Helios Investment Partners, a private equity firm in the UK, sold the Treasury a 60% stake in Telkom Kenya for Sh6.09 billion. As a result, the government owned the entire company.
According to documents given to Parliament, the Treasury spent money in the weeks before President William Ruto’s inauguration on September 13 on several things without getting permission from Parliament.
Plans for Telkom Kenya to list on the Nairobi Securities Exchange (NSE) through an initial public offering (IPO) have been scrapped. This is an unusual case of a privatized company being taken back over by the government.
When Telkom Kenya was privatized in 2007, France’s Orange purchased the bulk of the company’s shares. But in 2015, Orange sold its share to London’s Helios Investment for an amount that was not made public. At Sh6.09 billion, the deal puts Telkom Kenya’s value at Sh10 billion, or 1% of the market-leading Sh1 trillion value of Safaricom.
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A senior Treasury official said that when Helios told the government that it planned to leave Telkom, the state used its preemptive rights. If one of the owners decides to leave the business, shareholders have special rights that give them the first chance to buy a piece of the business.
The takeover was done by the government to revamp Telkom Kenya
The top Treasury official, who spoke on the condition of anonymity, said, “We bought the shares for Sh6 billion after Helios threatened to quit.”
We purchased the shares because the government feared Helios might sell them to a buyer who did not share our goal of turning around Telkom Kenya.
The third-largest telecom provider in Kenya by users, Telkom Kenya, has been losing consumers recently. During a time when Airtel and Safaricom were gaining customers, the operator’s mobile phone users went from 4.23 million in 2019 to 3.42 million in June, which is a 19.1 per cent drop.
A portion of the Sh23 billion that the Treasury spent with the MPs’ consent between July and August includes the Sh6.09 billion that the State wired to Helios.
The Constitution says that the Treasury must present a mini-budget two months after any withdrawals from the Consolidated Fund are made without the consent of MPs, whose terms ended on July 9.
The Sh23 billion is a portion of the Sh54.6 billion it had agreed to take out of the government’s primary account without parliamentary authorization. Even though the Parliamentary Budget Office (PBO), which gives financial and budgeting advice to parliamentarians, didn’t agree with the payment, the Treasury is now asking for approval to make the payment
“The Treasury has exploited this constitutional article.” What presently takes place is that the Treasury withholds funds to pay for items not included in the budget and then goes to Parliament to gain approval for the expenditure. Recently, PBO’s acting director Martin Masinde enquired.
Safaricom has been a dominant force in Kenya’s telecommunications industry
The most recent foreign operator to leave Kenya is Helios, where Safaricom, which is owned in part by Vodacom and Vodafone, controls 67 per cent of the country’s 36 million mobile subscribers.
Over the past 20 years, companies like India’s Essar Telecom, Kuwait’s Zain, and France’s Vivendi have left Kenya after failing to earn a profit in a market controlled by Safaricom—the most lucrative company in the area. They have had a difficult time gaining members because Safaricom has a 66 per cent market share as of June. In June, Airtel had 26% of all mobile phone subscribers in Kenya.
According to Safaricom’s rivals, the corporation controls over 90% of the market’s sales in segments including voice calls and text messaging, giving it a strong position in the industry. The attempt to divide Safaricom into distinct financial services and telecom businesses has been sparked by the company’s dominance. Safaricom asserts that it doesn’t abuse its hegemony or suppress competition.
Sources in the Treasury say that Helios lost interest in Telkom after its merger with Airtel Kenya didn’t work out. The operator said in August 2020 that it was no longer thinking about merging with Airtel because it would be hard to get the regulatory approval needed for the deal. With the merger, Safaricom would have faced a more formidable rival. After the Airtel contract fell through, Helios informed the Treasury that they were no longer interested in the project.