The Kenyan cabinet has reversed the government’s acquisition of a 60.0% stake in Telkom Kenya. The Kes 6.091 billion deal was made after Helios Investment, the London-based private equity fund, exited in July 2022. Following the acquisition, the Kenyan government became the sole owner of Telkom Kenya Limited.
Cabinet has announced that Helios will refund the Kenyan government with Kes 6.091 billion. Additionally, the cabinet has given Telkom the green light to search for a new strategic investor.
“BY DINT of this decision by Cabinet, Jamhuri/Helios will refund to the Government of Kenya the amount paid as consideration for the takeover. The decision by Cabinet offers Telkom Kenya an opportunity to source and onboard another strategic investor, subject to the receipt of all regulatory approvals. Cabinet’s intervention will enhance the operational capacity of Telkom Kenya and make it a competitive player in the telecommunications market” read the notice.
Telkom’s Board Absolves Itself
The payment Helios Investment received has been a cause of controversy. It was reported the deal was agreed without approval from the board of Telkom. It emerged, the government through National Treasury negotiated a full acquisition of the telco from Jamhuri Holdings Limited (JHL).
Eddy Njoroge, Telkom’s board chair, complained that the board lacked a quorum to facilitate the transaction. Further, the board claimed it was not privy to the deal.
Mr. Eddy Njoroge sent a letter of complaint but he was too late. The KES 6.09 billion had already been wired from the Treasury, on August 5 2022, to cater for the buyout of Helios Investment.
“As board members, we have not been involved at all in the transaction and in view of the fact that we could be held personally responsible for our actions, we could also seek this comfort from the Attorney General,” Njoroge said in the letter
At the time, Treasury claimed they had invoked Article 223 of the Constitution. This article allows Treasury to spend public 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 didn’t share its vision of turning around Telkom Kenya.
The fact that the payment was swiftly done raises questions on how the government plans to enforce reimbursement from Helios. Uhuru Kenyatta’s government paid the money a week before President Ruto was inaugurated.
Helios Claimed Government Frustrations
Helios exited the Kenyan market citing frustrations from the government. One of the issues the company raised was the government’s delay in sanctioning a merger between Airtel Kenya and Telkom Kenya Limited. As a result of the delay in approval, Helios claimed Telkom Kenya allegedly suffered a loss of $200 million (Sh26.1 billion).
However, it is worth noting that at the time Helios was on an exit spree. It had made around 6 exits in Africa within a 12 month period. Prior to purchasing majority stake in Telkom Kenya in 2016, the Private Equity firm had sold its stake in Equity bank the previous year.
When Helios sold its Telkom stake, it was reported the firm was looking to raise capital for another fund.
Telkom Kenya Ltd Debts
Telkom Kenya Limited is the third largest telecom operator in Kenya after Safaricom and Airtel Kenya. The company has itself been struggling with a reported debt of KES 7.2 billion. The huge debt has seen Kenya’s oldest telco struggle to pay its dues.
Previously, the government had indicated it was looking for a strategic investor who was willing to take up Telkom’s debt.