This article appeared in 2005, but it becomes very relevant when it appears that there is a sudden and

urgent rush to quietly privatize TKL by selling it to foreigners, while "restructuring and preparing" TKL for

that process at taxpayers expense, a tax burden that future generations of Kenyans will still be paying

with nothing to show for. The problems that TKL has are self created, they can be fixed and TKL should

not be sold at such a throw away price that is hardly sufficient to cover the debt that has been and which

additionally is likely to be transferred to the taxpayer. For those reading it is now 4 years to date since

the secret dossiers mentioned in the article were written and no prosecution or conviction has taken

place:

http://www.eastandard.net/archives/sunday/hm_news/news.php?articleid=14743

Self-inflicted woes

Telkom's growth is stifled by fraudsters colluding with staff as competition
bites, writes Gordon Opiyo.

Top officials of Telkom Kenya are involved in fleecing the cash-strapped company
of billions of shillings, according to independent investigations by the
Communications Commission of Kenya.

According to confidential reports prepared by the regulator, Telkom Kenya failed
to take advantage of the five-year local and international fixed line calls
monopoly due to collusion between the employees and an international syndicate
of phone companies.

In the estimation of then Transport and Communications minister John Michuki,
Telkom had lost over Sh120 billion in the previous seven years due to these
leakages.

Yet the minister failed to stop the syndicates, and appeared to have acquiesced
to them or become hostage. The company now has to grapple with tough competition
after the end of the exclusivity status in June, last year, with about 10,000
employees set to lose their jobs through an impending retrenchment exercise.
While Telkom Managing Director John Waweru says the company has nothing to hide
and is willing to co-operate with any investigators, indications are that there
are still too many untouchables fleecing the parastatal.

Information and Communications Permanent Secretary, Mr James Rege, plays the
same refrain: "We have an open-door policy and will ensure that any official
found to be involved in any improper deal takes responsibility for his or her
action."

Yet both officials have before them detailed reports of how the company lost the
opportunity to take full control of the local and international calls market,
despite having the advantage of being a monopoly. The decline was rapid, with
countrywide subscriptions to Telkom Kenya's switchboard falling by 14.7 per cent
to 280,000 lines in June 2004 from 328,358 the year before. And whereas
international calls used to generate 80 per cent of the total revenue a decade
ago, the figure has dropped to about 30 per cent.

Investigation

After the raid on Data Global Limited Justice and Constitutional Affairs
minister Kiraitu Murungi ordered the CCK to investigate the magnitude of the
fraud and how it was perpetrated. The Kenya Anti-Corruption Commission also
requested a similar brief.

According to the reports, Telkom Kenya's revenue declined because of fraudsters
adopting new technologies for transmitting international calls, and its failure
to change fast enough.

Fraudsters, with the help of Telkom Kenya employees, managed to get into the
lucrative international call market by offering cheaper calls. Among the methods
identified by the regulator's investigators were Voice Over Internet Protocol
and the Very Small Aperture Terminal (VSAT). These technologies make it possible
to make calls at a fraction of the cost of the traditional methods that Telkom
Kenya used.

Apart from the technology, Telkom entered into suspicious contracts with three
companies – CDR, N-Tel and Zantel – which, according to the CCK, have the
equipment to compress call traffic so that a small transmission capacity can
handle more telephone lines than a normal Telkom system. The companies entered
into agreements with the parastatal to terminate international calls from other
countries at a much lower cost — obviously to the detriment of Telkom.

For instance, a call that comes to the Telkom network from abroad is terminated
at $0.2 per minute, but those that come through the other companies are
terminated at $0.06 cents per minute. Worse for Telkom when the calls come to
mobile phones because it loses Sh14.50 per minute. "Going by the statistics of
the previous financial year (2002), where Telkom Kenya terminated over 17
million international call minutes, this amounts to a loss of over Sh178
million," says the CCK report to the Kenya Anti Corruption Authority.

The CCK questions the manner in which Telkom awarded the contracts to the three
companies, contravening three conditions laid down in its licence – condition 18
on fair trading, condition 25 of informing the regulator of joint ventures and
condition 26 that gave it exclusivity in the provision of international calls.

In other words, Telkom gave up its exclusive rights to operate international
calls to the three companies through the backdoor. Although the regulator says
that they have not been able to get the real owners of the companies,
investigations by The Sunday Standard have established that the firms were all
owned by influential members of the previous administration and a former
director of Telkom.

What is interesting is that although the file on the fraud investigation in
Telkom has been open at the Kenya Anti Corruption Authority since 2003, no
action has been taken to stop the illegal operations. Instead, most of the
officers investigating the have either been transferred or recalled to the
Criminal Investigation Department.

In December, last year, Dr John Mutonyi, assistant director in charge of
investigations told The Sunday Standard that that his men were still
investigating the matter. However, when contacted for the past two weeks, Dr
Mutonyi failed to respond to our calls.

The CCK report to Kiraitu says: "The kind of defense Telkom Kenya is giving to
agreements, which are one of the biggest contributors towards the decline in its
international revenue shows that individuals from Telkom Kenya are gaining from
it."

In an earlier interview with The Sunday Standard, Waweru had said that the
contracts were signed before his management came into office and that the new
team was reviewing them.

The investigations also revealed that billions of shillings were lost through
illegal satellite dish operators who, according to the briefs, were supported by
Telkom Kenya staff to get telephone lines fixed to the local exchanges.

"We suggest that an independent investigator be sought to address the problem of
decline in Telkom Kenya's revenue including the illegal international traffic
termination by Data Global at Lonrho House. Telkom Kenya cannot investigate
itself on this matter because they appear to be abetting culprits," concludes
the report.

However, two years after the secret dossiers were written, no major change
action has been seen.