Telkom’s loss throws bourse listing plans into doubt

Upon listing it was expected that Telkom Kenya shareholding would shift, with France Telecom and the public holding 40 per cent each, and the government 20 per cent.

Following its privatisation in 2007, France Telecom was expected to engineer the company to become a profitable firm in the next three to five years in preparation for its public offering.

But the company has met with stiff competition in the form of three other players in the mobile telephony market namely market leader Safaricom, Zain Kenya and Essar.

Although the company managed to recruit two million subscribers to its mobile service in 2009, its revenues were dented by shrinking profit margins on voice tariffs.

“We did not meet our internal targets for growth last year due to stiff competition in the sector. We plan to revamp our offering to focus on providing quality services to the market, especially on the data side,” said Mikael Ghossein, Telkom CEO in a former interview.

In 2009, Telkom Kenya was forced to retract its launch offer of Sh1 inter-network calls as it struggled to gain the optimal number of subscribers to sustain its low pricing model.

During the year under review, it launched a comprehensive suite of products aimed at leveraging its large infrastructure footprint and made formal in-roads into creating data solutions for home and small business users.

The company spent Sh18 billion on its network in the period under review, which was spent boosting its presence in the GSM and CDMA markets.

But Telkom was also forced to deal with rising attacks to its fibre network, which cost the company Sh2.5 billion in maintenance and revenue losses of its expanding terrestrial network.

The company has also complained that the fee attached to obtaining a 3G licence – a technology seen by analysts as critical for mobile companies wishing to enter the mobile internet field – is too high, and is lobbying the government to lower the licence fee.

Meanwhile, France Telecom also posted depressed earnings, returning consolidated revenues of 45.944 billion euros, down 1.8 per cent on a comparable basis to last year.

The firm’s restated EBITDA of 16.327 billion euros with a margin of 35.5 per cent, a decrease of 0.5 points on a comparable basis, however the company noted that it had marked 5.8 per cent growth in Africa and the Middle East.