Billions at the centre of CA boardroom fights, insiders say

Few State regulatory agencies have experienced the boardroom wrangles the Communications Authority of Kenya (CA) has endured in the recent past.

Since the CA was spin-off the Kenya Posts and Telecommunications Corporation (KPTC) in 1999, virtually no board of directors or director-general has served a full term without a legal suit challenging their authority or a key decision.

Outgoing director-general Francis Wangusi served more than 25 years at the government agency and his exit last Thursday, just like his ascent to the top office, embodies the clash of interests undermining operations at the giant regulator.

SEE ALSO :Court hands CA boss extended stay amid succession row

Insiders say, at the heart of the conflict is the struggle to control billions of shillings in licenses and fees the authority collects each year. There are also State officials and business people pulling the strings in the background. 

Last Thursday, CA board chairman Ngene Gituku announced the appointment of Mercy Wanjau to replace Wangusi at a chaotic press conference that betrayed the tensions bubbling underneath.

“The appointment that takes effect immediately has been made following extensive consultations with relevant stakeholders in order to ensure that CA continues discharging its regulatory mandate seamlessly,” Mr Gituku said.

For More of This and Other Stories, Grab Your Copy of the Standard Newspaper.

The appointment, however, came less than a week after a court order was issued directing Wangusi to remain in office until next week Tuesday when a suit challenging the authority of the board of directors will be heard.

The Consumer Federation of Kenya (Cofek) CEO Stephen Mutoro who filed the suit now accuses the ICT Cabinet Secretary and board chair of impunity and breaking the law.

SEE ALSO :CA board picks Wangusi’s replacement amid row

“We are instructing our lawyers to file contempt of court proceedings against the CS and Mr Gituku,” said Mutoro. “The appointment is in breach of the law and violates the constitutional requirements on ethnic diversity in the leadership of public institutions.”

According to a former board member who declined to be named for fear of retribution, the fight for control of the CA boils down to the immense cash reserves at the authority and large budget contracts.

Key among them is the Universal Service Fund (USF), the kitty into which all licensed service providers contribute a percentage of their annual revenues each year. 

The USF was meant to fund connectivity in underserved regions across the country and has since inception in 2013 collected close to Sh8 billion.

Mobile service providers particularly Safaricom, which constitutes the bulk of USF contributions, had initially opposed the ad hoc process of setting up the fund. Safaricom then insisted on having a structured committee set up before the company would begin remitting contributions.

SEE ALSO :CA: Safaricom not against merger

CA says close to Sh4 billion of the fund has since been disbursed in aiding connectivity projects in public schools and county offices across the country with local telcos including Safaricom, Telkom and Airtel granted tenders to build the infrastructure.

At a public rally last year, President Uhuru Kenyatta said the CA should move Sh1 billion from the USF to the Kenya Police to fund cyber-security efforts by the Directorate of Criminal Investigations (DCI).

Wangusi is said to have opposed the move despite pressure from the board, insisting that the mandate of the USF was clear.

“We have not received an official request from the government so at the moment we are proceeding with the rollout as planned,” said Mr Wangusi at the time when asked by The Standard whether the authority will wire the funds to DCI.

This was just weeks before Wangusi was sent on compulsory leave as the board conducted an audit on some of his employment decisions.

SEE ALSO :Standoff continues at CA

Wangusi, who spoke with the Standard on Sunday the day he was notified of his three-month suspension, blamed hidden forces that sought to get rid of him for his hardline stance.

“I had convened a board meeting but to my surprise, I was told I have been sent on compulsory leave for an audit to be conducted on some of the employment decisions I have made,” explained Wangusi. 

“I do not think the reasons given are genuine and I believe it has something to do with my hardline stance on several crucial matters the Authority has handled in the recent past.”

Blocking Sh1 billion to the DCI was not the only unpopular decision Wangusi had made.

Barely a month to his suspension, the High Court had blocked a Sh2.3 billion demand in license fees that the CA had slapped on Kenya’s second-largest mobile operator Airtel Kenya.

Airtel Kenya’s frequency spectrum license expired in February 2017 and the CA had issued the mobile operator with a Sh2.3 billion demand letter in order to grant the firm a new ten-year license.

Airtel protested the fees, arguing that the 2014 acquisition of Essar Telecommunications’ YU Mobile extended the company’s operating license to 2024, a fact the regulator had corroborated in a letter granted during the acquisition.

Treasury was, however, opposed to the waiver, demanding that CA collect the funds since the authority did not have the mandate to grant a license waiver of that magnitude.

The case dragged on in court for three years and in that time, the board of the authority had been split in two, one-half seeking to collect the license fees and the other maintaining that Airtel Kenya was exempt.

The final court ruling was made in December 2017 with the judgment in favour of Airtel Kenya. This is said to have irked the Government that was looking forward to a Sh2.3 billion revenue windfall and the heat turned up on the regulator’s leadership.

This is not the first time that the CA is finding itself in a leadership crisis and a legal dilemma.

In 2012, the High Court nullified the re-appointment of the then Director-General Charles Njoroge, leading to a legal dispute by Cofek and a leadership vacuum that ended with the appointment of Francis Wangusi on an acting capacity.

The boardroom wrangles at the CA now raise concern as to the independence of the Communications Authority, only guaranteed in law but limited in practice. 

The CA makes 75 per cent of its revenues from license fees and these have been steadily rising as more firms and service providers roll out new products and services in tandem with changing global trends.

In the 2009/2010 financial year, a total of 610 licenses were granted by the industry regulator across the various ICT market segments.

In the 2015/2016 financial year, this number had shot to 2,232 and is set to become bigger in the coming years as the adoption of digital technologies gains momentum.

The Government is currently pushing through a proposal to tax the usage of over the top digital platforms such as YouTube, Facebook and Netflix.

It is unclear how such a tax will be levied.

We are undertaking a survey to help us improve our content for you. This will only take 1 minute of your time, please give us your feedback by clicking HERE. All responses will be confidential.

Communications Authority of KenyaKPTCFrancis Wangusi