The Kenya Pipeline depot in Embakasi, Nairobi. PHOTO | FILE Recently, the government unveiled a licensing policy that will require telecoms firms to have local ownership of at least 30 percent within the next three years. Despite local ownership requirement regulations sounding progressive, many times they are just ambiguous.
Let’s take the case of Airtel Kenya where Naushad Merali is the local shareholder. When he wanted to dispose of significant shares below the shareholding rule of the 20 percent local ownership, he sought for an exemption so as not to be in contravention of the law. He was given the exemption because the law is ambiguous on blocking an investor who wants to cash out.
So, for a company that is not publicly listed, what exact policy problem is this regulation solving? The regulation is simply an exit barrier to investors. In fact, such laws are known to breed corruption because senior government officials use them to solicit shareholding from companies that want to enter the local market.
There is a big number of public officials who are billionaires because of these “local ownership ransom demands.” So, Kenyans should expect little from this regulation.
Some analysts have predicted that some telecoms companies will now opt to publicly list, but that will most likely not happen. Many companies are uncomfortable with the “stewardship” that comes from being publicly listed.
Stewardship means that supervision of management by informed investors – if the results of investment taken by the management do not meet the long-term needs of the business, then management always feels external pressure and ultimately risks the sack.
It is already reported that MTN Uganda has indicated that it will prefer selling a stake directly to a local pensions fund to listing its shares.
The primary reason companies opt to list their shares is to always unlock value of their business and raise new capital. In the telecoms industry, British Telecom was the first telecoms company to sell 51 percent of its stake in 1984, and it was as a result of a desire to facilitate major investment in digital switching capability.
So, unless the non-listed telcos aim to unlock value, they will not opt for public listing. And a company like Airtel Kenya which has not been a profitable venture for a period of time will be ill-informed to opt for listing because the cost of stewardship will be quite high for the management.
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