The Treasury bought an extra 60 percent stake in Telkom Kenya to avoid spying on the Army and the National Intelligence Service (NIS) communications through exclusive access to phone and data networks.
Former ICT Cabinet Secretary Joe Mucheru on Wednesday said the government had initially planned to develop its own National Security Telecommunication Service to secure its communications from potential tapping by third parties via a network owned by investors.
The National Security Council (NSC) approved the purchase of the 60 percent stake from Helios Partners on grounds of risk to national security after the fund opted to exit the loss-making entity.
“The NIS and KDF were building a new telecommunications infrastructure. But this was going to be very expensive and when the opportunity to buy a 60 percent shareholding of Helios presented itself, that was a great value to Kenya,” said Mr Mucheru.
“We reacquired Telkom Kenya and saved a lot of money that is being paid to the private sector who are running telecommunications services for the government,” he added.
Treasury sources reckon that the security risks cited are similar to the ones that led to the blockade of the planned merger of Telkom.
Telkom Kenya provides critical government communications services to the Office of the President, the State House, the government data centre, the Ministry of Interior, the General Service Unit, the Department of Defence’s restricted communications networks and other critical State functions.
The security organ argued that the proposed merger would render government communications vulnerable to interception since the new joint venture company between Telkom and Airtel would not be under government control.
The State had a 40 percent stake in Telkom Kenya.
Telkom Kenya’s data centres, data rooms and base stations manage critical security infrastructure, including carrier services, landing stations, undersea cables and meet-me rooms—where telecoms firms connect to each other.
“Telkom holds a lot of assets, including a data centre. All important telecommunications infrastructure should be held, managed and run by the government,” said Mr Mucheru.
“Currently, military, police and Kenya Wildlife Service, among other security systems, are handled by Telkom.”
Mr Mucheru said the government must retain ownership of the National Optic Fibre Backbone (Nofbi) Network, undersea cables and landing sites, and the fibre optic spectrum.
The Helios deal marked a rare return of a privatised company to State ownership, derailing initial plans for the listing of Telkom Kenya at the Nairobi Securities Exchange (NSE) through an initial public offering (IPO).
France’s Orange bought a majority share in Telkom Kenya when it was privatised in 2007 but then disposed of its stake to London-based Helios Investment in 2015 for undisclosed fees.
A former Treasury official in the administration of former President Uhuru Kenyatta reckons that the State exercised its pre-emptive rights after Helios notified the government of its intention to exit Telkom.
Pre-emptive rights are privileges extended to shareholders, giving them the preference to buy the stake in the business should one of the owners opt to exit.
The government’s decision to hive off property valued at Sh10 billion from Telkom Kenya’s balance sheet without the knowledge of Helios and its refusal to support the merger of the firm with Airtel prompted the private equity fund to sell the 60 percent stake.
“The government of Kenya proceeded to unlawfully expropriate the prime property of Telkom Kenya Limited situated along Ngong’ Road Nairobi measuring approximately 79 acres valued at over Sh10 billion without Telkom’s or Jamhuri Holding Ltd’s consent and without any compensation being committed or paid,” reads a letter from Paul Cunningham dated March 20, 2023, addressed to the Office of the Clerk of the National Assembly.
