Telkom Kenya has sent a strong message of its intention to compete in the tough GSM (Global System for Mobile Communications) market, signing a Ksh9 billion (US$145.6 million) deal with Swedish telecommunications giant Ericsson.

The deal, expected to run for 18 months, comes after Ericsson signed a separate deal with Kenya's third GSM company, Econet Wireless, which is expected to roll out services in July.

Telkom Kenya declared its intention to roll out GSM services two years ago, after its CDMA (Code Division Multiple Access) service came under criticism.

The CDMA calls are cheaper because they are not subject to the country's 26% duty on mobile calls. Telecom players expect Telkom Kenya to pay the mandatory 26% tax on all mobile-phone calls, which makes the cost of calls high compared to countries like Uganda and Tanzania.

Kenya currently has two GSM service providers, Safaricom and Celtel.

Under the agreement, Ericsson will build and operate the service while Telkom Kenya will retrain existing staff and recruit technical staff.

Ericsson willalso help in training engineers.

According to CEO, Mr. Dominique Saint Jean, Telkom Kenya plans to invest Ksh 19 billion.

The company was privatised in December 2007, with a France Telecom-led consortium buying a 51% stake and the government holding the rest.