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Corporate

Telkom Kenya manager leaves amid push for Treasury bail-out

Photo/File  Outgoing Telkom Kenya deputy CEO Jane Karuku at a past event.
Photo/File Outgoing Telkom Kenya deputy CEO Jane Karuku at a past event. 

France Telecom has firmed its grip on Telkom Kenya’s management by scrapping the senior-most position held by a Kenyan even as it seeks Sh10 billion from taxpayers locally.

The restructuring has seen the exit of Jane Karuku who held one of the two deputy managing director positions. Bruno Allassonniere held the other.

“I have had two deputy CEOs; one has left and I am not going to replace her because we have scrapped that post. The second one will stay until 2013 or probably longer,” said Telkom CEO Mickael Ghossein on Wednesday.

Ms Karuku — who is currently serving notice — is a former Cadbury Kenya CEO.

Besides supervising the three heads of departments, Ms Karuku’s responsibilities also included supervising government relations.

The move now leaves only one Kenyan, Angela Mumo, who heads the corporate communications docket, in the executive management team dominated by five officials seconded by France Telecom.

The five are Mr Ghossein, Mr Allassonniere; Yvan Ridard (head of finance), Allain Bridard (head of IT&N) and Laurent Giraud, the head of Wholesale.

Mr Ghossein said the heads of human resource, corporate communications and legal and regulatory departments who previously reported to Ms Karuku will now report directly to him.

“The restructuring has nothing to do with what is appearing in the press (referring to the company’s financial position as reported by our sister publications, the Daily Nation on Wednesday and the current issue of The EastAfrican), but are meant to cut the level of reporting structure that we had,” said Mr Ghossein.

Telkom Kenya created the two posts of deputies in July 2010 in what it said was alignment of its operations with France Telecom-Orange and also to ensure that Telkom Kenya, under its Orange commercial brand, sharpens focus on key business areas.

Mr Ghossein will now handle all the government relations at a time when Telkom Kenya is asking Sh10 billion from the Treasury to pay it debts and remain afloat.

Ms Karuku’s exit comes hot on the heels of that of another key staff member, Stephen Kipttiness, who left the firm at the beginning of the year.

Until January, Mr Kipttiness was the head of regulatory affairs. His position was taken over by Agnes Okelo.

In 2011, the firm made a loss of Sh18.2 billion after making sales of Sh9.2 billion and is reported to be servicing loans worth Sh51 billion.

The firm operates a fixed-line monopoly that has suffered immensely from vandalism while its other area of dominance, the fixed wireless, appears to have lost in strategic importance to focus on mobile phones.

Telkom Kenya is owned 49 per cent by the Kenya government, while France Telecom owns a 51 per cent stake through Orange East Africa.

Alcazar Capital — a Dubai based private equity firm — owns 15 per cent of the 51 per cent.

The EastAfrican has reported in its current issue that the Telkom Kenya management is seeking a Sh10 billion rescue package from the government.

It has also asked that the repayment of Sh41 billion in shareholder loans due this month be frozen.

France Telkom is said to have provided Sh34 billion of these loans at an interest rate of between 9.9 and 10.2 per cent in addition to other fees.

The government on the other hand has loaned the firm Sh3.9 billion.

Telkom Kenya had targeted to return to profitability by December 2010, but the halving of airtime costs since August 2010 has cut the operator’s sales and profits.

Safaricom, the dominant player whom Telkom faces in the mobile industry, opted to increase calling rates by 30 per cent in October, a reflection of the uphill task facing the Galic firm.

Telkom Kenya witnessed the fastest growth in subscriber numbers in the year to September, but this had little impact on its revenues since the bulk of its customers have been talking less and calling rival networks.

Safaricom controls 67.7 per cent market share in terms of subscribers while Airtel has 15.7 per cent, Telkom Kenya 10.4 per cent and yu 6.2 per cent, according to the CCK data.

The dominance of Safaricom has hurt its rivals, including Airtel and yu, since the bulk of calls in Kenya’s voice market terminate at its network, which has seen smaller players pay the firm a huge share of their revenues in interconnection charges.

These are the fees that operators pay competitors for calls terminating in their networks. Operators pay Sh2.21 per minute for the service.

Data from the Communications Commission of Kenya shows that Telkom Kenya’s subscribers made 28.2 million minutes calls in the three months to September to rival networks compared to 14.4 million minutes within the network.

This means the firm was paying more to rivals than its income.

In the year to September, Telkom Kenya added 1.8 million subscribers compared to Safaricom (1.2 million), Airtel (1.1 million), and yu (0.16 million).

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