Helios Investment Partners is the latest suitor said to be gunning for some or all of the 70 per cent stake in Telkom Kenya owned by France Telecom.
The Africa-focused private equity firm, which recently sold off its stake in Equity Group for billions of shillings, is said to be targeting 51 per cent of the struggling telecommunications operator in its latest offer to the French.
This would see the Kenya government retain a 29 per cent stake in Telkom Kenya (Orange), while France Telecom keeps 20 per cent.
We could not determine whether the French, long believed to want a full exit, would want to stay on as technical partners, or whether Helios has one in the wings that might come aboard and take up France Telecom’s remaining stake.
Treasury secretary Henry Rotich told the Business Daily on Monday that his ministry is aware of the ongoing buyout talks.
He said Treasury, a shareholder in Telkom Kenya with a say in the deal, would only be involved later after the two have agreed on buyout terms.
Mr Rotich said a new partner must have a viable business strategy and the technical and financial muscle to run a mobile service firm.
The buyer must also have a pool of local talent that understands the local market and demonstrate the ability to turnaround the firm, he said.
“France Telecom previously had discussions with a number of buyers, including (Vietnamese operator) Viettel, who came up with a lot of demands — some touching on the government — that led to the collapse of the buyout,” Mr Rotich said in a telephone interview.
“What followed is we asked France Telecom to only bring to us serious investors and, yes, they have told us that Helios is a serious buyer.”
Vincent Lobry, the Telkom Kenya CEO, last week said he was aware of talks between the company’s shareholders regarding the company’s long-term growth, but refused to comment on “shareholder issues”.
Helios is said to have almost concluded talks with France Telecom and is expected to soon begin negotiating with the government of Kenya.
Established in 2004 and led by co-founding partners Tope Lawani and Babatunde Soyoye, Helios is one of the largest investment firms focusing on Africa. The fund has invested in oil, financial and telecommunication sectors in Africa.
In Kenya, for example, it has invested in Wananchi Group Holdings, a triple play provider (Internet, TV and voice), among others.
Telkom Kenya is jointly owned by the Treasury and France Telecoms, which was in 2007 allowed to buy a majority stake in the loss-making company after undertaking to turn around its fortunes.
Until 2012, the government had a 49 per cent stake in Telkom Kenya while France Telecom held the remaining 51 per cent. But the State ceded a nine per cent stake in December 2012 following a Sh30 billion debt write-off before losing another 10 per cent stake in June last year after it failed to inject Sh2.4 billion in a Sh10 billion rights issue.
The last dilution caused a public uproar after Members of Parliament claimed that taxpayers lost at least Sh30 billion in the conversion of shareholder loans to equity.
President Uhuru Kenyatta’s government has effectively suspended the privatisation of State-owned firms pending establishment of a proposed Government Investments Corporation.
Telkom Kenya has continued to make huge losses despite efforts by the two shareholders to clean up its books. The combination of losses and the drop in revenues has negatively impacted on Telkom’s cash flow, prompting shareholders to pump in more cash and write off its debts.
After the Viettel Group dropped out of the buyout talks last year, Mr Rotich told the Business Daily that the government had set up a team comprising officials from the Attorney-General’s office, the Treasury and ICT ministries to advise on the next steps.
The demands that sank Viettel’s deal included the immediate extension of all telecommunications licences held by Telkom Kenya for another 15 years.
The Vietnamese company had also asked for an additional 10 per cent stake in Telkom Kenya, which would have left it with an 80 per cent stake.
France Telecom, which owns 70 per cent in Telkom Kenya, has offered several reasons for its planned exit, including a contention that that the Communications Authority of Kenya (CA), the industry regulator, has not established a level playing field to help stop price wars.
Safaricom remains the dominant player in the market with 67.1 market share, followed by Airtel 20.2 per cent, Telkom Kenya 10.8 per cent and Equitel 1.9 per cent.
Telecoms operator revenues have thinned out since August 2010 when the cost of airtime dropped by more than 50 per cent, halving subscribers’ monthly airtime budget.
This is the reality that convinced Essar Telecom, the owners of yuMobile, to wind up the Indian company’s Kenya operations.
If France Telecom gets a buyer for its stake in Telkom Kenya by the end of the year, it will be the second investor to pull out of Kenya in as many years.