CA grilled over Telkom Kenya's Sh3.1B debt and shareholding

Communication Authority of Kenya Director General David Mugonyi when he appeared before the National Assembly Petition Committee at Parliament on April 16, 2024 over the Tiktok. [Boniface Okendo, Standard]

The Communications Authority of Kenya (CA) was on Wednesday put on the spot to explain the longstanding debt it is owed by Telkom Kenya, in addition to providing its shareholding status.

CA Director General David Mugonyi, who appeared before the Public Investment Committee on Social Services, Administration and Agriculture (PIC-SSAA), explained that Telkom Kenya’s earlier assertion of a nil outstanding balance in a letter dated December 21, 2020, requesting a compliance certificate was based on the National Treasury commitment of June 29, the same year.

Mugonyi explained that in the commitment, National Treasury undertook to provide Telkom Kenya Limited with funds required to cover frequency spectrum fees for Financial Years 2019/20 and 2020/21 and urged CA to allow Telkom to continue utilising it.

“National Treasury’s letter dated October 22, 2021, committed to make available to Telkom Kenya Limited, the amount of money required to cover the frequency spectrum fees for the two financial years, amounting to Sh2.2 billion and requested for CA’s forbearance to enable Telkom Kenya Limited access regulatory approvals it requires,” he explained to the committee.

But in subsequent correspondence, Mugonyi explained that Telkom Kenya acknowledged the debt, as he cited a letter dated January 11, 20,22, addressed to the National Treasury and copied to CA.

In the letter, he said Telkom Kenya requested expedited formalisation and settlement of the outstanding regulatory fees amounting to Sh3.1 billion and quoted National Treasury’s previous commitments dated June 29, 2020, and the October 22, 2021 letter that reiterated the commitment and requested CA to assist Telkom Kenya obtain regulatory licenses required to operationalize the new Telkom group structure.

“The actions by Telkom Kenya recognised the Authority’s claim and confirmed the outstanding regulatory fees, further noting that any enforcement action would adversely affect their operations,” Mugonyi explained.

He said the Authority has been pursuing the outstanding debt, noting that on August 14, 2020, a formal request was made to National Treasury for the release of the committed funds to safeguard the validity of licenses held by Telkom Kenya Limited.

Similarly, he told the committee that CA also engaged Telkom directly through multiple follow-ups, including issuance of demand letters, emails, convening of meetings and denial of additional frequency assignments until outstanding payments are made.

“The Authority, through a letter dated February 2, 2024, formally requested the National Treasury and the Attorney General to prioritise the settlement of outstanding debt during the transition process,” he explained.

To this end, he said the engagement culminated in the issuance of a formal demand note and a notice of intention to initiate enforcement through a letter dated December 22, 2021, due to continued non-payment of regulatory fees.

“In response to the formal demand letter, Telkom Kenya Limited, in a letter dated January 11, 2022, wrote to National Treasury, copying the Authority, requesting the expedited formalisation and settlement of the outstanding amount. In this correspondence, Telkom acknowledges the debt and notes that any enforcement action could adversely impact their operations,” Mugonyi explained.

But the committee Chairperson, Navakholo Mp Emmanuel Wangwe, emphasised the need for transparency and institutional reforms within CAK, saying Parliament will not tolerate misuse or mismanagement of public funds.

“If you are able to switch off live broadcast, why not switch off Telkom to recover the debt?” Wangwe posed.

Mugonyi, however, explained that Telkom offers a critical component of security services, and it is for this reason that it cannot be switched off.

To settle the debt, the DG noted that they have been engaging the Ministry of Information, Communications and Telecommunications as well as the National Treasury.

“This issue is within the National Treasury realm, and our pursuit is also within that configuration, and that is why we report to our parent Ministry,” he explained.

With Saboti Mp, Caleb Amisi, who is the Vice Chairperson of the committee, adding, “An institution at the centre of security must be beyond reproach. This is something we need to solve; we cannot carry this forward in audit books.”

The committee also wanted to know the shareholding status for Telkom Kenya.

Mugonyi told the committee that the National Treasury holds 37.9 per cent stake, another 56.8 per cent by Jubilee holdings and 5.2 per cent by Adili Trustees, as of March 2024.

“CA was not involved in the transactions at all. We regulate Telkom, not the entities behind it. We also know Telkom, not the entities behind it other than the National Treasury,” he affirmed.