Local ownership requirement waived for Airtel Kenya

Airtel Kenya has received an unlimited waiver to the 20 percent local ownership requirement, as the Kenyan government acknowledges the profitability troubles of the operator.

Company regulations set out by the government require all foreign entities operating in Kenya to be 20 percent locally owned.

The mobile operator currently only boasts 5 percent local ownership in the form of the stockholding of local businessman Naushad Merali and had been required to find local investors for a further 15 percent of the company or face sanctions.

Yet the government has now waived the requirement due to the losses the company is making.

Since launching in Africa with the acquisition of the Zain Group in 2009, Airtel has not been profitable, most recently reporting losses in the region of US$960 million for the second quarter ended September 30.

With a share pricing which does not reflect the less-than-rosy financial state of the company, Airtel has been struggling to find local investors willing to become involved in the telecom, which has resulted in the 15 percent local ownership shortfall.

Airtel has received favourable treatment from the government in local ownership terms since its inception on the Kenyan market. Having purchased the African operations from Zain – which was a Dubai-owned company – the operator renamed Airtel already had a three year exemption to the local ownership requirements due to the takeover, in order to provide the operator with a sufficient timeframe to comply.

The waiver was due to expire in 2012, but was extended for a further year. However, the current extension to the waiver sees the operator receive an open-ended exemption from the requirement, with Airtel Kenya free to operate despite its almost wholly foreign ownership for the foreseeable future.

Posted in: Telecoms

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