* E-COMMERCE THE WAY FORWARD FOR KENYA (from Balancing Act)

The way we do things has changed in the last few years mobile phones became more affordable.

Take, for example, the short message service, or SMS as it is popularly known. It is now the medium of interaction in popular radio and TV programmes or season's greetings and invitations. There is an addition to our vocabulary - smsing.

Our lives have been tremendously changed by technology. This is a perfect illustration of the magnitude of change.

A local beer company once held a competition that required participants to send entries of bottle tops by post. A story is told of a gentleman who went ballistic when he woke up one morning from a night of heavy drinking to find his little son scattering his treasured collection of "prize-wining" tops.

Today such a humiliating quarrel over bottle tops would not arise since all the old fellow needs to do is instantly SMS the details of entry to the company server, and he will be notified of the outcome by SMS.

And if this is what the simple SMS can do, what revolution would computers and the internet cause if they were made accessible to more people?

Advertisements along the road from a country's major airport to the city centre is said to reflect its core economic activity.

And what do we see from Jomo Kenyatta International Airport to Kenyatta Avenue in Nairobi? An array of what the world calls ICT (information and communication technology) messages are lined up to entice us - from mobile phone handsets and wireless service providers, computers, TVs and so on to radio stations.

They are the gadgets and services that matter, and what George Gilder calls "the vectors of growth, the sweet spots of finance" (Telescom: The World After Bandwidth Abundance, Touchstone, 2002). So if the information age is where the money is, who does not want to be there?

One sector that is going to drive the next phase of the internet boom, or Web 2.0, is e-commerce, which is doing business electronically without the seller and the buyer being in physical contact.

Lower communication costs is enabling people to reach wider markets and making it possible for goods and services to be traded in a whole new way.

For example, some women's groups in Tabaka, Gucha district, now sell their soapstone artifacts to the world by simply taking digital pictures of their new products and posting offers on their Web ite, www.soapstoneafrica.com

A firm in Eldoret that spins yarn and makes woollen products cannot imagine business without the e-mail, which has made it easy for them to reach the sophisticated western market at the click of the mouse.

There are many more Kenyans making innovative efforts in the e-business, especially in the service industries of consultancy and outsourcing. People used to believe in duty-free shops as real bargains, but they now say they are as cheap as the internet.

Although e-commerce is the future of enterprise, consumer protection, intellectual property rights, privacy and security are issues of grave concern. For instance, on the internet you do not know whom you are dealing with; it could be a robber or a con man.

Thus, for e-business to grow, people must trust the technology. People are not only buying and selling cars, computers and kiondos and other "brick and mortar" goods online, but they are also dealing in information, music and software, which are now categorised as products. There is an urgent need to enact e-commerce laws. The law shoulddeal with if electronic evidence is admissible in the court.

Kenyans would do more business if there was legislation and the right infrastructure for electronic transactions, and more tourists would be happy to come and see the new wonder of the world at the Maasai Mara and make payments online.

Although it may be difficult to tame the Internet because of its cross-border nature, all is not lost as there are tools of control. Recent efforts by the Government and development partners to tackle reforms in e-transaction and e-commerce laws are commendable, but more needs to be done. (SOURCE: The Nation)

* KENYA GOVT MAY LET VTEL OFF 30% LOCAL STAKE AS IT CONSIDERS RULE CHANGE

The government of Kenya is considering abolishing the rule that stipulates that foreign companies investing in the telecommunication sector must allocate at least 30 per cent shares to nationals.

It is the government's response to the perennial disputes between local and foreign investors that have frustrated the conclusion of major telecommunications projects in the country, especially of late.

The East African has learnt that the Ministry of Information and Communication has already drafted a document with proposals for a more liberal regime for foreign investors. The developments come in the wake of a major falling out between the shareholders Vtel Holding Ltd - the company that only recently won the bid for a major telecommunications licence combining mobile and landline services - that has now plunged what was regarded as the most promising deal in the telecommunications sector in recent years into uncertainty.

V-tel won the highly contested licence, for which it bid an impressive Ksh12 billion ($169 million) - the single largest foreign direct investment in Kenya in decades. Well-placed sources told The East African that the government wants an arrangement where the 30 per cent local shareholding rule will be made optional, on the understanding that foreign investors have to sell the 30 per cent stake to the public through an IPO after a stipulated period.

Before the Dubai firm won the bid, the licensing of the second national operator to compete with the lacklustre Telkom Kenya - the country's sole fixed-line operator - had proved to be a messy affair mired in court cases leading to several postponements.

But hopes that the Vtel will hit the ground running seem to be fading after it turned out that its local partners are unable to raise their portion of the financial commitment. In a development that is eerily reminiscent of the woes plaguing Kenya's third operator Econet Wireless, the dispute between Vtel and its Kenyan partners seems destined for the courts, where it is likely to take years to resolve.

Legal experts who spoke off the record to The East African trace the origins of the problem to a policy statement made by the government in 1997. In November of that year, the government published the "postal telecommunications sector policy statement," spelling out a new structure for the industry. It was this document that introduced the threshold for equity participation by local investors in privatised telecommunications companies.

