Kenya's Safaricom could get extra spectrum in government deal

NAIROBI Fri May 16, 2014 6:32am EDT

NAIROBI May 16 (Reuters) - Safaricom, Kenya's largest telecoms operator, could gain vital additional spectrum to help improve its services as a spin-off benefit from a multi-million dollar government contract to build a security and surveillance system, its chief executive said.

The firm, which is 40 percent owned by Britain's Vodafone , needs additional spectrum to improve the quality of its network and roll out fourth-generation (4G) broadband internet services, also known as LTE.

"It will solve that but also it will likely allow us to deploy LTE," CEO Bob Collymore told Reuters by phone on Friday, after a newspaper report said the company had won a 12.3 billion shillings ($140.7 million) contract to develop a communication and surveillance system for the Kenyan police.

Safaricom's need for extra bandwidth was shown by its joint bid with Bharti Airtel for the assets of Essar's Yu mobile in April, a deal which would give Safaricom Yu's spectrum but which has been put in doubt because it has not yet been fully cleared by regulators.

Under the terms of the security contract, Safaricom will spend about 12 billion shillings installing and running a communication and surveillance system to help combat crime. The deal will not affect Safaricom's guidance to the market for this year, which was issued on Monday, the CEO said.

In Monday's statement, Safaricom said it expected free cash flow to rise by between 10 and 17 percent in its financial year through March 2015, driven by higher usage across its products and services.

Safaricom shares were up 3.6 percent at 13.05 shillings by 1015 GMT. The stock has risen sharply through recent months and hit a record 13.40 shillings in April, some four times its value at the start of 2012.

Additional spectrum remains difficult for telecom operators to come by in Kenya but Collymore said he expected to company to win additional facilities under the contract that among other things will virtually link up police stations.

"One option for government is to sell us some spectrum at market value in order to defray some of the total cost," he said. ($1 = 87.4000 Kenyan Shillings) (Editing by Drazen Jorgic and David Holmes)