Essar Group to sell its stake in Kenyan telecoms firm

mobile KiwanjaOne of the reasons for withdrawal of Essar from Kenya is the low price elasticity of demand in the Kenyan markets. (Image source: Kiwanja/Flickr)Essar Group has announced its intention to sell its stake in Essar Telecom Kenya following an earlier decision to sell its shareholding in Vodafone India

The Essar Telecom Kenya sale will complete the effective exit of Indian-based Essar Group from telecom operations in India and overseas.

According to top company executives, Essar has appointed French banking major BNP Paribas to help it get the best value from the sale of its stake in the Kenyan telecoms firm.

A top Essar official said, “We have appointed BNP Paribas for the sale of our controlling stake of around 72 per cent in Yu Mobile. We expect the valuation for the same to be several hundred million dollars.

The official added, “Our decision to sell our stake in Essar Telecom Kenya follows our decision to sell our shareholding in Vodafone India which was the main chunk of our telecom business.”

Industry officials familiar with Bharti and Essar’s African cellular service operations said, “Kenya, like other markets in Africa, has shown relatively low-price elasticity of demand unlike India where usage zoomed in response to price cuts.

“This makes it a far tougher market for Indian companies to operate in as the market is split between extremely high-end users and very low-end customers, both of which are relatively price inelastic.”

According to a Communications Commission of Kenya (CCK) report, however, Essar was the fastest growing telecom operator in Kenya during the quarter ending March 31, 2012. In that period, mobile subscriptions in Kenya grew four per cent while mobile penetration touched 74 per cent in that market.

Earlier last year, the group had exited its stakes in Warid Telecom’s Uganda and Congo operations scaling back its plans to expand across Africa.

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