Treasury allocates Telkom Sh2.5bn as shareholder loan
Telkom Kenya’s CEO Mickael Ghossein. Finance assistant minister Oburu Odinga told MPs on May 16 that the government had an agreement with France to help Telkom Kenya repay its loan. Photo/File
The Treasury has allocated the debt-ridden Telkom Kenya Sh2.5 billion. The amount represents just half of what the company had asked for in the form of a shareholder loan.
Telkom Kenya, 49 per cent owned by the government and the balance by France Telecom, had earlier denied that it was in need of a lifeline following media reports that it was seeking Sh10 billion from the exchequer as bailout.
The Treasury, which holds stake on behalf of the public, said there was a possibility for the amount to be changed by Parliament once it had gone through the Budget.
This applies to other items already allocated cash and even those that have been excluded because the Constitution gives power to the House to make changes to the Budget Estimates.
“On Telkom Kenya, the request was for Sh5 billion but the Treasury could only afford Sh2.5 billion considering the resource constraints and many competing priorities,” Geoffrey Mwau, economic secretary at the Treasury, told the Business Daily.
The company, which controls 10 per cent of mobile telephony services, is indebted to the tune of tens of billions of shillings and could find it difficult to settle the obligations.
In particular, it owes its parent firm, France Telecom, Sh38 billion. In total, the firm owes a colossal Sh51 billion in expensive loans and may not return a profit in the foreseeable future.
The former parastatal had earlier said it was repaying Sh230 million per month, which means that the cash it is to receive from the Treasury is enough for repayment of debt for 10 months.
The matter of Telkom Kenya allocation also arose during parliamentary Budget Committee hearings on Wednesday when its chairman Chris Okemo enquired why the cash had been allocated to the firm.
Cryptically labelled
The allocation was not initially disclosed in the Budget estimates as it was cryptically labelled as “other domestic lending and on-lending.”
“We had an agreement with the government of France that we will both contribute funds to help Telkom Kenya repay its loans,” Finance assistant minister Oburu Odinga told the parliamentary Budget Committee on Wednesday.
While denying that the company was experiencing financial problems, the management had earlier disclosed it had Sh2 billion loans from KCB and StanChart.
Telkom CEO Michael Ghossein said he had no comment to make on the government loan and referred the Business Daily to the Treasury.
Earlier, Mr Ghossein had given the impression that even if the company defaulted, it was ready to pay any resulting penalties.
“We are in a position to meet all our financial obligations to banks and if we don’t, then there is no reason for them to worry because there are penalties. The next time we are due for repayment is between November and December,” Mr Ghossein had told a press conference called over a month ago in response to reports that it was financially handicapped.
In an earlier statement, its chairman Mr Eddy Njoroge said that the company was seeking cash to support its strategic plan.
