Telecoms liberalisation is a flagship economic reform for Kenya
The Kenyan Government is reported to have given the go-ahead for a new fixed-line telephone licence, raising the prospect of competition for the state-run monopoly.
Communications Minister John Michuki has told the Communications Commission of Kenya, the national industry regulator, to start the process of issuing a second fixed-line licence, Reuters news agency reported.
The government will also now start the legal process of lifting the monopoly enjoyed by Telkom Kenya, the state carrier.
"I expect the CCK will move fast and make this happen well before the end of June next year," Reuters reported the minister as saying.
Kenya is under pressure from international lenders to speed up its economic liberalisation programme and Telkom Kenya, which was first due for privatisation in April 2000, is considered a flagship reform project.
Telkom Kenya has just over 300,000 subscribers in a country of 32 million people and the company says it needs $5.85bn to install 3.7 million new lines if demand is to be met.
Businesses and customers complain that Telkom's monopoly affects the quality of international and domestic calls and slows the advance of the internet in Kenya.
Industry analysts welcome progress in liberalisation.
"The second national carrier licence in Kenya is certainly an attractive proposition. The new operator will be able to tap into the energy of what is sub-Saharan Africa's second largest internet and third largest mobile market," says Paul Hamilton, Africa telecoms analyst at World Markets Research Centre.
Unreliable fixed-line services have led to a boom in mobile phone use with two providers and 1.8 million subscribers, up from 20,000 in 1999.
The government is also planning to license a third mobile operator by December 2003. Zimbabwean company Econet was awarded the contract in September but the proces has been caught in political wrangling.
Econet was also the lead bidder for a 49% stake in Telkom in a failed privatisation in November 2001 which would have been the country's biggest ever state sell-off.