MPs raise the red flag over Airtel, Telkom merger


An Airtel shop in Nairobi. FILE PHOTO | NMG

A National Assembly committee has raised the red flag on the proposed merger between Airtel and Telkom Kenya, saying there are outstanding issues in the deal that should be addressed before it is given the seal of approval.

The two telcos have signed an agreement to merge their businesses and operate as Airtel-Telkom, but the Committee on Implementation claims the deal has all the hallmarks of a scandal where private individuals are buying off a public entity through the backdoor for a song.

The committee has thus invited the relevant government agencies to appear before it to shed light on details of the merger that industry players say is aimed at taking on the dominant industry player, Safaricom #ticker:SCOM.

Of particular interest to the House team, which is chaired by Narok North MP Moitalel ole Kenta, is the 2014 Special Report of Public Investment Committee (PIC) on the privatisation, recapitalisation and restructuring Telkom Kenya’s balance sheet which was adopted by parliament in 2015. The committee is charged with the responsibility of the ensuring that all the resolutions of the House are implemented.

Among the agencies that will appear before the committee include the National Treasury, Ethics and Anti-Corruption Commission Headquarters (EACC), State Law office, Telkom Kenya, Communications Authority of Kenya (CA) and the Ministry of ICT.

On Monday, Nominated MP Godfrey Osotsi, who is the vice- chair of the committee, confirmed that the report had been tabled to the committee for consideration following reports of a looming merger.

“We are handling the matter. We have invited all those mentioned in the report and the implementing agencies to establish the status of the implementation of the report. We want to know from these agencies why the report has never been implemented,” Mr Osotsi said.

In the restructuring, carried out in December 2007, France Telecom (now Orange S.A.) bought a 51 percent stake in Telkom Kenya at a cost of Sh26 billion but PIC dismissed the deal as akin to share- fixing arising from the fact that the Government only got Sh2.5 billion of the required Sh4.9 billion.

Telkom Kenya is currently majority owned by private equity firm Helios Investment Partners (60 percent) while the Government of Kenya holds the remaining 40 percent stake.

The committee noted that the National Treasury did not apply due diligence in the identification of the French multinational as a strategic investor during the bidding for privatization as a company called Alcazar Capital LLC, which was in partnership with France Telcom, remains a mystery and its real owners not known.

The Public Investment Committee (PIC) therefore faulted the Ministry of Finance for its inability to protect public interest during the restructuring as it failed to involve stakeholders such as the Privatisation Commission and CA in the process.

Similarly, the State law office was not involved in the initial stages of the transaction which is contrary to the provisions of the Office of the Attorney General Act.

“We have no problem with the competition. All the committee wants is that things should be done above board. It is our form believe that some people want to use this merger to take over Telkom Kenya in exchange of Nothing,” Mr Osotsi said.