KCA Members Implicated in Telecom Scandal in Kenya??

A Kenya Democracy Project Investigative Exclusive
Monday, July 26, 2004

Kenya Democracy Project has come into possession of a series of e-mail communications sent to us anonymously. This document on the face of it, would appear to strongly link a significant handful of young middle class Kenyans(some of them high profile members of the KCA organization) to a brewing national scandal in Kenya that threatens to dwarf the Anglo Fleecegate in its sordid ramifications. We are unleashing that dossier without having an opinion one way or another on its veracity. We present it in the spirit of transparency and freedom of information and trust our intelligent readers to exercise discretion in interpreting the content that is purveyed here or indeed any other site on the world wide web...

You have to remain on tenterhooks for the next several minutes though. It about time, of course for the essay to veer off course….


1.0.Heko to Fidel Castro on the 51st anniversary of the invasion of the Moncada Barracks.

Today, July 26th, is a big holiday in Cuba, second only to the New Year’s celebration of the victory of the1959 Revolution.

Hear it from the pages of the People’s Weekly World, the organ of the Communist Party, USA:

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And from Vietnam:

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And from Radio Havana:

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Granma:

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Two messages from


Fidel Castro

an open letter sent in May 14th, 2004 from to George W Bush and a more recent follow up are available at the same Radio Havana homepage:

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The Speech, “Historia me absolvera” that Castro gave in 1953 is considered among the greatest ever delivered anywhere:

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Here is the man again, still VERY MUCH ALIVE 49 years later:

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It is interesting to note that SOON AFTER the 1959 Cuban Revolution, Castro DID NOT consider it a “Communist Revolution” nor did he call himself a Communist:

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The United States made sure that Cuba did become communist in orientation, but that is another story altogether...

Over here at Kenya Democracy Project we say:

Long live Fidel Castro and the Cuban Revolution!

Long live socialism!
Patria o Muerte!
Venceremos!

And in an act of solidarity with the Cuban people we would like to officially announce that the Kenya Democracy Project has launched a Kenya-Cuba Friendship Society with the immediate formation of two chapters in Canada and the Scandinavia.

2.0.Why Was ECONET Awarded 3rd Mobile Operator License Despite Its SHADY History?

We have commented elsewhere on this blog about the defensive, totally clueless reaction of President Kibaki and his deputy about the corruption scandal rocking it from within and without.

This story from the Economist will NOT calm any nerves in Nairobi today:

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Nor will this sober assessment from the Center for Public Integrity:

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The Kenya telecommunications industry has not had a dull moment for months.

There is the story of the Merali deal-making coup:

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Psst…. tune in for some inside mnunguniko inside and outside the nyoomba of ECONET:


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Why did the Kenya government grant a license to a company that has been tainted with allegations of corruption in more than one African country?

Information about ECONET is readily availableon the internet. For instance,we generated the above links simply by typing the words “econet” and “corruption” in the same dialog box- adding “nigeria” when we wanted more specific info on that country.

Did money change hands?

Was there influence peddling?

Soon after the decision had been made, we saw some very interesting stories planted in the Kenyan media.

Here is one:

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And here is another one:


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This claim was disputed hotly:


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3.0. Were Some KCA Members Linked to Any Questionable Deals?

From the above it is clear that KTIG, a consortium with many KCA members in it was actively in the race to get the bid for the third mobile operator. Press reports indicated that they had been actively lobbying for this opportunity for quite some time.

The Kenya Democracy Project has received a document from an anonymous source that consists of a series of email exchanges between Kenyans in Nairobi, the United States and the United Kingdom. We are making no judgment as to the veracity of the various statements contained therein. We are presenting this document in the same spirit that someone leaked private communication within the KTIG group to certain Kenyan media outlets. We trust in the discretion and intelligence of our readers to think and act for themselves.

