Factors affecting financing of private telecommunications companies in Kenya: an exploratory study
The purpose of the study was to explore the factors affecting external financing of private telecommunications companies in Kenya. The study targeted privately owned telecommunication companies in Kenya and the funding constraints they face.The findings of the study indicate that telecommunication companies in Kenya to a large extent source for funds externally (95%), many early life companies (0 to 5 years) have not fully benefited from the external funding for both for Operating expenditure (Opex) and capital expenditures (Capex). The main factors influencing sources of funds were identified to be decision making, interest rates, and government policies, age of company, inflation and available sources of funds. Funding constraints included high interest rates, over-regulations, and slow pace of external funding procedures amongst many other challenges.Chi square and factor analysis was used to test relationship between identified variables and to test for reliability of the factors under study. Findings indicate that political instability is the most important determinant factor in funding. This must be strengthened to keep telecoms liquid in the long-run. The results also show that market regulation had the highest impact as a constraint.The study recommends the need to engage investors and venture capital firms to reap the benefits of untapped markets segments in the telecommunication sector in Kenya. The involvement of the government as a facilitator through the provision of policy and economic environment will continue to be more critical. A stable regulatory and economic environment as identified in this study is equally important to the sourcing of external funds.There is need for further studies to seek deeper knowledge on the priorities of telecommunications investors and the donor community and thus begin the process of creating a valuable relationship for both investor and recipient companies.