Helios takes over Telkom’s assets as Frenchmen exit tough market

Kenya has acquired an additional 10 per cent stake in Telkom Kenya for a symbolic Sh1 from the company’s new owners, Helios Partners.

National Treasury Cabinet Secretary Henry Rotich said late Friday that Orange, the previous owners, had completed the sale of the entire stake of 70 per cent to the UK firm. Helios Partners will now control 60 per cent stake through a Mauritius-registered company, Jamhuri Holdings. The transaction value was however not given although it is thought to be about Sh8 billion.

Orange shop

Kenya will, however, take up about Sh12 billion owed to the French owners by Telkom Kenya, being 40 per cent of the Sh30 billion in shareholder loans.

“We will take up our share of the loans owed by the firm to the exiting shareholder,” Mr Rotich said after the conclusion of the sale announced at his office. The company will continue using the ‘Orange’ brand for at least 18 months, according to the agreement entered after intense negotiations.

He defended the acquisition of the additional stake in the troubled company, terming it a ‘strategic asset’. Investment Secretary Esther Koimett said the Government would not be paying any amount to the French, while taking up the debt was actually an asset. “It is actually an asset which we could use to defend our stake in future in case of another sale,” she said. It is Telkom Kenya that will pay the debt, Koimett adds, if and when it starts generating profits.

“We are not paying anything in this transaction since the loans were granted to the company.” Details of the transaction between Orange and Helios were not revealed, with both parties citing that it was a private matter.

The State previously owned 100 per cent of Telkom Kenya before divesting its stake to 49 per cent in 2007 in a broader privatisation that also saw the sale of a majority stake in Safaricom.

finding traction

But unlike Safaricom that is owned 40 per cent by UK’s Vodafone, Telkom Kenya has struggled to find traction in the mobile telephony business and subsequently reporting losses after the divestiture.

Safaricom has a near 80 per cent market share, while Telkom Kenya controls less than 10 per cent. Eddy Njoroge was reappointed as the chairman by the new owners who like Vodafone are also from the UK.

“We are optimistic that with new people in management, the company should turn around and be profitable,” Mr Njoroge said after the sale. He has been the chairman of the asset-rich company since 2011.

A new management will be unveiled tomorrow, he said, pointing to major changes in the executive suite of the telco. Already, the officials seconded by Orange to Telkom Kenya have left office and were said to be flying out of the country.

Helios which is a private equity fund already has several multi-billion worth investments in the country. Most notable one was a near 25 per cent stake held in Equity Bank until last year. It grew its wealth seven-fold before disposing its stake in Equity Bank. Telkom Kenya was the country’s sole telephone operator, managing the now obsolete fixed lines before the emergence of mobile telephony in the late 1990s.

It was later split to create the Communication Authority – the sector regulator, Safaricom to offer mobile services and the fixed line operator (Telkom). But heavy operating costs associated with repairs of the cable infrastructure, and the unprecedented uptake of mobile phones, pushed the firm to loss-making.

The entry of Orange enabled Telkom to expand its service offering to include mobile networks and broadband. With the heavy investment required, Orange pumped in billions of shillings into the ailing business including the Sh30 billion that remains outstanding. Lack of resources on the side of the Government of Kenya saw Orange convert some of the debts to equity, raising its stake from 51 per cent to 70 per cent – which has now been acquired by Helios Partners.