By Charles Opiyo**
Recently, one of the local dailies had the following headline emblazoned upon it, “Tycoon gifted Sh5bn mobile phone license…” This story related to Communications Authority of Kenya (CA) granting a Network Facilities Provider Tier 1 License to Jamii Telecommunications Limited (JTL). The holder of this license is permitted to build and commercially operate telecommunication/electronic communications systems. According to media reports however, the amount paid by JTL was well below the full value of the license (stated by the press to be 5 billion Kenya Shillings). The media report goes on to relate that the amount that JTL paid was only 100,000 Kenya Shillings.
This media report has inexorably led to a barrage of claims and counterclaims by parties involved. JTL acted swiftly to dismiss the report, terming it as “the product of machinations and intrigues by dominant actors in the telecommunication industry who are keen on protecting their monopolistic dominance.”. This statement from JTL appears to be directed at the three largest network operators, Safaricom, Airtel and Telkom who are accused of using the media to hinder competition and prevent growth of the technology sector.
Joshua Chepkwony, CEO of JTL stated that the decision of CA to grant the license to the company was instrumental in the injection of competition in the Kenyan market. The final beneficiary of this would be the end consumer, the Kenyan citizen. Meanwhile, the chairman of CA, Ngene Gituku has made assurances that “no money had been lost” and a “more substantive statement” would be made once CA’s Board of Directors met, adding that the chairman could not speak on behalf of the board.
There are two issues that are worth commenting on in this saga. These are the procedural and legal implications that arise due to the granting of the license by fair means or foul.
Regarding procedure, what need to be proven at this point by CA is that it followed its regulations to the letter in granting the license to JTL. Granting licenses to network service providers is conducted by CA, which is mandated to do so under section 5 (1) of the Kenya Information and Communications Act (KICA).
The process utilised to provide the license is via application. This entails applying for said license in the prescribed format as per the Second Schedule of the KICA Regulations. These applications are directed to CA and are deemed to have been received as soon as CA receives the application fee and issues the receipt. The application fee of the license in question is set out in the telecoms market structure under the Unified Licensing Framework (ULF).
The actual pricing of the frequency band that the service provider utilizes is determined through a formula that is set out in the second schedule of the KICA Regulations. The formula is as follows:
Fn (KShs) = (Assigned bandwidth (kHz) x Weighting factor x 1043.65) ÷8.5 kHz
Where: Weighting factor to be used = 6
Unit fee = Kshs. 1043.65
The band being utilized for the rollout of the 4G network is the 800MHz frequency. This formula of pricing applies across board to all service providers regardless of their tier. In this instance, Jamii Telecom has been granted a license for the 700MHz frequency. The initial fee that the three largest telecoms had to pay for the rollout of 4G at the time was 2.5 billion Kenya Shillings as mandated by CA.
To clarify, the tier of a service provider depends on the size of coverage of their network and not whether the service provider is incorporated in Kenya or is a foreign company. Tier One service providers have a countrywide coverage whereas Tier Two have regional coverage. The CA does however consider the assessed price regarding the scope of use of that frequency.
Service providers are also obligated to pay an initial operating fee of 15 million Kenya Shillings over and above other licensing fees. The CEO of JTL refers to this fee in his interview with the press stating that all providers have been paying the stated amount. The media however erroneously stated that this is in contradiction with the pricing of licenses the chairman of CA elucidates. The fact of the matter is, both parties are addressing themselves to two different fees in the same pricing schedule.
The rationale for the licensing of Kenyan airwaves is that these frequencies are treated as a finite resource and as such, licensing is necessary to allow the state to reap financial benefits from the levied use of its airwaves.
This dispute could augur legal implications for JTL as an interested party. If a complaint is lodged as against CA for the improper conduct of business. This is provided for in the in section 102A (1) (c) of KICA which states that:
“(1) A person aggrieved by—
(c) any action taken, any omission made or any decision made by any person under this Act, may make a written complaint to the Tribunal setting out the grounds for the complaint, nature of the injury or damage suffered and the remedy sought.”
The “Tribunal” is the Communications and Multimedia Appeals Tribunal established under section 102 of KICA.
From the above, it is clear that more facts need be released to the public in order to establish the veracity of the statements made by JTL and those of CA. It is the opinion of this author however, that the public might not wait for too long to hear more on this developing issue.
CA has since come out to clarify that the award of the license to JTL was not on a full basis but rather on a trial basis. As such, the full license fees would not need to be paid at that point in time. However, the licensee would be obliged to pay the full fee of 2.5 Billion Shillings at the end of the trial period.
**Charles Opiyo is a Bachelor of Laws student at Strathmore University.