Kenya’s third largest telecommunications service provider, Telkom Kenya, could soon get a new lease of life following its acquisition by UK private equity firm, Helios Investment Partners.
This comes as the mobile service provider yesterday confirmed that France Telecom had sold off its 70 per cent stake to Helios after eight years. But no financial details were disclosed.
“The Orange Group announced that it has signed a binding agreement with Helios Investment Partners for the sale of its entire 70 per cent stake in Telkom Kenya,” read a statement from Telkom Kenya. “The finalisation of the transaction remains subject to approval from the relevant authorities.”
Orange bought a controlling 51-per cent stake in the company in 2007 for $390 million. The decision by France Telkom to sell off its stake comes following months of frustration at the Government’s inability to clear the path for the restructuring of one of Kenya’s oldest institutions.
In 2012, the State wrote off a Sh30 billion debt in a debt-equity swap that saw France Telkom increase its shareholding by another 20 per cent in efforts that were supposed to mark the beginning of Telkom’s turn-around.
In addition to the debt-swap agreement, France Telecom was to inject another Sh5.1 billion with the Government putting in Sh4.9 billion. While its partner funded its portion fully, the Government only released Sh2.5 billion and was unable to raise the Sh2.4 billion.
According to financial reports from France Telkom, the Government stymied efforts to turn Telkom Kenya to profitability necessitating its (France Telkom) exit.
“In 2014, Orange intended to implement certain solutions to respond to Telkom Kenya’s financial difficulties,” read the statement.
“During the fourth quarter, due to continuing disagreements with the Government of Kenya, its co-shareholder, Orange concluded it was contractually unable to implement these solutions without the latter’s agreement. This led the Group to conclude that it had lost control over the entity.”
Despite having the most extensive cable network in east Africa’s telecommunications industry, Telkom Kenya has struggled to remain in business piling debt upon debt in the last decade.
Data from France Telecom’s financial statements indicates that Telkom Kenya has accrued over Sh15 billion in debt between 2012 and 2014 alone.
The Communications Authority of Kenya (CA) is also owed monies by Telkom Kenya and the regulator has indicated intent to pursue its dues even as the entity changes hands.
“We heard that they were negotiating the sale but we have told them that they have to pay us the Sh1.5 billion they owe us in spectrum and operational fees,” stated CA Director General Francis Wangusi last week.
