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Mystery surrounding Telkom Kenya’s Sh1bn CA debt deepens

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Telkom Kenya CEO Mugo Kibati. PHOTO | SILA KIPLAGAT | NMG

Summary

  • Auditor General Nancy Gathungu says the CA had recognised the Telkom debt in its books for the year ended June 2020.
  • Ms Gathungu’s analysis showed that the Sh1.07 billion was owed by Telkom Kenya comprising of general and specific provisions of Sh292 million and Sh780 million respectively.
  • A report by the Auditor General on the books of CA showing that the telco owes the regulator comes barely a few months after talks to merge with competitor, Airtel Kenya Limited, collapsed.

The Auditor-General has raised concerns over a Sh1 billion debt allegedly owed by Telkom Kenya to the Communications Authority of Kenya (CA), which appears to have been written off in the regulator’s books but whose existence has been denied by the mobile company.

Auditor General Nancy Gathungu says the CA had recognised the Telkom debt in its books for the year ended June 2020. The authority had gone ahead to make provisions for the debt alongside its other receivables totaling Sh2.7 billion.

Ms Gathungu’s analysis showed that the Sh1.07 billion was owed by Telkom Kenya comprising of general and specific provisions of Sh292 million and Sh780 million respectively. But Telkom denied the existence of such a debt.

“Telkom Kenya Limited vide letter dated December 21, 2020, confirmed nil amount being owed to the authority. However, no reconciliation was provided for audit review explaining the discrepancy of Sh1.07 billion between the two sets of records,” reads part of the report.

The report further shows that National Treasury also committed to provide the telco money for frequency spectrum fee for the financial year 2020/21 despite management having provisioned for the bad and doubtful debt in full.

“Under the circumstances, the accuracy and fair statement of the reported receivables from non-exchange transactions balance of Sh310.82 million as of June 30, 2020, could not be confirmed,” said Ms Gathungu.

A report by the Auditor General on the books of CA showing that the telco owes the regulator comes barely a few months after talks to merge with competitor, Airtel Kenya Limited, collapsed. Parliament reportedly warned the National Treasury against approving the deal.

On February 8, 2019, the pair had jointly announced the signing of an agreement that would see shareholders of both firms merge their respective Mobile, Enterprise and Carrier Services businesses in Kenya.

They would then operate under a joint venture company that was to be called Airtel-Telkom where Telkom would have the option of holding up to 49 percent stake.

CA had already approved the deal before refusal by Treasury to give it the green light frustrated Airtel to the point of calling off negotiations in August last year. The firm cited challenges of securing the required regulatory approvals for the collapse of the Airtel deal, which was meant to challenge Safaricom’s dominance.

Besides the challenges of securing the required approvals, it also cited opportunities presented by the growing demand for internet services on the back of the coronavirus crisis, which has forced many to work and learn from home.

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