An Orange shop in Nairobi. The government is yet to inject Sh2.4 billion into the firm to help retain its stake at 40 per cent, two weeks to the deadline. Photo/FILE
What you need to know:
The delay may see the government lose the right to acquire additional shares.
The Treasury’s stake in Telkom Kenya dropped to 30 per cent in December after the government only offed Sh2.5 billion of Sh4.9 billion it was meant to inject into the firm citing tight finances.
A regional business intelligence report by Indian Ocean Newsletter Monday said that President Kenyatta is adamant that the government should not give Telkom Kenya any more money, even if that means diluting its stake.
The Treasury is yet to inject Sh2.4 billion to increase its stake at Telkom Kenya to 40 per cent two weeks to a June 30 deadline.
The delay may see the government lose the right to acquire additional shares. The Treasury failed to factor in the amount in this year’s budget, a pointer that it was not keen on acquiring the stake, especially in the light of an inflated wage bills as a result of devolved government.
The Press officer at France Telecom, Tom Wright, Monday said the Government of Kenya (GoK) has not yet committed itself to pay the amount but still has two weeks to do so.
“The GoK is yet to wire the money. However, the June 30 deadline is not yet over. If it pays then their stake will rise to 40 per cent but if they don’t the status quo will remain,” Mr Wright told the Business Daily.
The Treasury’s stake in Telkom Kenya dropped to 30 per cent in December after the government only offed Sh2.5 billion of Sh4.9 billion it was meant to inject into the firm citing tight finances linked to below-target revenue collection and high expenditure based on public service salary hikes. France Telecom gave Sh5.1 billion raising its stake to 70 per cent.
But a regional business intelligence report by Indian Ocean Newsletter Monday said that President Kenyatta is adamant that the government should not give Telkom Kenya any more money, even if that means diluting its stake.
“He is intransigent that the Kenyan government should not help Telkom Kenya sort out its financial problems,” said the report.
“He is, therefore, refusing to allow the State to lend the company Sh6 billion, which Telkom Kenya needs to repay its debts to Kenya Commercial Bank and Standard Chartered Bank as well as bridging loans taken with France Telecoms and Orange East Africa.”
In a previous interview, the investment secretary at the Treasury, Esther Koimett, said that cash injection will be tied to Telkom Kenya’s ability to cut losses and availability of resources.
According to Telkom Kenya’s latest audited accounts, the company made a loss of Sh7.8 billion last year compared to a loss of Sh16 billion in 2011. The business generated Sh9.7 billion but spent up to Sh14 billion in operational expenses.
The government had an agreement on December 21 with France Telecom to inject additional cash and write off shareholder loans, aimed at easing the operator’s debt burden that currently consumes nearly half of its annual revenues.
This saw the Treasury convert Sh4 billion shareholder loan into shares and France Telecom swap its Sh15 billion debt for equity, effectively cutting Treasury’s stake in Telkom Kenya to 40 per cent from 49 per cent and raising France Telecom’s to 60 per cent.
More recently, Telkom’s interest expenses rose to Sh4.7 billion in 2011 from Sh883 million the previous year as it took on more shareholder and bank loans.
The re-organisation agreement is billed as the most expensive in corporate Kenya having consumed Sh119 billion in the past six years.
The process began with an Sh85 billion clean-up of Telkom Kenya’s books in readiness for privatisation in 2007.
