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How Telkom billed rivals after the end of contract

By Moses Njagih | November 11th 2020 at 00:00:00 GMT +0300

Telkom Kenya CEO Mugo Kibati when he appeared before the Public Accounts Committee in Parliament on Monday. [David Njaaga, Standard]

Telkom Kenya is in a spot for charging private data service providers millions of shillings to use the National Optic Fibre Backbone Infrastructure (Nofbi) despite the expiry of a Government contract.

A parliamentary watchdog committee was alarmed that since June 2016–when the five-year contract ended–Telkom Kenya has continued to bill other private service providers without any legal engagement.

When he appeared before the Public Accounts Committee (PAC) of the National Assembly on Monday, Telkom Kenya Chief Executive Officer Mugo Kibati was at pains to explain the legality of the money made by billing other players for use of the infrastructure.

Mr Kibati revealed that Telkom Kenya had so far collected around Sh1.7 billion from customers.

The committee protested that despite Telkom Kenya knowing that its contract for operations and maintenance of Nofbi had ended, it had continued billing other players without any legal basis.

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“You did not inject any cash in putting up the infrastructure. It is purely Government-owned yet without any formal legal basis after expiry of the contract in 2016, for four years you have continued billing other private data service providers and enjoying the profits. How legal is this?” asked PAC chairman Opiyo Wandayi.

Under the contract that was to take effect from June 1, 2011, Telkom Kenya was required to commercialise the Nofbi infrastructure, settle the incurred operations and management costs from the realised revenues received from other private players, and split the net profit with the Ministry of Information, Communication and Technology on 50-50 basis.

The committee demanded that Kibati give details of all payments received from the other players since 2016 by Friday.

In defence of the company, Kibati, who argued that he was not in office when the contract ended in 2016, said he has been pushing for its renewal. He revealed that the contract had a clause for renewal for a second term of five years.

Critical services

He said the services they were undertaking on behalf of the Government were critical and thus could not just quit the operations and maintenance duty, which would precipitate a shutdown of Government operations that use 54 per cent of Nofbi.

“Unlike other players, we have a unique relationship with the Government and so we are bound by a certain level of responsibility. We cannot wake up and decide that since the contract has ended, we recall our engineers and stop operations. This would cause a shutdown.”

He argued that since the ICT ministry had never written to them indicating that the contract had lapsed, and given that they are in constant communication over the matter, there is an “implied contract” that would allow them to carry on with their duties even as they seek to regularise the matter.

Kibati said that although they have continued billing customers, Telkom Kenya operate at a loss since the major user of the infrastructure is the Government, which does not pay a cent for the service.

“If we are to bill the Government, we would be making a profit on this. But, unfortunately, while we have billed around Sh1.7 billion, we have incurred costs worth around Sh2 billion in operations and maintenance,” he said, adding that total usage by the Government since 2010 was around Sh1.4 billion.

Public Accounts Committee Telkom
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