Private equity firm Helios Investment Partners is set to acquire the entire 70 per cent stake in Telkom Kenya held by France Telecom, a deal which gives the struggling telco the financial muscle to take on its rivals Safaricom and Airtel.
The transaction, whose value was undisclosed, will see the Treasury remain in Telkom Kenya with its minority stake of 30 per cent.
“The finalisation of the transaction remains subject to approval from the relevant authorities,” France Telecom, which trades as Orange, said in a statement.
The buyout brings to an end Orange’s long search for an investor to take over its interests in the company which has lost billions of shillings despite several capital injections and debt write-offs by its shareholders.
Helios declined to reveal the value of the deal as well as its strategy in turning around the former monopoly in the fixed line business.
Analysts at Standard Investment Bank (SIB) say Helios could focus on wholesale and Internet business using its existing infrastructure as well as sharing its towers.
“We do not think it will be a major disruptive force to the industry and will target to turnaround to profitability,” SIB said in a statement.
“It could also target to support Mobile Virtual Network Operators (MVNOs) looking to launch in the Kenyan market.” France Telecom in 2007 acquired a 51 per cent stake in Telkom Kenya for $390 million (Sh39 billion) but convertible loans doled out to the loss-making telco saw its stake grow to 70 per cent.
Telkom operates 3G, CDMA, GSM and Wimax frequencies that are critical to the rollout of the increasingly important data services as the voice market continues to shrink.
The cash-strapped Telkom Kenya owns real estate valued at Sh13 billion, according to a leaked report seen by the Business Daily ahead of the sale.
It also owns a 23 per cent stake in TEAMs, a 5,000-kilometre undersea fibre optic cable that links Kenya to the global Internet superhighway through Fujairah in the UAE.
The company also has a 10 per cent stake in another undersea optic cable, LION2 - a 2,700-kilometre cable that connects Kenya to the global network through Mayotte in Mauritius - and an eight per cent stake in the East Africa Submarine System cable.
The former cash-rich State agency also manages the National Optic Fibre Backbone, an inland fibre optic cable network that runs across the district/county on behalf of the government. Telkom Kenya’s net asset value, however, was not immediately clear.
The company posted €85 million (Sh9.2 billion) in revenue in the year 2014, reflecting a growth of five per cent, which is lower than the 13 per cent jump in Safaricom’s total sales to Sh163.4 billion in the period to March 2015.