Over the past few weeks, Telkom Kenya customers have experienced service outages on the mobile network. Finally, the telco came out officially and acknowledged its network has been facing challenges.
In a statement, the company had this to inform the public:
“Service provision has been impacted in some parts of the country resulting in service degradation.
We apologise for the inconvenience caused to our esteemed customers. Telkom is actively engaging all stakeholders to restore the impacted services. Telkom Kenya and its stakeholders are in the midst of reviewing the short to long-term strategic imperatives that will improve and guarantee services to our esteemed customers.”
The statement was signed by Mugo Kibati, Chief Executive Officer of Telkom Kenya Limited. However, the statement does not give the reasons why Telkom is experiencing service outages.
Customers on short and long-term subscriptions have lamented since their subscriptions are lapsing with no services provided. The telco did not state if such customers will get any compensation.
Telkom Towers Switched OFF
Reports in the media claim American Towers Corporation (ATC) has switched off half of its masts due to Ksh 200 million pending bill. This has paralyzed the operations of the telco across the country.
Telkom Kenya Limited has not commented on the story and our efforts to get an official comment have been futile.
Telkom Kenya (TKL) and global tower company, American Tower Corporation (ATC) announced that they have reached an agreement for ATC to acquire up to 723 towers from Tellkom. This agreement was announced in 2018.
Current reports indicate, the telco is cash-strapped and may soon be unable to pay salaries for its 600 workers. Additionally, it risks failing to cater to operational costs.
Lack of capital to pay ATC may be the underlining reason behind network interruptions.
What is also surprising is the silence from the Communications Authority. As the sole industry regulator, the authority is mandated to ensure consumers get reliable services. Thus, it must play its role to give Telkom customers a status update.
Telkom Kenya Network Issues Not New
When signing the tower agreement with ATC, Telkom’s board chairman stated “Our objective is to transform Telkom into a business which has a reputation for excellence in terms of the quality and reliability of its network.”
Furthermore, the company’s CEO at the time added: “The network availability and service levels we have agreed with ATC are world class and this agreement represents another important step towards the transformation of this business and the service levels we deliver to our customers. Telkom will now focus on its core function – the provision of quality telecommunications services to our customers.”
Needless to say, this has not been the case. The service outages being experienced are just the cumulation of bad service provision.
Telkom has never been near the top in terms of network metrics for service provision. It ranked fourth when it comes to mobile internet speeds in Kenya as of Q3, 2022 scoring 5.80 Mbps. This is a huge gap from Safaricom’s 22.19 and still quite a gap from Airtel Kenya’s 15.69.
In terms of latency, it’s third at 28 ms. In terms of consistency, the company ranks fourth at 40.5%.
In comparison, Safaricom has a consistency of 81.6% while Airtel is not far off at 79.7 %.
The poor metrics are evidence the telco has not been the best option for mobile phone users in the country. This is despite the claims made when they signed the deal with ATC, the alleged source of their current network problems.
In November 2021, they announced partnering with Ericsson and systems integrator NEC XON. The partnership was a project to add 2,000 4G sites onto Telkom’s Mobile 4G/LTE Network, by 2023.
Clearly, this has also not added much value to the quality of service and reliability.
Government Interference and Shareholder History
In July 1999, Kenya Posts and Telecommunications Corporation (KPTC) was split into three legal entities, namely Telkom Kenya Limited (TELKOM), the Postal Corporation of Kenya (POSTA), and the Communications Commission of Kenya (CCK). This followed the enactment of the Corporation of Kenya Act, of 1998.
This was the birth point of Telkom. Telkom Kenya is the state’s oldest telco, and prior to the mobile telephony boom, it basically owned the infrastructure and services associated with making telephone calls via landlines.
Furthermore, Telkom also spun off Safaricom, which started its services in the country over two decades ago as its subsidiary. In 2000, Safaricom started running as an independent company. Safaricom has since grown to the biggest telco in the country.
Currently, Telkom is far behind market leader Safaricom’s almost 43 million subscribers and second place Airtel Kenya’s 16.4 million users but does come out ahead of Jamii Telecommunications which only has 275,000 subscribers.
This clearly shows Telkom has undergone bad management spells in order to lose its head start.
Currently, the Kenyan government owns 100% of Telkom Kenya Ltd. This was after upping its 40% shareholding by buying the remaining 60% stake that was owned by British investment firm Helios Investment.
In 2007, Telkom was privatised after a sale to France Telecom and Alcazar Capital consortium. The deal was structured in a way the winning consortium got 51 per cent of the shares with the government retaining 49 per cent.
