New licensing rules announced by ICT Cabinet Secretary Joe Mucheru are set to push Airtel Kenya to sell a 30 per cent stake to Kenyans by 2024.
Airtel Kenya is currently fully owned by India’s Bharti Airtel. It is among firms that were exempt from the shareholding rule which sets a local ownership threshold of 20 per cent.
It is these firms that Mucheru through the Kenya Gazette Notice on Friday, April 9 directed to comply within three years – by March 2024. He further raised the local ownership threshold to 30 per cent, up from 20%.
Firms which met the previous threshold of 20% will have to increase local ownership to 30 per cent.
According to the ministry, the rules are meant to promote local ownership of firms in ICT and telecommunications.
In 2009, the regulation limiting foreign ownership of telecoms companies to 80 per cent was eased in a bid to spur investment – allowing foreigners to begin operations without a Kenyan partner and gradually comply by finding local partners in three years.
Airtel Kenya was in 2013 granted the exemption from the local ownership rule without a defined period for compliance. This allowed billionaire investor and Kencell founder Naushad Merali to sell a large portion of his stake in the business without breaking any rules.
To comply with the new rules, firms such as Airtel will have to consider their options such as listing on the Nairobi Securities Exchange (NSE) or selling stake directly to deep-pocketed billionaire investors or institutional investors such as local pension funds.
Unlike in neighboring Uganda, there is no legal requirement for telcos to list on the securities exchange.
The regulations are expected to trigger deals in tech and telecommunications as firms look to maintain compliance.
Airtel Kenya’s biggest competitors, Safaricom and Telkom Kenya, are compliant with the local ownership rules.
Including the government’s 35% stake, more than half of NSE-listed Safaricom is owned by locals.
The government also owns a 40 percent stake in Telkom Kenya with private equity firm Helios Investment Partners owning the remaining 60 percent.
Questions have been raised on Airtel Kenya’s ability to find a buyer for the stake – due to the contrast between the company’s valuation and local investors’ assessment of the firm based on its loss-making history.
Airtel Kenya posted a combined loss of Sh3 billion in the year to March 2020.