Tower firm demands Sh500m to switch Telkom Kenya back on

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Tower firm demands Sh500m to switch Telkom Kenya back on
Thursday December 07 2023

A silhouette of a communication mast. FILE PHOTO | JOSEPH KANYI | NMG

By NDUBI MOTURI

The dispute between Telkom Kenya and American Towers Corporation (ATC) has taken a new twist with the foreign company now demanding a down payment of Sh500 million and Sh150 million per month to turn on the 246 mast sites switched off seven months ago. The debt owed by Telkom Kenya has also risen from Sh4 billion in May to Sh7.1 billion as of October. The amount is expected to grow as the debt accrues interest at the rate of Sh300 million per month.

ATC Kenya chief executive Thomas Sonesson, while appearing before the Senate ICT Committee accused Telkom Kenya of breaching a contract that it entered in 2018. He also revealed that the company has put on hold several investments in the country due to the debt and is currently unable to meet its obligations including meeting the operating cost. The firm has been paying a value-added tax (VAT) of Sh50 million a month to the taxman since January due to the invoices they sent to Telkom Kenya that have never been paid.

“We have not been paid since January this year. This led to the event we decided to disconnect 900 out of the 1,000 leases that we have with Telkom Kenya. When I sent an invoice of Sh300 million linked to the leaseback to Telkom Kenya, there is a Sh50 million VAT that we are required to pay to Kenya Revenue Authority,” said Mr Sonesson. It is a cash out for us that we are not getting paid but we are paying the VAT.” Mr Sonesson said.


Efforts to resolve the dispute have also proved futile for the past two years with Telkom Kenya insisting it is not able to pay the debt and it requires a strategic investor and clearance of pending bills by the government to put in place a payment plan for the debt

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Back in August
How Sh4bn Telkom feud with US firm escalated to massive mast shutdown
Thursday August 24 2023

A silhouette of a communication mast. FILE PHOTO | JOSEPH KANYI | NMG

By NDUBI MOTURI

By EDWIN MUTAI

The acquisition of 715 towers by American Towers Corporation (ATC) for $155 million from Telkom Kenya five years ago has come to haunt the telco, with the Senate warning that the feud between the two companies is putting the country's security infrastructure at risk. Documents tabled before the Senate Committee on Information and Technology have revealed a battle that a few weeks ago led to the disruption of Telkom network services across the country.
In its submissions, ATC accused Telkom Kenya of violating the tower sale and leaseback agreement by failing to pay Sh4 billion owed to the American company despite providing services and upholding its part of the deal.

The ongoing battle between Telkom and ATC reached a notch higher a few weeks ago when ATC Kenya switched off half of its base masts that are spread throughout the country. The showdown led to the loss of the Telkom network with several Kenyans appealing to the company to restore the network.

Thomas Sonesson, ATC Kenya chief executive, said the firm is seeking Sh4 billion from Telkom Kenya, which has leased part of its 3,600 telecommunication towers. He told the Senate Committee on ICT chaired by Trans Nzoia Senator Allan Chesang that ATC Kenya has been stopped by the State from carrying out further investment in towers in Kenya.

The company sent several notices to Telkom Kenya informing the telco of the huge debt but it did not respond, making the company stop bearing the costs related to the electricity in the masts as a result of the debt. In a retaliation action, ATC Kenya said Telkom Kenya had deployed police officers to several masts who prevented ATC Kenya agents from gaining access to the sites where the masts are located, leading to a disruption of services.

"Telkom Kenya denied ATC Kenya access to the lease sites, violating the lease terms and affecting services such as connectivity, mobile money transfers and voice communication. Eight clients, including MNOs, ISPs and broadcasters have been off the air since May 15, 2023, hindering the government's digital transformation agenda," said Mr Sonesson. While appearing before the committee a few weeks ago, ICT Cabinet Secretary Eliud Owalo said the ongoing feud between the two entities risks compromising the security of the country given that Telkom Kenya is in charge of critical infrastructure.

"It is a big question that I need to bring to the attention of legislators because as you all know Telkom transmits critical security information. Sadly, we privatised infrastructure dealing with security. On one side, American Towers is claiming that they own the towers but Telkom is also telling them that they do not own the land," Mr Owalo told the senators.

According to Broadcasting PS Edward Kisiang'ani, efforts by the government to help solve the impasse between the two companies have encountered challenges. Telkom Kenya says they are a private company yet 60 percent of the shares are owned by the government through Helios. "I urge the senators to ensure that security infrastructure is not privatised because it's a huge risk for the country. As the government we are going to look for a new investor," Dr Kisiang'ani told the committee. During the hearing, security concerns were raised by the senators who said Telkom Kenya transmits critical government infrastructure.

