France Telecom bought a 51 per cent stake in Telkom Kenya in December 2007 for Sh27 billion with the brief of turning around the loss-making firm.
So far, Telkom Kenya is estimated to have borrowed Sh48 billion in shareholder loans, which combined with bank loans have been costing it Sh9.5 billion in interest payments. This is more than the Sh9.2 million revenue the company made in 2012.
The government has converted its shareholder loans in Telkom Kenya into equity in a move that could see it gain majority control and ease the operator’s debt burden. A brief from State House said that France Telecom, which owns a 51 per cent stake in the hitherto state firm, will also write off the debts it has advanced the operator. The move comes only weeks after Telkom Kenya said it had received Sh2.5 billion from the government and Sh5.1 billion from France Telecom to turnaround its operations. “The Cabinet also approved the proposed recapitalisation and balance sheet restructuring of Telkom Kenya Limited by converting into equity all the shareholder loans provided to Telkom Kenya by the government,” said the brief from State House. “In exchange, France Telkom will write off the balance of its shareholder loans. This will enable Telkom Kenya to be properly capitalised and regain competitiveness in the market.” Details on the balance sheet restructuring plan remained sketchy last evening and it was not clear whether the government equity would be ordinary shares or preference shares. There is a possibility of the government gaining control and the operator converting to a State firm if the loans are converted to ordinary shares. On Thursday, Mr Mickael Ghossein, the Telkom Kenya CEO, and Ms Esther Koimett, the Investment Secretary and director in the telecom firm, said they did not have details on the impact of the debt conversion on the shareholder structure.
The chairman (Eddy Njoroge, CEO of KenGen,) will know its impact since it’s a shareholder issue,” said Mr Ghossein. Ms Koimett promised to give details on the issue on Friday.
France Telecom bought a 51 per cent stake in Telkom Kenya in December 2007 for Sh27 billion with the brief of turning around the loss-making firm. So far, Telkom Kenya is estimated to have borrowed Sh48 billion in shareholder loans, which combined with bank loans have been costing it Sh9.5 billion in interest payments. This is more than the Sh9.2 million revenue the company made in 2012.
In March, Telkom Kenya requested the government and its parent company, France Telkom, for a Sh5.8 billion emergency loan to avoid a liquidity crisis that could have seen the firm default on its bank loans and other supplier debt starting in April.
