(Ecofin Agency) - A law effective since 2008 requires foreign companies operating in the Kenyan ICT sector to sell at least 20% of their capital to local investors. Airtel Kenya has been exempted from this rule since 2013 but, things are about to change.
Airtel Networks Kenya Ltd is considering an IPO on the Nairobi Stock Exchange (NSE) by March 2024. According to Segun Ogunsanya (pictured), CEO of Airtel Africa, the move is expected to allow Kenyan investors to acquire at least 30% of the company's share capital per the country's laws.
"We keep discussing with the regulator to be able to select the best vehicle to ensure there is local participation in the business," the executive said, adding that the group was also considering the possibility of selecting a local shareholder to directly sell at least 30% of Airtel Kenya to.
The Kenyan government, through the 2020 ICT Sector Policy, introduced a rule stating that only companies with at least 30 percent Kenyan ownership would be allowed to provide ICT services in the country. The new rule increased the local ownership requirement, which was 20 percent since 2008. In 2021, the new policy was amended to set compliance deadlines.
Airtel currently has an indefinite waiver granted in 2013 under the 2006 ICT Sector Policy Guidelines. Nevertheless, it has to meet the local ownership threshold within three years from the date of the notice (March 25, 2021).
The new local ownership rule does not affect Airtel Kenya's competitors Safaricom and Telkom Kenya. Indeed, more than half of Safaricom's equity is held by the Kenyan government and local investors. Meanwhile, Telkom Kenya is now a state-owned company since the government bought 60% of its stake last year.
By opening its capital to local investors, Airtel Kenya will, among other things, improve its image in the local market, where it is the second leading operator with a 26.3% share. In the market, it is far behind Safaricom, which controls 66% of the shares.
The initiative is also expected to let Kenyan investors and the government profit from the growing telecom market. Nevertheless, it is worth mentioning that Airtel recorded an after-tax loss of $18.3 million at the end of the 2021/2022 fiscal year, down from the $22.3 million loss the company recorded in 2020/2021.
Isaac K. Kassouwi