Without further ado, here is the dossier we are unleashing:

From: Iruku [iruku@bellsouth.net]
Sent: Thursday, October 30, 2003 8:25 AM
To: Duncan Onyango

Dear Mr. Onyango,
My name is Iruku Makanga. I was given your contact information by David Karangu. I met with him yesterday and we would like to discuss an important business matter with you. When you get this message, please e-mail me back or call me in the US at 770-974-6561 or 404-668-4829, urgently. regards,
Iruku


Telecommunication project:

Conference call: November 7,2003 8:00 AM EST
DK, DO and IM.
The following issues were discussed:
1. TEAM: The team comprises of 7 individuals. Namely; David Karangu, Duncan Onyango, Iruku Makanga, Francis Makanga, Raphael Kilondu, Alex Kagwe and
Mugo Kibati.
2. ORGANIZATION: A company will be registered in Nairobi and in Georgia. Each
of these individuals will have shares in the company based on participation level
and risk capital invested.
It was suggested that the company shares will go as follows:
Share description Percentage
5% for each individual (5X7) 35%
Based on participation – This will be scored by amount of work individuals
are performing in the company. Those who perform the bulk of the work will
have a larger share.15%
Based on capital investment – Based on contribution to total risk capital budget.
E.g. if you invest 50% of budget, you get another 25% equity in company.50%
TOTAL 100%
There will be a shareholder agreement drawn that puts in effect a provision to
discourage “passengering”. This will stop the scenario where someone does not
participate in the project and contributes no capital and still has 5% shares in the
company.
Company name will be decided ASAP.
The company will have an Executive Board comprising of 3 individuals. This will
allow for speed in decision-making. These individuals are:
David Karangu: CEO/President
Duncan Onyango: CFO/project lead
Iruku Makanga: COO
A website will be created for the company. Additionally, secure server space will
be made available as a data repository for the company.
3. Project:
Duncan will coordinate the strategic partner. Currently, he is considering Telenor
– a Norwegian company and Detecon, a German company. His preference is for
Telenor.
Bid amount financing: It was discussed that in this project, we would come up
with a list of potential financial partners. Dagama Rose was mentioned as a
possibility.
A budget final budget will not be possible until the bid documents are available.
This must be acquired ASAP.
4. Next meeting.
Another conference call was scheduled for Monday Nov 10 at 8:00 AM
5. Alliances:
We have access to these individuals if necessary. Before we communicate with
them, the implications of the alliance must be analyzed particularly in the Kenyan
political climate.
Chris Keriri : Access to State house through dad. . David
Kirui: CCK- Duncan and David
Gen Kariuki CCK: Francis
Dr. Kulubi – National Communication Secretariat (NCS): Francis
Michuki: David
ACTION ITEMS:
DK: Prepare list of 10 company names for research on availability in Kenya.
IM: Begin registration process of company in Georgia.
Contact FM for documents.
Contact FM for analysis of Chris Keriri as an ally.
Begin website.
Secure server space
DO: Prepare list of potential financial partners
Prepare list of potential strategic partners
Facilitate contact with Alex and Mugo. Pass contact information to
Francis and Alex so they can work together.
Continue with formation of company in Kenya
Prepare draft Shareholders agreement
Prepare budget.
FM: Who do we involve at Statehouse?
Contact Alex
Information and contact with DaGama Rose
Get Bid Package.


-----Original Message-----
From: David Karangu [mailto:dkarangu@yahoo.com]
Sent: Friday, November 07, 2003 11:32 AM
To: Duncan Onyango; Iruku Makanga
Subject: Follow up on Conference Call
These notes should help in mapping out the next course of action;
DAVID
-come up with names for companies
Teleken
Kentelco
Simu International
Kensim
Telepartners
International Telephone Partners
Network Partners
Strategic Investment Consortium
Digital Telecommunications
Teleinvestments
Communications Network of Kenya
Landline of Kenya
Phone Networks of Kenya
Kenphone
DUNCAN
2
-will continue formation of company in Kenya, with the following officers; David-CEO,
Duncan-CFO, Iruku-COO, and research the above names quickly
-come up with draft for shareholders agreement
-come up with budget for the seed money
-draft a list of major investors and share it with us
-draft list of strategic partners
IRUKU
-will form US company incorporated in GA with above named officers
-develop secure website; and coordinate with Alex.
This will be our best PR tool. It is where potential investors and regulators will form an
opinion about us.
FRANCIS
-find out who we need to involve at Statehouse
-make contact with Alex
-make contact with DaGama Rose Co. in Kenya
-get us the bid package ASAP
PROPOSAL
As far as the shareholding ownership percentages; I propose the following;
1. to be a shareholder one has to come up with $5,000
2. after contributing the $5,000; Alex, Francis, Mugo, and Ralph would each own 5%- total
20%
3. after contributing the $5,000; the founders and key strategists who will do most of the
work will each own 10% (Iruku, Duncan, David)-total 30%
4. this means that 50% of the company will be owned thru the above arrangement. The other
50% will be owned via a percentage of seed money contributed.
Let me get your input on this which is a variation of what we discussed earlier. You can
lower the $5,000 to what you feel will be fair to the guys in Kenya. We definitely need to
examine the roles of people not contributing sweat equity as well as major capital and
decide if we really need them on board (Mugo & Ralph).
The shareholders agreement should address entry and exit of partners, as well as the power
and role of the executive committee, dispute resolution etc
Please do not forward this note, let it remain within the executive committee.
dk