Telkom Kenya provides critical communications services to the Office of the President, the State House, and the government data centre, the Ministry of Interior, the General Service Unit, the Department of Defence's restricted communications networks and other critical State functions. The military, police and wildlife service are handled by Telkom Kenya. The data centres, data rooms and base stations also manage critical security infrastructure, including the carrier services, the landing stations, undersea cables and meet-me rooms where the telecoms firms connect one another.

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Where the problem started; privatization, asset stripping, and sale-back to the government.

Telkom deal reeks of corporate greed
Friday April 28 2023

Committee on Finance and National Planning Chairperson Francis Kuria Kimani during joint committee sitting with Committee on Communication, Information and Innovation of National assembly at the County Hall Nairobi on Thursday, April 20, 2023, investigating the Sh6.2 billion acquisition of Telkom Kenya limited by the Government of Kenya. PHOTO | DENNIS ONSONGO | NMG

By JAINDI KISERO

The details coming out of proceedings of the parliamentary committee investigating the circumstances under which the government paid $51 million to London-based private equity company, Helios LLP, to acquire 100 percent of Telkom Kenya are sensational — to say the least.
I have followed Telkom Kenya’s privatisation issues since March 2007 when France Telecom paid us $390 million to acquire a 51 percent stake in the company. The experience has led me to adopt a new definition of this phenomenon we call privatisation: private sector greed aided and abetted by elites — lawyers, accountants, investment bankers and transaction advisers- whose primary motive and intention is to craft complex transactions to reap billions.

The game is played as follows: the State gets a wodge of cash ($ 390 million in the case of Telkom Kenya), and the private sector gets a cash cow which they milk dry before they flip it to a third or fourth party. The flipping happens even if the new party coming to buy the public asset has no domain knowledge or experience in running the parastatal being sold. The big question I keep asking myself as I track the parliamentary proceedings is the following: why did the government allow Telkom Kenya to end up in the hands of a private equity company — a mere financial investor with no experience in running a telco?

This question is pertinent because when I go through my archives of the transaction documents signed by the parties in 2015 as Helios was coming, including the business plans and ‘heads of terms’, it is clear that Helios was to bring in a technical operator to run Telkom Kenya. The investor was required to purchase Telkom under the terms of the ‘request for proposal’ that was used during the original privatisation transaction in 2007, the most important condition of which was that any investor bidding to buy Telkom Kenya had to provide proof of the existence of a technical and experienced operator in its consortium. Our original intention and objective were not to sell Telkom Kenya to a mere financial investor. And when Helios came in, the requirement of a technical operator was maintained as a key requirement.

The ‘head of terms’ signed on November 5, 2015, between Babatonde Soyoye of Helios and former Finance Cabinet secretary Henry Rotich, stipulates that a share and purchase deal between the parties would only be signed after production by Helios of a technical services agreement between the company and an experienced technical operator. I don’t know how this important requirement was skipped. Now, we are told that days before President William Ruto was sworn in, the investor flipped the company to the original owner and flew away with a fat Sh6 billion cheque in his back pocket. The transaction advisers also flew away with a big cheque worth hundreds of millions in his back pocket.

How much capital did Helios put into the business? What we know is that in December 2018, Telkom Kenya sold Extelcoms House, the multi-storey building on Haile Selassie Avenue, to the Central Bank of Kenya for Sh1.15 billion. This was not the largest asset-stripping deal to be conducted by Telkom Kenya under the management and stewardship of Helios. The previous year, the company sold 720 tower sites in a sale and leaseback deal to the American Tower Company of the United States at $ 235,000 per site, meaning that Telkom Kenya, under the investor, pocketed a whopping Sh16.9 billion from the sale of those assets.

With former President Uhuru Kenyatta about to leave the scene, the time was ripe for another round of share flipping and complex financial engineering transactions. Helios offered to sell the 60 percent stake in Telkom to the government at a paper value of $1. It also offered to give the government a $239 million shareholder loan it had acquired from Orange Telecom when it was taking over Telkom Kenya for free. Was this philanthropy? No. As the saying goes, the devil is in the details. The government had to take over a $51 million shareholder loan Helios had extended to Telkom Kenya.

They laughed all the way to the bank. The transaction adviser also made hundreds of millions.
With the money in the bank and the mission accomplished, it was now time to look for an expedient justification. The government pretended that it was feasible to dump such a large company working in a competitive commercial environment into the hands of the little-known Embakasi Garrison-based National Security Telecommunications Service. It could not work. Now, I gather that a legal firm has been appointed as a transaction adviser to facilitate yet another privatisation.

 

[Okiya]

Il not be surprised, if possible Telkom gets liquidated and the company that acquires the assets rises from the dead.

 

[Mtumsafi]

Are their sim cards still working

 

[Tommy Kwesule.]

Ruto should save Telkom for the Hustlers (don't ask me how) juu we get 50 GBs for Ksh. 1000. I can watch Pirated movies and YouTube at 480p resolution on my phone.