Telkom officials grilled on firm's performance

Telkom Kenya Limited CEO Mickael Ghossein. Photo/FILE  NATION MEDIA GROUP

By IMMACULATE KARAMBU ikarambu@ke.nationmedia.com and CHARLES WOKABI 

 

Telkom Kenya officials were Tuesday taken to task over the company’s continued dismal performance despite its privatisation six years ago which was expected to turn around its fortunes.

Meeting the Public Investments Committee (PIC) in parliament, Telkom Kenya chief executive Mickael Ghossein was questioned over the company’s failure to exit the loss-making territory contrary to the plan when it was privatised.

Blaming unfair competition, the mobile operator, which is jointly owned by the government and Orange – a French company, has yet to make profit and has resorted to seeking finances from shareholders to fund its operations.

Mr Ghossein said the lack of supportive regulation has contributed to the company’s woes.

Particularly, Mr Ghossein blamed the failure by the Communications Commission of Kenya (CCK) to put in place a regulation that requires operators to share sites.

“With just 1,000 sites, how can I (Telkom Kenya) compete fairly with another player having more than 3,000 sites? In a liberalised telecommunications market, it is not possible to have one player commanding above 80 per cent of voice market and 90 per cent of mobile money transfer services,” said Mr Ghossein.

Currently, the mobile operator has written to its shareholders seeking an additional Sh8 billion which it says will fund its operations in an unfairly competitive environment.  

But the parliamentary committee questioned the move by the company’s to rely on additional funding from shareholders saying it could be a systematic way of kicking the government out of the firm.

“Maybe you cannot manage competition. Does it mean there is no research and development and staff motivation in Telkom Kenya? Could changing the company’s management lead to profitability,” Mr Chrisantus Wamalwa, a member of the PIC asked.

Telkom Kenya was privatised in 2007 with Orange, then France Telkom, obtaining the majority shareholding of 51 per cent.

The government was left with 49 per cent. However, failure by the government to answer to cash calls made by the firm has eroded its shareholding now expected to drop to 30 per cent by June 30.

In December last year, the two shareholders agreed to a restructuring plan that required them to jointly raise Sh10 billion to the company in proportion to their ownership.

France-Telecom Orange, which at the time owned 51 per cent of the firm, was to raise Sh5.1 billion while the Treasury was to provide Sh4.9 billion.

By end of last year, the government had only given Sh2.5 billion which saw its stake in the company fall by 10 per cent while that of Orange went up to 70 per cent.

The restructuring agreement gives Treasury until June 30th to raise the difference funds if it hopes to recover the 10 per cent hold it lost in the transaction.

The reduction of Treasury’s stake, which has already declined to allocate any money to the mobile operator, means that the government will have less power in the firm’s management and cut its claim to its assets which include prime land, buildings and telecommunication equipment.

“Over the last few years, the government has lost shareholding in Telkom Kenya to 30 per cent. Failure by the government to avail the additional funding could further erode the government’s shareholding. Is this a systematic way of kicking the government out of Telkom Kenya?” Mr Francis Nyenze, a member of the parliamentary committee posed in the session.

The dismal performance was also blamed on the rampant vandalism on the telecom’s infrastructure.