Corporate News
By OKUTTAH MARK, mokuttah@ke.nationmedia.com
In Summary
- The Treasury has requested Parliament to allocate Telkom Kenya Sh90 million for salaries, Sh338 million for pending bills, including travel agency fees and another Sh110 million for unspecified expenses.
- Telkom is plagued by a combination of losses and a drop in revenue that has negatively impacted on the telco’s cashflows, prompting shareholders to pump in more cash and write off its debts.
Telkom Kenya is set to receive a Sh588 million
bailout from the Treasury to pay salaries and settle pending bills if
MPs approve a request for the amount made by the Treasury through a
supplementary budget tabled in Parliament on Thursday.
The Treasury has requested Parliament to allocate Telkom
Kenya Sh90 million for salaries, Sh338 million for pending bills,
including travel agency fees and another Sh110 million for unspecified
expenses.
This is the latest cash request to Parliament made
by Treasury secretary Henry Rotich in an effort to bail out Telkom Kenya
which has continued to sink deeper into the red.
Telkom is plagued by a combination of losses and a
drop in revenue that has negatively impacted on the telco’s cashflows,
prompting shareholders to pump in more cash and write off its debts.
The amount that the Treasury has requested is
however far below what the management had asked its two shareholders –
France Telecom which owns 70 per cent of the company and the Kenya
government which holds a 30 per cent stake-- to refinance Telkom’s
cashflow needs for quarter four of the year amounting to Sh2.08 billion.
This means that, even if granted in total, the bailout cash will only relieve the firm in the short term.
The firm which was a State parastatal before
privatisation in 2007 has previously also made a Sh17.8 billion cash
call to repay a loan advanced by parent firm France Telecom’s
subsidiary, Orange East Africa.
News of the bailout request comes weeks after it
emerged that Vietnamese firm Viettel had pulled out of talks to buy out
Telkom Kenya after the government failed to honour some of its requests,
key among them being that it should acquire up to 80 per cent of the
telco.
France Telecom had hoped to return the loss-making
firm to the profit zone by 2010 and list at the Nairobi Securities
Exchange by next year — a target that has been made impossible by its
stay in the loss-making territory.
Telkom Kenya has continued to make huge losses
despite efforts by the two shareholders to clean up its books. The firm
has partly tried to shore up its accounts by selling assets to boost
cash reserves that have over time been eroded as competition intensified
and call tariffs dipped.
Telkom Kenya has in the past sold 11 houses valued at Sh80 million in Gilgil, Nakuru County.
Until 2012, the government had a 49 per cent stake in Telkom Kenya while France Telecom held the remaining 51 per cent.
But the State ceded a nine per cent stake in
December 2012 following a Sh30 billion debt write-off before losing
another 10 per cent stake in June last year after it failed to inject
Sh2.4 billion in a Sh10 billion rights issue.
The last dilution caused a public uproar after MPs
claimed that taxpayers lost at least Sh30 billion in the conversion of
shareholder loans to equity.
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