Telkom Kenya faces penalties for costly share deal with French firm

Telkom Kenya is likely to be slapped with a heavy penalty for changing its shareholding structure without notifying the regulator.

During a Parliamentary Investments Committee hearing yesterday, the Communications Commission of Kenya said they had learnt of the dilution of government shareholding from 49 per cent to 30 per cent through the media, adding that this was unprocedural as the company was expected to notify the regulator on such a move.

“We will write to Telkom Kenya to show why government shares were diluted without notifying CCK and levy fines for breach of regulations,” said Commission Secretary John Omo.

The parliamentary committee is investigating how the government ceded an additional 19 per cent stake in Telkom Kenya to France Telecom without the French-owned company paying a single cent to the Treasury.

The CCK officials told PIC that the dilution of government shareholding was done without permission being sought, or any approval provided “as is required when the ownership structure is to change, as some thresholds have to be met (if the approval is to be provided),” said Mr Omo.

The PIC read mischief in the manner at which Treasury, which had 49 per cent of share-holding in Telkom as at December 21 last year, has ceded its shareholding to France Telecom.

In December, Treasury allowed France Telkom to write off Sh30 billion worth of loans which Telkom Kenya owed it in lieu of an extra 9 per cent shareholding in the firm.

And in June 30 2013, the Treasury aagain failed to honour a promise it had made to give the firm a Sh2.4 billion cash boost.

New twist

For that, it gave the company a 10 per cent shareholding, equivalent to Sh33.3 billion.

This adds a new twist to the issue of the government ceding 19 per cent shareholding to France Telecom in two deals the committee says lead to taxpayers losing billions of shilling.

On Tuesday, the executive director of the Privatization Commission, Mr Solomon Kitungu, said his commission was not informed of the dilution of shares, adding that such changes should have been handled only by his office.

PIC chairman Adan Keynan told CCK officials that Telkom had complained that the regulator had failed to create a level playing field, which had ended up disadvantaging the mobile operator.

CCK, however, denied that the regulations favoured any of the operators, adding that due to the reduction of termination fees between various networks yuMobile and Airtel broke even last year.

“The issue of non-profitability of Telkom Kenya can not be related to the interconnection fees but other issues that we can not determine,” said CCK’s director of competition, tariffs and market analysis, Mr Matano Ndaro.