Bloomberg News

Essar Kenya Denies Report It’s Up for Sale; Sees Sales Doubling

June 22, 2011

June 22 (Bloomberg) -- Essar Communications Holdings Ltd.’s Kenyan unit, the nation’s second-biggest provider of mobile-data connections, denied a report it is being sold and said revenue may double this year as it targets more Internet customers.

Essar Telecom Kenya Ltd., which trades under the yu brand, has invested $400 million in East Africa’s biggest economy since it began operations in November 2008 and plans to spend more in Kenya, Country Manager Madhur Taneja said in an interview in Nairobi, the capital, yesterday. The Economic Times of India reported last week that Essar is looking for a buyer for its Kenyan operations.

“Our expectations for Kenya have not changed, our outlook on Kenya has not changed and our commitment to Kenya as a market continues,” Taneja said. “We have already invested substantial monies and we will continue doing so.”

Yu competes in Kenya with Safaricom Ltd., Kenya’s largest mobile operator; Airtel Kenya Ltd., the domestic unit of Delhi- based Bharti Airtel Ltd.; and Telkom Kenya Ltd., a division of France Telecom SA. As of December, yu had 680,494 Internet customers, compared with Safaricom’s 3.71 million, according to Communications Commission of Kenya data. The Essar unit had 1.59 million mobile-phone subscribers in the period, giving it a market share of 6.4 percent compared with 6.7 percent three month earlier, the regulator said on its website.

“We are moving our focus from subscribers to revenue, which means we are focussing on quality rather than quantity,” Taneja said. “At the end of the day what you take home is not subscribers, it is revenue.”

Data Revenue

Kenyan mobile-phone companies are trying to generate more income from data after the industry regulator in August ordered mobile-phone operators to cut by half the rates they charge each other to transmit calls across networks. That triggered a round of reductions in call costs by companies to as low as 2 shillings (less than 1 cent) per minute.

Earlier this month, President Mwai Kibaki ordered a halt to further cuts in mobile-phone call tariffs after companies including Safaricom and Telkom Kenya opposed the reductions, Business Daily reported on June 8. Charges had been expected to drop to 1.44 shillings per call at the beginning of July from 2.21 shillings, it said.

“There is further room for a drop in prices,” Taneja said. “The regulator needs to decide what is more important: private companies’ profitability versus growth of the economy?” While lower call costs might result in reduced revenue for the government, this would be offset by increased revenue from higher productivity in other industries, he said.

Double Sales

Yu expects to boost data revenue by relying on “a network which is top class, which we already have, and of course cutting-edge customer service,” Taneja said. “Definitely there will be an increase in revenue by more than 100 percent” this year.

In Kenya, yu is the only mobile-phone company that doesn’t have a license to operate a third-generation, or 3G, network and has no immediate plans to apply for one, he said. Of the three operators with 3G licenses, only Safaricom has built a network so far, while Telkom Kenya plans to switch on its network later this year.

3G enables faster data transmission and allow mobile-phone users to download music and video to their handsets. As many as 80 percent of Kenyan subscribers use their mobile phones to read e-mail and browse the Internet, both of which can be done with the speeds provided on a so-called 2.5G network that yu operates, Taneja said.

The company expects data to contribute 12 percent of overall sales within two years, compared with 8 percent now, Atul Chaturvedi, yu’s former country manager, said in March.

Taneja, who has headed the Kenyan unit for three months, was previously in charge of Essar Telecom’s Ugandan operations, which were sold to the United Arab Emirates-based Dhabi Group earlier this year.

--Editors: Paul Richardson, Alastair Reed.

To contact the reporter on this story: Eric Ombok in Nairobi at eombok@bloomberg.net.

To contact the editor responsible for this story: Shaji Mathew at shajimathew@bloomberg.net.


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