Appendix:

SNO TENDER ATTRACTS SEVEN (7) PREQUALIFICATION BIDS
Nairobi, 19th December 2003
It will be recalled that on 23rd October this year, the Government of Kenya announced its decision to further liberalize the fixed telecommunications market segment. The decision was motivated by the need to improve the penetration of telecommunications services
throughout the country in order to free Kenyans, and particularly the business community, from the hurdles posed by lack of connectivity.

The decision was in light of the Government's objective of increasing the level of telephone penetration from the present 0.16 lines to 5 lines per 100 in the rural areas, and from 4 lines to 20 lines per 100 people in urban areas by the year 2015. The realization of this target requires the installation of a further 1.5 million fixed lines in the rural areas and 2.4 million lines in the urban areas at a cost of US$ 5.85 billion. This cost is way beyond the capacity of the incumbent national operator.

Once licensed, the Second National Operator (SNO) will compete with Telkom Kenya in all parts of the country in the provision of local, long distance communications, international gateway, international commercial VSAT network and Internet node and backbone. The Commission looks forward to completing this licensing exercise by end of June next year.

On November 7, 2003, the Commission placed a pre-qualification notice in the local and international press, inviting interested companies to participate in the pre-qualification process. The deadline for submitting pre-qualification bids was today at 3.00p.m. I am proud to announce that the SNO licence has attracted considerable response from investors. By 3 p.m. today, seven firms had submitted pre-qualification bids.
The following are the firms that have expressed interest in the licence:
1. Alldean Satellite Networks (K) Ltd. and Gilat Satellite Network Ltd (Israel).
2. China Netcom International Ltd., ZTE Corporation and Kensim Ltd.
3. Telenor (Norway)
4. Sasktel International (Canada)
5. Africa Bell Communications Ltd. (Pegrume Kenya, TCIL India, Tata India, PCA UK, British Telecoms UK, Wizcor, South Africa)
6. China Network International Corporation
7. Detecon and Deutsche Telekom Consortium
The Commission will immediately commence the process of evaluating the pre-qualification bids with a view to establishing the companies that have met the criteria set in the pre-qualification notice.

To pre-qualify, bidding consortiums were required to submit evidence of:

· A minimum annual turnover of more than USD 150 million.
· Managing a network of in excess of 500,000 subscribers.
· In addition, interested parties were expected to submit a financial and network history of consortium members including past three years' annual reports. Members of the bidding consortium were required to provide year-end financial statements for the last three years.
· Further, and in accordance with Government policy, prospective bidders were notified that at least thirty percent (30%) of the equity must be owned by Kenyans.
Upon pre-qualification, approved bidders will be invited to participate in a formal tendering process and will be eligible to obtain tender documents from the Commission. The Commission shall notify the pre-qualified bidders in writing.

I wish to affirm the Commission's commitment to managing the licensing process for the Second National Operator in a fair and transparent manner.
Thank you for your attention.
Issued by
Sammy K. Kirui
Director-General


Some recent information:

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Happy Reading!

The Kenya Democracy Project
Monday, July 26, 2004

11:26 am EST