Telkom wants Sh10bn bailout from taxpayer

Photo/FILE

Telkom Kenya Chief Executive Officer Mickael Ghossein during a past news briefing. In an interview with The EastAfrican, the CEO said that the final amount of the shareholder loan being requested was still under discussion.

Telkom Kenya, which has sunk into a fantastical debt trap, is asking taxpayers for a Sh10 billion bailout.

The firm, which made a record loss of Sh18.2 billion in 2011, has about a week to raise Sh5.8 billion to repay a bank loan by the end of the month.

The country spent more than Sh90 billion of taxpayers’ money to prepare the company for sale to French Telecom in 2007. This resulted in loss of 16,100 jobs in five years.

Additionally, the government surrendered its crucial fibre optic network as a Sh10 billion sweetener for what is turning out to be one of the messiest privatisation transactions in recent times.

Now the company, whose turnover was only Sh9.2 billion, owes a massive Sh51 billion in expensive loans and is not expected to make any money for years to come. (READ: Telkom still lives off other people’s money)

According to official documents, Telkom Kenya’s management says it has hit a “brick wall” and warned the Treasury and its parent shareholder France Telecom that if the emergency cash injection does not come through this month, it will be unable to make short term cash repayment worth Sh1.6 billion to Standard Chartered Bank.

This will trigger a chain reaction that could see bank loans worth Sh12.5 billion from Standard Chartered and KCB called in, sinking the company deeper into insolvency, forcing taxpayers to fund an even bigger rescue package.

In this situation, the management says it will only be able to pay basics like electricity, water, security guards and salaries and it will even be unable to pay the outstanding bills of connecting its customers’ calls to other mobile networks.

Other suppliers owed Sh1.9 billion since 2011 will not be paid on time.

In an interview with The EastAfrican, Mickael Ghossein, the chief executive of Telkom Kenya, said that the final amount of the shareholder loan being requested was still under discussion.

The management has also requested its parent company to roll over Sh35 billion in principal and interest that is also falling due at the end March.

Kenya Union of Civil Servants secretary general Tom Ondege was outraged by the firm’s woes and questioned the rationale of privatising such companies in the first place.

“It is the role of the government to make sure that the parastatals are self-sustaining and succeed in creating jobs for the citizens, not reducing the jobs already available in the country.” (READ: Full Report)