In May this year, investment banker John Ngumi moved to the High Court and obtained an injunction barring the Ethics and Anti-Corruption Commission (EACC) from arresting him.
The EACC was investigating an irregular transaction where the National Treasury paid Sh6 billion to Helios Investment Partners to take over the majority stake in Telkom Kenya.
The transaction, conducted during a political transition, raised eyebrows particularly after Controller of Budget Margaret Nyakang’o revealed that senior government officials including Treasury Cabinet Secretary Ukur Yatani pressured her to authorise release of the funds.
The intrigues behind the sale continue and more questions arise with the mention of the telco than answers. A cabinet decision made on Tuesday rescinded the nationalisation of Telkom Kenya and that the decision “offers Telkom Kenya an opportunity to source and onboard another strategic investor, subject to the receipt of all regulatory approvals”.
A few hours after Cabinet allowed Telkom Kenya to source a strategic partner, Treasury Cabinet Secretary Njuguna Ndung’u made an announcement.
“A competitive process to identify the new investor was set in motion in January 2023, resulting in an evaluation process that recommended the Infrastructure Corporation of Africa LLC (ICA) of the United Arab Emirates, to be the new majority shareholder in Telkom, based on the offer they put forward,” said Prof Ndung’u.
Prof Ndung’u said ICA will inject capital to fund Telkom Kenya’s infrastructure and settle some of its outstanding liabilities estimated at over Sh140 billion.
“GoK through the National Treasury will meet its part of the obligations as a minority shareholder and as a key consumer of services offered by the company,” he said.
“GoK as a critical stakeholder will pursue the actualisation of regulatory reforms that are necessary to correct the structural imbalance in the telecommunications industry.”
The news has presented another twist in the Telkom Kenya saga and raised more questions including on the new entity that has entered the fray, the names and faces behind last year’s botched transaction and the future prospects of the telco.
Who is ICA? What offer have they tabled? Was there a tender flouted Have the issues raised in the botched Airtel-Telkom deal been ironed out? A parliamentary committee has been probing the initial deal but a report has not yet been filed so what happen to the probe? How will the refund be done? Does the cancellation expose the government to legal minefields? Of what significance is Telkom Kenya to national security?
Helios Investment Partners’ Chief Financial Officer Paul Cunningham told Parliament earlier this year that it sold its stake back to the Treasury after the failed merger with Airtel Kenya in 2021.
The merger collapsed after key Telkom Kenya assets, including a Sh10 billion parcel of land on Ngong Road and lucrative tenders for the government’s security services, were left out of the agreement.
“We were concerned as directors of Telkom that these were assets that we felt belonged to Telkom Kenya and should be used for the benefit of Telkom Kenya,” Cunningham told an inquiry by the Parliamentary Departmental Committees on Finance and National Planning, and that of Communication, Information and Innovation.
Former ICT Cabinet Secretary Joseph Mucheru told the inquiry that the merger was rejected by the National Security Advisory Committee.
In July, the National Assembly Finance Committee led by Molo MP Kimani Kuria retreated to Mombasa to write the report on Telkom after a two months investigation but flew back to Nairobi after they failed to agree on the recommendation of the report.
A source at the committee told the Standard that some committee members were torn between indicting some individuals and were keen to ensure that no names were mentioned.
“They retreated to Mombasa but because of what I believe were interests, there was no unanimity on issues and eventually they disagreed,” said the source.
Nearly three months later, the committee is yet to come up with the report.
Telkom Kenya is the major digital infrastructure service provider for the government’s ministries, departments and agencies, including critical departments such as Defence and the National Intelligence Service.
However, the sale of the 60 per cent stake to the ICA of the United Arab Emirates is hazy.
The firm has almost no online footprint and a check on its domain registration details indicates that the website was created last month and updated yesterday, a few hours after Treasury released its statement.
Cabinet’s move to rescind the sale and demand a refund of the Sh6 billion from Helios further puts the private equity firm and Jamhuri Holdings in an awkward position.
Constitutional lawyer Paul Mwangi says the decision to rescind the transaction and demand a refund from Helios Investment Partners is a question of whether a contract can be legally undone once entered into.
“Where the parties have discharged their obligations in full or substantially, the law absolves them from further obligation,” he wrote in The Verdict.
“In that eventuality, there is nothing to reverse. Courts will not rescind a contract if one party has affirmed the contract by his action.
“Affirmation is an indication to continue with the contract.”
Mr Mwangi said Treasury affirmed the deal by making payment in full. It also went to Parliament and again publicly affirmed the deal.
The move by Cabinet also means other fees, including those paid to transaction and legal advisors as well as stock options held by management, might have to be refunded.
This includes Sh500 million that was paid to legal and transaction advisors that had been privy to the deal over the course of the past year, as well as Sh384 million worth of stock held in trust for top managers under Telkom Kenya’s Management Incentive Plan.
Another question that remains pertinent is the identity of shareholders of Jamhuri Holdings, incorporated in Mauritius, as well as the fate of the Telkom Kenya’s asset holdings.
In July, the Environment and Lands Court ruled that the Ministry of Sports, Culture and Heritage owes Telkom Kenya Sh15 billion as compensation for failing to compensate the telco for acquiring the 60-acre piece of land on Ngong Road on which it constructed the Posta Jamhuri Sports Complex.
This ruling, if implemented, could significantly increase the value of Telkom Kenya’s assets and change its fortunes.