France Telecom closes door on Treasury

A man walks past an Orange Telkom shop in Nairobi’s CBD. FILE 

By MARK OKUTTAH

Posted  Monday, July 15  2013 at  20:20

In Summary

• The French multinational on Monday said it will not extend the June deadline for the government to inject Sh2.4 billion into Telkom Kenya.
• The Treasury failed to allocate the cash, part of the operator’s Sh10 billion rights issue, by the set deadline.

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France Telecom has closed the door on fresh negotiations with the Treasury that would raise the government’s stake in Telkom Kenya above 30 per cent.

The French multinational on Monday said it will not extend the June deadline for the government to inject Sh2.4 billion into Telkom Kenya, that would have raised Treasury’s stake to 40 per cent.

The Treasury failed to allocate the cash, part of the operator’s Sh10 billion rights issue, by the set deadline.

Economic secretary Geoffrey Mwau last month said Cabinet will consider the rights issue and make a final decision, but France Telecom is not keen on talks over the cash call.

“I confirm to you that there will be no negotiations. The capital structure will remain unchanged at 70:30,” Olivier Emberger, a press officer at France Telecom told the Business Daily in an e-mail.

The new structure gives the French firm bigger influence in the board and executive suite of the cash-strapped telco, as well as a bigger share of the prime land, buildings and telecommunication equipment that Telkom Kenya owns.

(Read: Treasury drags its feet on raising Telkom stake)

The government’s stake in Telkom Kenya stood at 49 per cent in November, but dropped to 40 per cent in December following a Sh34 billion balance sheet restructuring plan.

This further dropped to 30 per cent in June after the Treasury failed to raise Sh2.4 billion for the cash call.

France telecom provided its share of Sh5.1 billion in the rights issue called to address Telkom Kenya’s financial difficulties. The government offered Sh2.5 billion.

Treasury had tied the release of the cash to improved performance of the loss-making Telkom Kenya and the condition of the national Budget.

France Telecom is eyeing additional seats on the board of Telkom Kenya. It current has five seats while the Kenya government has four.

“The dilution of Treasury’s stake means that the government will have less clout in the management of the loss-making company,” Standard Investment Bank said in an earlier brief to their clients.

Reduced voting rights and smaller board representation at Telkom is expected to make it difficult for the Kenya government to push its agenda.

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