The Kenyan government is canceling a contract with France Telecom because the company is likely to exit the east African telecom market by pulling out of Kenya and Uganda.
France Telecom, which uses its Orange brand for Internet, mobile and TV services, and the Kenyan government are joint owners of Orange Telecom Kenya, but the Kenyan government is not happy that its partner may leave the country's telecom market. Orange Telecom Kenya has been the principle manager of the state-owned National Optic Fibre Backbone Infrastructure (NOFBI), with the contract extended last year for another three years.
Orange Telecom, one of the small operators in Kenya, has said it is considering pulling out of the east African telecom market if it fails to acquire additional partners. The company said the planned sale of Essar's yuMobile in Kenya to two big rival operators, Safaricom and Airtel Kenya, will make it difficult for it to survive competition and remain in the business. However, Safaricom pulled out of that deal over conditions imposed by the regulator, the Communications Commission of Kenya (CCK).
Orange has hired Lazard Consultants to conduct a strategic review of its operations in east Africa, but unless it finds additional partners, it is widely expected that it will leave that market.
Kenya's Cabinet Secretary of Information and Communications Fred Mutiang'i has notified Orange Kenya of the government's intention to terminate the contract.
"We will this week inform the company of our decision to cancel the contract. This is being done in the public interest," Mutiang'i said Tuesday.
The government and the company are to meet this week to discuss the situation.
Orange Kenya entered the Kenyan mobile market after buying a majority 51 percent stake in Telkom Kenya, a state-owned operator, in 2008. The company later bought additional shares in Telkom from the Kenyan government to reach a 70 percent share of the company.
In Uganda, Orange Telecom is facing similar competition Warid Telecom was bought by Airtel Uganda for about $100 million last year.
Orange currently has operations in 15 African countries including Egypt, Niger and Botswana. Kenya is Africa's third largest telecom market, after Nigeria and South Africa.