An Orange shop in Nairobi. A recent balance sheet restructuring plan cut the Treasury’s stake in the firm to 40 per cent. Photo/File
What you need to know:
France Telecom bought the stake held by Alcazar Capital and replaced its CEO, Charbel Jaoude, on the Telkom Kenya board.
The deal means that the French firm now fully owns the 60 per cent stake in Telkom Kenya initially held by an entity known as Orange East Africa.
France Telecom has bought the 11 per cent stake owned by a Dubai based private equity firm in Telkom Kenya in a deal that has tightened the French multinational’s grip on the local operator.
The Business Daily has learnt that France Telecom bought the stake held by Alcazar Capital and replaced its CEO, Charbel Jaoude, on the Telkom Kenya board. The amount paid to Alcazar was not disclosed.
The deal means that the French firm now fully owns the 60 per cent stake in Telkom Kenya initially held by an entity known as Orange East Africa, a special purpose vehicle created by France Telecom and Alcazar Capital after jointly acquiring a controlling stake in the Kenyan operator in 2007.
The deal closed last year and it will dim debate and speculation on how Alcazar, which was established weeks before the 2007 deal, came to own Telkom Kenya.
The ownership was a subject of a special audit by the government. “Alcazar is no longer an indirect shareholder of Telkom Kenya since mid-2012 when France Telecom-Orange acquired Alcazar’s stake in the holding company OREA (Orange East Africa),” said Mr Tom Wright, the press officer of France Telecom, in a statement to the Business Daily.
“Their representative on the Board of TKL was replaced by France Telecom-Orange.”
Alcazar gained the stake after paying $83 million of the $390 million that the consortium led by France Telecom offered for purchase of the 51 per cent stake in Telkom Kenya.
This earned the firm a 21.5 per cent stake in Orange East Africa with the remaining share held by the French conglomerate, whose direct stake in the Kenyan operator stood at 40 per cent. This means that the French firm’s direct stake has been smaller than the government shareholding of 49 per cent.
A recent balance sheet restructuring plan cut the Treasury’s stake in Telekom Kenya to 40 per cent, from 49 per cent, and raised France Telecom’s stake to 60 per cent.
The French firm also wrote off another debt of Sh15 billion. Under the plan, Treasury converted its Sh4 billion shareholder loan into shares as France Telecom swapped its Sh15 billion debt into equity to ease the heavy debt burden on the firm.
But the Treasury’s stake is expected to fall to 30 per cent after it offered half of the Sh4.9 billion that was expected from the government in the operator’s Sh10 billion rights issue.
France Telecom provided its share of Sh5.1 billion. The Alcazar deal took place before Telkom Kenya’s shareholders’ cash call and it’s not clear whether the PE firm’s decision to exit was tied to the rights issue or the poor performance of the operator, which has accumulated losses since the 2007 deal.
Telkom made Sh9.2 billion in revenues in 2011 and returned losses of Sh18 billion in what its management blamed on the price war in the voice calls market that saw tariffs drop by half in 2010.
In 2008, the French had hoped to return Telkom Kenya to profitability by end of 2011 but this was scuttled by the sudden deep cuts in call costs—which halved in 2010— and its ultimate impact on revenues.
More recently, the huge losses forced Telkom Kenya to rely on shareholder and bank loans, a mode of operation that raised its interest expenses to nearly half the revenues after it paid Sh4.7 billion in 2011 to its lenders.
