Kenya's regulator starts spectrum sale

The authority will receive $56.25 million from Safaricom, Kenya's largest mobile services provider, to enable it to roll out 4G services. Safaricom indicated that it will pay up to $75 million when more spectrum is available.

"The amount is just an initial down payment for the spectrum, whose true value has not yet been determined; Safaricom has committed to top up the balance if the true value is higher and forfeit the refund if the true value is lower," said Francis Wangusi, director general of the communications authority.

Broadcast services are currently provided on the 700MHz and 800MHz bands. The band is further divided into blocks that are allocated to different providers. For $56.25 million, Safaricom will get two blocks of 15MHz each on the 800MHz band.

Safaricom has already launched its 4G advanced services on the 1800MHz and 2100MHz bands, allocated for its voice services. Upon completion of the deal with the regulator, it is expected to run services on 800MHz.

"The plan is to deploy fully on 800MHz which gives us the capability to aggregate capacity, retain the 1800MHz for voice traffic and enable us to ensure that our drive to provide quality voice services is not affected," said Robert Mutai, head of engineering at Safaricom.

Safaricom has pulled ahead of its rivals Airtel and Telkom Orange in the race for the 4G rollout and was also the first to launch 3G services.

In 2008, Safaricom paid $25 million for two blocks of 10MHz spectrum to run its 3G services, but three years later, the regulator dropped the price to $10 million for the other service providers, after they complained that $25 million was a barrier to entry. Safaricom initiated legal proceedings and got its $15 million refund, which probably necessitated the present clause that it will forfeit the difference if it is later determined that the spectrum was overpriced.

"The value of 800MHz is obviously higher than 2100MHz band (3G services) due to favorable propagation characteristics and technology capabilities," Wangusi added.

One of the contentious issues between Safaricom and the regulator relates to the efficient utilization of spectrum. The regulator has said that Kenyan operators were not optimizing the spectrum in line with global standards, especially in highly populated areas.

"The Authority has imposed a strict network rollout plan and wholesale network sharing conditions for Safaricom's 4G network which is aimed at providing faster network rollout and competition for service provisioning," Wangusi said.

The regulator expects Safaricom to open up 30 percent of the 4G spectrum to other service providers, but the pricing will be determined by the parties.

There is a government-led 4G initiative, where operators were to come together and form one body that can get the license and lease out to the others depending on shareholding and need. The 4G "special purpose vehicle" is similar to the TEAMS fiber optic cable, with government and private sector shareholders. Safaricom has already pulled out of that initiative, which has been in limbo for the last two years.

Safaricom has also been allocated another 4G spectrum as part of the National Surveillance, Communication and Control System, for Nairobi and Mombasa project, which will be deployed on the 400MHz band. However, the two licenses carry distinct and separate networks with the 400MHz exclusively for security services.