By Jevans Nyabiage and Emmanuel Were
Kenya: With yuMobile’s exit due to be finalised and its assets stripped, another key mobile operator may be following in its steps and could soon announce its way out from the Kenyan market.
Six years after making a dramatic entry into the local market through the acquisition of defunct Telkom Kenya’s assets, Orange Mobile is considering whether it will fight it out for market share with Safaricom and Airtel, or throw in the towel.
Orange began with a senior management shake-up on March 1 that saw three new directors appointed: Gerard Ries, Olivier Froissart and Sebastian Fayard. The firm also appointed Allain Bridard as chief technical and information officer, a key position in the organisation.
The mandate of the new management is unknown, and whether their job involves preparing Orange for an eventual, and what appears to be an inevitable sale, remains to be seen.
Alternatively, the management changes could be intended to keep the firm afloat a while longer as it attempts to turn its fortunes around.
Orange’s management has so far kept the process under wraps, but disclosed to The Standard that it is auditing its Kenyan operation to establish viability and find out if bringing in a partner would end its years of operating in the red.
Paris-based Orange has also remained tight-lipped over reports that the telecoms giant has appointed Lazard to scout for a buyer for its Uganda telecoms business unit.
Strategic review
Tom Wright, Orange’s press officer, corporate, said France Telecom, which owns 70 per cent of Telkom Kenya, is currently carrying out a strategic review with regards to its activities in Kenya and Uganda.
“One option would be to find new partners in these countries to ensure the necessary financial and operating resources are available to maintain investment and support the continued development of operations,” he said.
The audit recommendation will determine the fate of Orange.
However, as things stand, Telkom Kenya is under immense pressure after the exit of yuMobile.
It has also yet to turn a profit since it was sold to Orange – then operating as France Telecom – in December 2007.
According to the Orange’s full year results, revenues for the Kenyan unit dropped to Sh9.79 billion in 2013 from Sh10.12 billion in 2012.
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Orange acquired a 51 per cent stake in Telkom Kenya by paying Sh27 billion.
Its shareholding has since grown to 70 per cent, following the conversion of loans by both Orange and the Government of Kenya to equity.
When releasing its financial reports last week, Orange added that it expected to make substantial payments to former employees of Telkom Kenya that recently won a court case in which they were seeking Sh3.2 billion in severance pay after they were retrenched from the firm in the years before its sale to Orange.
More cases
There are two more cases that are still in the courts where more ex-employees are seeking Sh2.1 billion in damages.
When the Government sold Telkom Kenya to the Frenchmen, the main objective was to stop the perpetual pumping of taxpayers’ money into what had evolved into an inefficient monolith.
Telecom was privatised because it did not have the resources to invest in new technology.
France Telecom was touted because it had solid capital resources to invest and to turn Telkom Kenya into a company capable of competing with nimbler, modern players.
But six years down the line, none of the objectives for which Telkom Kenya was sold have been met, and the firm is still bleeding red despite massive cash injections and sweetheart deals from the Government.
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