Kyai,
If Telkom Kenya is a 'junk corporation', why is there an uproar over its new
services by its
competitors? What do they have to fear? How has Telkom Kenya managed to sign
over
70,000 subscribers for its new fixed wireless service if it has indeed gone
to the dogs ? Shouldn't sleeping dogs be left where they lie? Why wake a
sleeping dog if TKL couldn't hope to compete against these titans that mint
millions of dollars from Kenyans?
Surely we didn't expend billions of taxpayer funds so that we could hand
taxpayer owned corporations to foreign entities on silver platters, or did
we? TKL did not make profits for reasons attributed to fraud, pilferage of
funds, gross mismanagement and the list that could go on and on. Do you have
an argument supporting or endorsing the non prosecution of these actions as
well as the negation of the need to attempt to recover and return these
funds to where they rightfully belong? Can we at least locate where the
missing Ksh 7bn is before we rush to sell this corporation? An extra 7bn or
more in TKL's balance sheet would certainly up the price that ought to be
offered.
-----
*Daily Nation * *Friday, March 30, 2007 * *Page 38 *
*Business *
Financial figures for Telkom Kenya do not add up for the year ending June
30, 2005, the Controller and Auditor General has said. More than Sh7 billion
has not be accounted for, said Ms P.N. Komora in a report tabled in
Parliament yesterday. According to her, the accuracy of bank balances
amounting to Sh58 million could not be verified.
It was also not possible to verify how overdraft balances of Sh73 million,
letters of credit and bills of acceptances amounting to Sh432 million have
been accounted for in the absence of adequate records and
documentation.[...]
--------
We know why there is no infrastructure on the ground, but could we focus
on what TKL is doing currently in determining TKL's potential ? The
reason there
is no infrastructure on the ground is the aforementioned reasons in addition
to a bloated workforce. That workforce has recently been trimmed down at
considerable tax payer expense, TKL is making strides in turning around and
additional tax payer funds have been provided for in the budget for this
purpose. Is it too much to ask that TKL be given an opportunity given the
recent progressive strides? Wouldn't TKL be more valuable if it were allowed
to accumulate the gains of its new strategies and technologies?
" In short, the private sector's sweat, speed and effort (and the tax payer)
are required to keep the institution alive "
Well said and rather accurate, indeed if these are the parties responsible
for keeping TKL alive, shouldn't they have the preferential shot at gaining
ownership of TKL ?
Jaindi Kisero recently wrote in an editorial:
--
"As it prepares for privatisation, Telkom Kenya will gobble billions of the
tax
payers money. Under the budget of the ministry of finance is an allocation
of
massive Sh 15 billion for Telkoms' tax arrears and Sh 2 billion for
preparing
the parastatal for privatisation."
--
It is ridiculous that Ksh 17bn or US$ 255m will be pumped into TKL at tax
payer expense only for foreigners (including a pariah foreign government) to
walk in and buy the corporation for a song with taxpayers getting minimal
shareholding in the corporation while bearing the burden of debt offloaded
on them for generations to come. The belief that taxpayers will be
alleviated of the misery of dragging an iron ball is a fallacy. Instead of
the new foreign investors dragging the iron ball, the average Kenyan will be
paying for generations to come to ensure that a foreign entity reaps a quick
profit in the shortest amount of time possible at tax payer expense. It is
only equitable that those condemned to dragging the iron ball have the
opportunity to have something to show for their tax burden.
You cited results of the past 30 years, but didn't in fairness mention what
TKL is doing today.
---
The national operators' new service, known as Telkom Wireless, will be
launched using a CDMA 2000 platform purchased from Chinese company Huawei at
a cost of US$22.6 million. The new investment is in a fibre and microwave
backbone and has been rolled out across the country.
---
How could a brand new national fibre and microwave backbone be worthless or
junk? This is in addition to several other infrastructure investments
including a $50m fiber optic cable between Nairobi and Mombasa.
You may have misunderstood the point on national security. For illustrative
purposes, the next time Kenya has a serious diplomatic dispute with Libya
(and it has in the past), Libya, if handed TKL on a silver platter, could
potentially add pressure to the situation by disabling key telecommunication
services which would have an adverse impact on the nation's national
security. There are several issues of national security, that cannot be
simply expounded on in a concise message but which are the basis world wide
for limiting foreign ownership of national telephony entities.
There are many types of investors, there are long term investors who are in
for the long haul. A short term investor for instance in Kenya Airways would
have been very disappointed if they were looking for a quick gain at the
time. TKL needs long term investors. Naturally such investors would be
informed through a prospectus prior to an IPO. Anyone who jumps into an IPO
without reading a prospectus is basically leaving all to chance and market
hype.
Nobody disputes the fact that TKL's services are far from excellent let
alone satisfactory. At least that is something all can agree on. Neither is
anyone against the fact that TKL needs to be privatised or turned around, we
just want it done correctly, equitably and transparently, the issues at hand
just to reiterate are:
- TKL should be privatised using a model that allows maximum equity
participation by the average Kenyan. The KQ model was cited purely to
illustrate possible percentages that are equitable to all parties with a
stake in the process.
- TKL should be sold at price that reflects an accurate and up to date
independent valuation. The government should disclose without further delay
the valuation it has arrived at of TKL and how it was arrived at. This is
not a private asset for sale but rather a public asset so there is no need
to have this shrouded in secrecy.
- Judicial action to rectify the pilferage of TKL's coffers needs to be
undertaken. This might be wishful thinking considering no major prosecution
of corruption cases in the country has taken place to date.
