Is Vodafone’s Acquisition of Essar India not Dangerous for the Kenyan Market?

Vodafone is said to have acquired Essar India at a cost of $5 Billion. The valuation was decided four years ago when the UK operator acquired 67% of Hutchison’s Indian operations. This will give Vodafone 33% control at Essar India. In India there are Foreign direct investment (FDI) guidelines which put a ceiling of 74%. It means that Vodafone would have to look for an Indian Investor willing to buy the 26% stake.

Essar India has a 49% stake in Econet Wireless Kenya which in turn owns a chunk in Essar Kenya. This brings Vodafone as now indirect substantial shareholder in Essar Kenya. We had the issue of Celtel being sold to Zain Africa and then to Bharti Airtel where Kenya, Gabon, Nigeria and even Tanzania had problems with the transactions involving the sale of foreign parent companies with local arms where the transactions generated no Tax revenue to the local government. Questions have been asked if there is another Tax avoidance by Vodafone UK and if CCK and Treasury and even Commisioner off monopolies slept on their jobs in monitoring this sale which has great impact on the Kenyan telecom market.

Vodafone already owns part of Safaricom Kenya and the acquisitions of Essar India will mean that Vodafone has a controlling stake in Essar Kenya and Safaricom. Are we not reducing competition in the market here. When there were cries on the Zain Africa to Bharti Airtel sale, the PM office and parliament both had committees which investigated the transactions and apparently came with conclusions that nothing was a miss but one committee, parliamentary committee, went ahead and issued guidelines on how future transactions which involves the local telcos with foreign companies should be handled.

This seems not to have been the case with the sale of Essar India to Vodafone UK and questions to CCK, Treasury, PMs office and Ministry of Informations are not being answered.

We will have to wait and see how this pans out in the market and if the concerned government officers will resort to fire fighting after the deal or not.