In phase two of the deal, the government was set to offer 19 per cent of its shares to the public through an IPO. Thus, the government would remain with a 30% stake. Additionally, the majority shareholder would scale down to 40% after the IPO.
This was meant to happen by 2010, 3 years after the privatisation deal. However, this did not happen. Instead, the government ceded a 9 per cent stake in 2012 as Sh30 billion debt write-off. Hence, the consortium increased its stake in the telco.
The deal involved an agreement to put up Ksh 10 billion to spur growth. France Telecom funded its part of the deal but the government failed. Eventually, in 2015 France Telecom, which was trading as Orange, announced it was selling its stake in Telkom Kenya. Admitting failure to turn the telco around, Orange claimed it lost control of Telkom Kenya.
This was due to disagreements with its co-shareholder, the Government of Kenya.
“In 2014, Orange intended to implement certain solutions, allowing it to respond to Telkom Kenya’s financial difficulties. During the fourth quarter, due to continuing disagreements with the government of Kenya, its co-shareholder, Orange concluded it was contractually unable to implement these solutions without the latter’s agreement. This led the Group to conclude that it had lost control over the entity.” : stated a report
Helios as Telkom Shareholders
The exit of Orange brought in Helios Investment Partners, a UK-based but Africa-focused investment firm. They bought a majority stake in Telkom in 2016. That transaction also included an increase in the shareholding of the Kenyan government in Telkom from 30% to 40%.
However, trouble attributed to the government followed. The government decided to sell off property valued at Sh10 billion from Telkom Kenya’s balance sheet. This was done without the knowledge of its partner Helios.
“The government of Kenya proceeded to unlawfully expropriate the prime property of Telkom Kenya Limited situated along Ngong’ Road Nairobi measuring approximately 79 acres valued at over Kes 10 billion without Telkom’s or Jamhuri Holding Ltd.’s consent and without any compensation being committed or paid,” a letter from Paul Cunningham to the Clerk of the National Assembly read.
At the time, Helios was managing its Telkom Kenya assets under Jamhuri Holding Limited.
Furthermore, government institutions had delayed sanctioning the merger between Telkom and Airtel Kenya. This was another bone of contention between the two partners.
As a result of the delay in approval, Helios claimed Telkom Kenya allegedly suffered a loss of $200 million (Sh26.1 billion). Helios pointed to government agencies such as the Competition Authority of Kenya as the cause for the delay.
Telkom Returns to State ownership
The disagreement led to the exit of Helios in a rare occurrence of an institution once sold, returning to the state. The governement took over 100% ownership. However, the deal was marred with controversy.
Treasury had invoked Article 223 of the Constitution. The article allows them to spend money without the approval of Parliament. Treasury officials claimed the government made the decision as they feared Helios was going to sell to an investor that did share its vision of turning around Telkom Kenya
Telkom Assets a Cause for Government Interference
When Telkom was formed in 1999, it inherited valuable real estate in major cities/towns across Kenya. This included residential houses and commercial buildings.
This has led to the government sanctioning sales arbitrarily. One such is the sale of 17 properties across the country estimated to be worth Sh1 billion. This sale was sanctioned just days before Orange’s planned exit.
We have already mentioned the sale of 79 acres that sparked Helios’s exit. Another instance is in 2012. This time the operator issued a tender for the sale of 11 houses valued at Sh80 million in Gilgil, Nakuru County.
Additionally, Telkom has heavily invested in three undersea fibre optic cables, TEAMs, Eassy, and LION. Telkom is also the landing partner for the Djibouti Africa Regional Express 1 (DARE 1) a 4,854km cable from Djibouti to Mombasa.
Recently, it became a landing partner for the Pakistan and East Africa Connecting Europe Cable (The PEACE Cable) a 15,000km cable from Marseilles, France through to Singapore and South Africa.
Added to that, the telco owns the largest terrestrial fibre optic network, which runs from Mombasa to Malaba on the Kenya-Uganda border.
From, 2010 to 2021 the company also managed the government-owned National Optic Fibre Backhaul Infrastructure (NOFBI) at a fee. However, the management was reverted to the Ministry of ICT following concerns about revenue loss by the Auditor General.
Huge Contrast With Safaricom
It would appear, its assets are a major cause of the government’s constant interference.
In contrast, the Government of Kenya has 35 per cent in Safaricom. Despite that, it has very few wrangles or allegations of interference in the operations of Safaricom. Notably, Safaricom has been posting profits and leading in innovation while Telkom struggles to play catch up.
We wait to see how the current network problem is resolved. However, customers would want a long-term solution for the troubled telco that is bleeding taxpayers money.