Specifically, the document stipulated that "any company licensed to provide telecommunications services in the liberalised market should have at least 70 per cent of its equity owned by Kenyans." In subsequent years, to make the regime more friendly to foreign investors, the rule was revised to 60 per cent for foreigners and 40 for locals.

In the year 2002, then Minister for Information and Telecommunications Musalia Mudavadi published a gazette notice in which he changed the local equity threshold to 70 per cent for foreign investors and a minimum of 30 per cent for locals.

Another condition that has come to affect the process and which Vtel will have to deal with is the requirement that the shareholding structure of the winning bid's tender cannot be changed before the licence is issued. This, say experts, is what has seen the South African-based Econet Wireless Ltd locked in one case after another.

Sources tell The East African that Vtel was facing a crisis that emerged barely a fortnight after it won the tender, when it failed to formally submit its licence application.

It is believed that Vtel, a $1 billion holding company registered in the United Arab Emirates, which serves as the investment arm of the Palestinian Telecommunications Company (Paltel) in the Middle East, North Africa and Asia, could easily pay its share of the licence fees, but was being held back by its local partners.

Sources say the firm stated as much in a letter to the Communications Commission of Kenya (CCK) in which it sought an extension of the December 8, 2006 deadline for formally applying for the licence.

Subsequently, one of the local partners, Unitel, denied in a press statement that they were unable to raise their share of the licence fee.

Unitel's managing director Francis Makanga, insisted that the firm has the required funds. He said the company's documents were completed on time and are filed with the CCK and that it will have all financing ready for its shares by the time the licence fee is to be paid.

Vtel Holdings, the consortium's bid leader for the second national operator, had written to the Communications Commission of Kenya notifying their intention to drop its local partner owing to its inability to meet its share of financial obligations.

A profile of Vtel's local partners makes for intriguing reading. They comprise Kirinyaga Construction, a leading road builder in Kenya associated with tycoon Ephraim Maina; Unitel, which is said to be owned by the family of former District Commissioner Ben Makanga; Kusco, the umbrella body of more than 3,000 co-operatives; and businessman Michael Kirui, Nairobi lawyer Fred Ngatia and Fairacres Ltd coming in as minority shareholders. Loita Capital Partners International is the lead transaction advisor.

Sources say Vtel, in its letter to the CCK, was seeking the nod to drop its partners on the grounds that they were facing difficulties coming up with their share of the licence fees. The firm says it will not be able to submit its application with Unitel as its partner, raising fears that the matter could be headed for the courts.

Econet, has been involved in damaging feud with its local partners, the Federation of Co-operatives of Kenya and Corporate Africa after the two failed to raise their share of the licence fees, which saw the matter end up in court, where it is still stuck.

Vtel's imminent falling out with its partners has put paid to a declaration by its Chief Executive Officer Nour Atout that the consortium will roll out both fixed line and mobile telephony networks at the same time, making a record of sorts.

The pledge saw Telkom, Vtel's principal competitor as a national operator, declare it will also venture into the highly profitable cellphones sector, drawing immediate protests from its partner Safaricom, the region's most successful cellular phone company. (SOURCE: The East African)

WEB AND MOBILE DATA NEWS _____________________________________________________________________ * KENYAN PUPILS GET SCHOOL RESULTS THROUGH THE INTERNET AND MOBILE PHONES

For the first time in KCPE history, candidates and their parents yesterday received details of their results directly on their cellphones and through the Internet. The results were accessible through the Kenya National Examination Council (Knec) website www.examscouncil.org.ke or on the cellphone after sending a prescribed short text message (sms) to 7070.

Last February, Kenya Certificate of Secondary Education candidates were able to access their results by logging on to the council website, but yesterday was the first time the short text message was used to relay examination results. This year's top candidate David Wamugi got a breakdown of his results on the sms service.

His father, James Wamugi, sat for his primary school examination 27 years ago at Gathathiini primary school in Nyeri. But it took him a day to receive his results from the school, unlike the instant services his son's generation is enjoying. Last week, the senior Wamugi told the Nation: "I didn't know that they had received the breakdown until I saw it on the mobile phone. "In our days, it took a day to receive the results and then one had to see the result slip to get a breakdown."

The website appears to have been inundated with visitors and it often failed to download the results, unlike the first instance in February this year when KCSE candidates used it. The public also expressed concern that strangers could access the results of any candidate whose index number they held and suggested that a security measure be put in place to protect the candidates.

The tradition has been that provincial directors of education attend the news conference where the Education minister was releasing examinations. They were then expected to physically transport the results to their respective offices where their juniors from the districts and head teachers would collect them. Students in Nairobi would receive their results the same day while those in other parts of the country would have to wait for a day or more, depending on how far the school was from Nairobi.

In Mombasa, hundreds of parents jammed cyber cafes trying to know how their children had performed but left frustrated as the Knec website was yet to be updated. Boniface Otieno, who wanted to know how his sister had performed, said: "I have spent three hours trying to refresh this website but there are no KCPE results." (SOURCE: The Nation)

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