A consortium led by France Telecom offered Sh26.1 billion ($390 million) to beat two competitors to a 51 per cent stake in Telkom Kenya. The price is Sh6 billion ($90 million) above what the Government transaction advisor – the International Finance Corporation – had put forward as the market valuation of the State corporation.
France Telecom, in consortium with Dubai-based Alcazar Capital Limited who subscribed to a 15 per cent stake, also outbid by $109 million (Sh7.3 billion) the second highest bidder, Telkom South Africa.
Came third
Reliance Communications of India, which came third, tabled $221 million (Sh14.8 billion) for the deal.
Speaking at Treasury on Friday during the opening of the bids for the sale of the majority stake in Telkom, Investment secretary Esther Koimett said the French firm also surpassed the Government’s $300 million (Sh2 billion) reserve price.
The privatisation transaction is expected to close before the end of the year with the French firm negotiating and signing with the Kenyan Government a purchase agreement and a shareholders agreement.
Ms Koimett said the fourth bidder, Lap Green Network, did not meet all the prequalification and qualification requirements.
The debt-ridden Telkom Kenya is now valued at Sh14 billion, but there are debts, including the firm’s pension fund (Sh10 billion), Kenya Revenue Authority (Sh36.3 billion) and a syndicate of banks (Sh5.8 billion).
However, Ms Koimett said Telkom is being privatised without the 60 per cent stake it holds in Safaricom to ensure that the investor who takes over the telecommunications company transforms it into a profit-making outfit. Its ownership in the mobile service provider was being transferred to the Finance permanent secretary, the custodian of public shares in corporations.
But the Treasury is giving Telkom Sh64 billion to clear its balance sheet that is bloated with debts.
“The pension deficit and the syndicated loan are funded as part of the Sh64 billion restructuring costs of Telkom. We want to hand over a company with a clean balance sheet,” she said.
On claims that the process was being rushed, the officials said it started in 2004 when a consulting firm was hired to conduct a study on how it should conducted.
Under the deal, France Telecom will have five directors on the privatised Telkom Kenya’s board with the Government getting four slots.
The investment secretary also said that the company is expected to have turned Telkom Kenya into profitability in three to five years.
This will see the French firm cede 11 per cent and the Government 19 per cent of their respective stakes through the Nairobi Stock Exchange to create a new shareholding structure – France Telecom 40 per cent, the public 40 per cent and the Government 30 per cent.
The opening of the bids took place a day after the Government moved in to allay fears over the sale of Telkom Kenya declaring it a clean deal following allegations of impropriety by the ODM leadership.
ODM leaders
Ms Koimett, Financial secretary Mutua Kilaka and Information permanent secretary Bitange Ndemo said some of the ODM leaders criticising the deal were in the Cabinet when it was approved.
They termed the claims by ODM that the sale of Telkom would lead to a Sh420 billion loss to the taxpayer as baseless.
Speaking at Friday’s function at Treasury, World Bank country director for Kenya Collin Bruce defended the process saying the Government had carried it out in a transparent manner under the watchful eye of IFC.
Ms Anne Bouverot, France Telecom’s executive vice-president for international business development said that the company will use the existing infrastructure of Telkom Kenya – including the CDMA platform – to roll out its network in the short-term. It aims to market Telkom Kenya’s services under the Orange brand.
France Telecom is the number three mobile operator and the number one provider of broadband internet services in Europe and one of the world leaders in providing telecommunication services to multinational companies.
Source: the Nation