- Which independent parties with the requisite expertise and experience are
advising the government on this transaction?
- Has the government considered a BOT arrangement ie Build - Operate -
Transfer ? This would ensure that the investor gets a return on investment
but ultimately TKL remains Kenyan owned in the long run ?
These processes including the Safaricom IPO should not be rushed purely on
the sole basis that an election is looming in the coming months.
Mike
PS You cited the following examples to name a few which on checking the
facts turned out to mismatch the situation they were cited for :
=====
Alitalia - A public notification was announced on January 2007. The buyer
must acquire at least 30.1% of Alitalia, must guarantee the airline's 18,000
jobs, domestic routes, and the Italian identity of the Alitalia brand,
according to the tender document published on the Treasury Web site. Italy
has invited bids for at least 30.1% of Alitalia's shares, to be submitted by
Jan. 29, 2007. [It is not evident that Alitalia is being sold for a song,
neither is a controlling percentage being sold either, it is premature to
make a comparison where a process has not concluded ]
Telkom SA - Telkom is a semi-privatised, 39% state-owned company. Government
sold 30 per cent of Telkom to a US-Malaysian consortium. As part of the
service agreement, government required Telkom to roll out 1,9 million new
phones to disadvantaged areas. In the three years since then, the price of
local calls, which the poor use, has risen by 35 per cent in real terms,
while international calls (used by businesses and the rich) have fallen by
40 per cent in real terms. The local call increases have led to
disconnections that have almost matched the roll out of new lines. After
accounting for disconnections, the reality is that there was a bigger roll
out of new lines before Telkom was privatised than after. South Africa
privatized it's state utility Telkom by selling a 30% stake to a consortium
from the United States and Malaysia for $1.261 billion. [It is not evident
that Telekom SA was sold for a song, neither is a significant percentage
being sold either to single investor, in addition it underwent a successful
IPO that allowed the general public a stake in the company even then the
average South African did not benefit in regards to better access to
services]
Kenya Railways - Kenya Railways was not sold, rather it was concessioned,
why don't we concession TKL if service provision and development of the
infrastructure is the main objective ?
Eurotunnel - Privatisation did not save Eurotunnel from going virtually
bankrupt.
Amtrak - Has never been privatised. Amtrak is a quasi-governmental agency;
all of its preferred stock is owned by the federal government. The members
of its board of directors are appointed by the President of the United
States, and are subject to confirmation by the United States Senate. Some
common stock is held by the private railroads that transferred their
passenger service to Amtrak in 1971. Though Amtrak stock does not pay
dividends and is not routinely traded, a small number of private investors
have purchased Amtrak stock from its original owners. The United States
obviously recognizes the national interest in the ownership of this critical
service.
====
On 7/17/07, Kyai Mullei <mullei(a)gmail.com> wrote:
>
> Mike - some good points.
>
> I have a few comments on the issues of national security as a reason why
> Telkom shouldn't be sold for pennies. Frankly, I find the argument slightly
> myopic. As you reiterated, Telkom Kenya (like most parastatals including
> national banks) are technically insolvent. These are dead corporations that
> depend on sutained periodic government (tax payer) bailouts to continue
> providing sub standard and expensive services.
>
> The current situation is that (thirty years on) there is no infrastructure
> on the ground to speak of. 98% of the country is not covered by our
> 'national' provider. A few digital exchanges in the Nairobi and Mombasa
> environs just doesn't cut it. And we all know that the only reason Telkom
> Kenya has any cash to roll out any of these new services is through bank
> loans the collateral of which are govt. shares in Safaricom. In short, the
> private sector's sweat, speed and effort (and the tax payer) are required to
> keep the institution alive.
>
> In my view, the faster we sell these insutitutions off, the cheaper it
> will be for us in the long run. I would hope that any Kenyan investor
> willing to buy Telkom Kenya shares would be doing it purely on speculation
> grounds - in the hope that the liscences etc. could be sold to a serious
> provider for more money in the future (In fact, this is exactly what the
> foreign investors are doing). The privatization of Telkom Kenya and Kenya
> Airways cannot be compared. The latter had working planes and landing rights
> that could be turned profit-making. For the average Kenyan investor, Telkom
> Kenya has nothing worth buying.
>
>
> The world over, the notion that national firms - telecommunications,
> aviation, etc. (relics of the 70s when economists and national
> planners wrongly thought centralized economies were key for development) -
> are key to national security, and therefore should belong to the public, has
> been turned on its head. Just look at Alitalia, Vargas, SA Telkom, Amtrack,
> Kenya Railways, Eurotunnel. All considered critical to national
> security, all of which are nothing more loss-making iron balls dragged along
> by the exchequers (taxpayers) in their respective countries.
>
> I can't see how an institution that is a consistent drain on the exchequer
> would be critical to national security. Lets admit it. If sound
> communication provision is critical to national security, mobile providers
> have given me that - more extensively (see safaricom/celtel network
> coverage) and faster (in the last 6 years) and cheaper (the wireless rates i
> pay while high do not come close to the price of repeated bailouts in my
> name) than the Telkom Kenya has ever been able to.
>
> If someone else has the money and patience to by the piece of telephony
> junk in my back yard and turn it into something, please do so fast, and i'll
> sell it for exactly what its worth...pennies. The longer I wait, the less my
> junk will be worth. In the meantime, i'll save my money to invest in more
> sound privatizations the future - perhaps the Safaricom IPO.
>
> Regards
>
> Kyai
>
>
