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Telkom deal reeks of corporate greed


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Telkom deal reeks of corporate greed


Committee on Finance and National Planning Chairperson Francis Kuria Kimani during joint committee sitting with Committee on Communication, Information and Innovation of National assembly at the County Hall Nairobi on Thursday, April 20, 2023, investigating the Sh6.2 billion acquisition of Telkom Kenya limited by the Government of Kenya. PHOTO | DENNIS ONSONGO | NMG

The details coming out of proceedings of the parliamentary committee investigating the circumstances under which the government paid $51 million to London-based private equity company, Helios LLP, to acquire 100 percent of Telkom Kenya are sensational — to say the least.

I have followed Telkom Kenya’s privatisation issues since March 2007 when France Telecom paid us $390 million to acquire a 51 percent stake in the company.

The experience has led me to adopt a new definition of this phenomenon we call privatisation: private sector greed aided and abetted by elites — lawyers, accountants, investment bankers and transaction advisers- whose primary motive and intention is to craft complex transactions to reap billions.

The game is played as follows: the State gets a wodge of cash ($ 390 million in the case of Telkom Kenya), and the private sector gets a cash cow which they milk dry before they flip it to a third or fourth party.

The flipping happens even if the new party coming to buy the public asset has no domain knowledge or experience in running the parastatal being sold.

The big question I keep asking myself as I track the parliamentary proceedings is the following: why did the government allow Telkom Kenya to end up in the hands of a private equity company — a mere financial investor with no experience in running a telco?

This question is pertinent because when I go through my archives of the transaction documents signed by the parties in 2015 as Helios was coming, including the business plans and ‘heads of terms’, it is clear that Helios was to bring in a technical operator to run Telkom Kenya.

The investor was required to purchase Telkom under the terms of the ‘request for proposal’ that was used during the original privatisation transaction in 2007, the most important condition of which was that any investor bidding to buy Telkom Kenya had to provide proof of the existence of a technical and experienced operator in its consortium.

Our original intention and objective were not to sell Telkom Kenya to a mere financial investor. And when Helios came in, the requirement of a technical operator was maintained as a key requirement.

The ‘head of terms’ signed on November 5, 2015, between Babatonde Soyoye of Helios and former Finance Cabinet secretary Henry Rotich, stipulates that a share and purchase deal between the parties would only be signed after production by Helios of a technical services agreement between the company and an experienced technical operator.

I don’t know how this important requirement was skipped. Now, we are told that days before President William Ruto was sworn in, the investor flipped the company to the original owner and flew away with a fat Sh6 billion cheque in his back pocket.

The transaction advisers also flew away with a big cheque worth hundreds of millions in his back pocket.

How much capital did Helios put into the business? What we know is that in December 2018, Telkom Kenya sold Extelcoms House, the multi-storey building on Haile Selassie Avenue, to the Central Bank of Kenya for Sh1.15 billion.

This was not the largest asset-stripping deal to be conducted by Telkom Kenya under the management and stewardship of Helios.

The previous year, the company sold 720 tower sites in a sale and leaseback deal to the American Tower Company of the United States at $ 235,000 per site, meaning that Telkom Kenya, under the investor, pocketed a whopping Sh16.9 billion from the sale of those assets.

With former President Uhuru Kenyatta about to leave the scene, the time was ripe for another round of share flipping and complex financial engineering transactions.

Helios offered to sell the 60 percent stake in Telkom to the government at a paper value of $1.

It also offered to give the government a $239 million shareholder loan it had acquired from Orange Telecom when it was taking over Telkom Kenya for free.

Was this philanthropy? No. As the saying goes, the devil is in the details. The government had to take over a $51 million shareholder loan Helios had extended to Telkom Kenya.

They laughed all the way to the bank. The transaction adviser also made hundreds of millions.

With the money in the bank and the mission accomplished, it was now time to look for an expedient justification.

The government pretended that it was feasible to dump such a large company working in a competitive commercial environment into the hands of the little-known Embakasi Garrison-based National Security Telecommunications Service. It could not work.

Now, I gather that a legal firm has been appointed as a transaction adviser to facilitate yet another privatisation.

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