Telkom Kenya incurred a Sh575 million loss for running a government-owned fibre optic network worth Sh16 billion, a new audit shows.
A forensic audit on the National Optic Fibre Backbone (Nofbi) Phase 1 project shows that Telkom Kenya ceased carrying out operations and maintenance in December last year.
It reveals that Telkom Kenya earned Sh2.33 billion in revenue from leased out Nofbi Phase I infrastructure from June 2011 to December 2021 when it ceased carrying out operations and maintenance.
However, the State firm incurred Sh2.9 billion in cumulative costs for operating Nofbi infrastructure—which provides telecommunications connectivity in all 47 counties--over the 10-year period.
“As a result, Telkom Kenya Ltd incurred a cumulative net loss of Sh575 million, which has not been reimbursed as at the time of audit in February 2022,” Nancy Gathungu, the Auditor-General said in a forensic audit.
The Ministry of ICT and Telkom Kenya signed a five-year Nofbi Phase I infrastructure commercialisation deal following the expiry of a two-year operations and maintenance agreement in which Telkom had earned Sh141.8 million between 2010 and 2011.
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In the initial deal, the telecoms firm was to undertake minor repairs on the network for a monthly payment of Sh20.3 million.
The project was commercialised through a five-year management of Nofbi Phase I Infrastructure Agreement. The forensic audit revealed that the commercialisation agreement was backdated to June 1, 2011, resulting in a seven-month overlap with the operation and maintenance agreement.
“However, Telkom (K) Ltd was paid the monthly operation and maintenance fee of Sh20,261,964 during the seven months’ period but did not claim any maintenance charges,” says the report. Telkom leased out Phase I infrastructure to other telecommunications companies.
The commercialisation agreement stipulated that the government and Telkom Kenya share the net profits received from the Fibre Cable without any active telecom equipment (Dark Fibre) services where each party was to receive 50 percent of net profits.
The report states that as at December 2021, a cumulative total of 26,432 kilometres of Dark Fibre was leased out to various entities including the government, Safaricom, Jamii Telcoms, Kenet Links, Wananchi Links, Telkom/Airtel Links, Telkom/Kaysalt Links and Telkom/Sanmarco Links.