Government seeks to renegotiate Telkom fibre management contract

20 Jul 2011

According to Business Daily Africa, the Kenyan government is poised to renegotiate its existing contract for the management of state-owned fibre-optic infrastructure. The management contract was signed in July 2010, granting Telkom Kenya the right to run the National Optic Fibre Backbone Infrastructure (NOFBI), and sell capacity to other operators, such as Safaricom, Access Kenya and the Wananchi Group. Although France Telecom acquired a 51% stake in Telkom Kenya in December 2007, the remainder of the shares were retained by the government, and it is believed that Telkom was offered the fibre management contract on the strength of the government’s continued shareholding in the company.

The possible change in management has arisen because the state believes that Telkom has not been aggressive enough in selling capacity to its rivals. Further, it considers the KES250 million (USD2.75 million) management fee to be disproportionately high considering the amount of unused capacity; the fee is broken down as KES1,050 per kilometre. Apart from Telkom, the only other operator currently believed to be utilising NOFBI is cellco Safaricom. Although telcos such as Jamii Telkom Ltd (JTL) and Access Kenya have rolled out fibre-optic infrastructure in the main urban centres, they currently lack the appropriate fibre links connecting Nairobi and Mombasa. Joshua Chekwony, chairman of Jamii Telecom, told Business Daily Africa: ‘Jamii cannot access the NOFBI because Telkom Kenya has not finalised [its contract] with the ministry. In a letter to us, Telkom said that the price is determined by the ministry, which is yet to finalise on the new arrangement’.

A senior government official who declined to be named, told the newspaper: ‘Telkom Kenya has not been strong enough to handle this infrastructure as a business so far, thus slowing the uptake of internet in the country’. The official went on to indicate that the government is planning to offer the contract to a neutral firm, although reports elsewhere suggest that Telkom may be offered a commission-based arrangement, to prompt it to take on a more aggressive sales approach. A final decision on the management contract is expected to be reached later today, following a meeting attended by government communications officials and the telecoms sector’s main players.

Kenya, Telkom Kenya