TKL is being sold for pennies on the dollar, unfortunately this is a phenomenon that keeps repeating itself over and over again with telecom licencing in Kenya. Investors in several other Africa countries pay hundreds of millions of dollars to secure licences but in Kenya it appears to be ok to sell a 15 year term licence for $50m and 6-7 years down the road the companies are making annual profits in the hundreds of millions that major western corporations would envy. In this particular case, TKL is being sold with its basket of licences which alone should cost hundreds of millions of dollars more, its exclusivity as a existing and the only current nationwide provider should also factor in. Interestingly enough the paltry valuation of TKL at $205m is a slap in the face and an affront to taxpayers who have a stake in TKL by virtue of it being a government owned entity, not forgetting the TKL owned infrastructure that is already in place. Not factored into the equation seems to be the undersea cable which TKL has a key stake in. The sale of TKL to foreigners should not take place as a matter of key national security and interest. Countries such as Canada and the US have well established laws that state that their telecom companies should not be foreign controlled because they understand the implications this has on their sovereignty and interests. In 1999 in part : 24 September 1999 Africa Confidential Vol 40, No, 19 "If the politicians prevail on CCK over the cellular licence, more questions will be raised about the sell-off of the state's land-based telephone network, Telkom Kenya. Continuing delays in its sale due to political interference have lost the government over $300 mn. in revenues, according to industry sources. Kenya's telecommunications sector was valued at some $1.2 billion in 1997 by Rothschilds, the government's then financial advisors on the privatisation, but would be unlikely to fetch much more than $800 mn." ----- Original Message ----- From: Robert Alai Sent: Sunday, July 08, 2007 4:35 PM Subject: [africa-oped] Telkom Kenya is not this cheap sign petitin......... http://www.petitionspot.com/signature/TELKOMKENYA Dear Members The Kenyan government is in the process of looking for an investor to buy off 40% of Telkom Kenya shares. The current bidders which they say is the highest is giving 5.6Billion Kenya Shillings. This is an amount which we, stakeholders in the IT sector in Kenya feel is less than the amount the corporation can fetch when privatised. This makes us think that the best way the Kenyan government can sell the corporation at the right price is by listing it in NSE. It would be good for the strategic National interest for Telkom Kenya to remain in the hands of Kenyans and only around 8% shares be sold to a foreign investor or a maximum of 10%. Why should we be selling all our state corporations to foreigners. We cannot allow this and must stand up to this. Telkom Kenya is a very vital corporation which must either remain in the hand of Kenyans or be sold to individual of corporate Kenyan investors but not what is currently happening. Why is the government not ready to list telkom Kenya in the bourse? What is the rush to sell to an outsider. We must never allow this. Please click the following link and sign the petition. We must never allow Telkom Kenya to be owned that much by foreigners. 40% is just too much. Please sign the petition http://www.petitionspot.com/signature/TELKOMKENYA . Please dont let your country down. We must never allow Telkom Kenya to go that far at that less amount. Its just too cheap. Robert Alai Onyango IT Stakeholder Kenya On 7/8/07, yamanjanl < yamanjanl@yahoo.com> wrote:

BT EMERGES FRONTRUNNER IN RACE TO BUY TELKOM KENYA, ACCORDING TO GOVT OFFICIAL

A consortium that includes British Telecoms and Libyan investors has emerged as the only strong contender to acquire a strategic 40 per cent shareholding in Telkom Kenya. People close to the matter told the Business Daily that senior officials from BT and Libyan investors on Friday met top Treasury and Ministry of Communication officials to work out the deal's finer details. Treasury estimates the stake to be worth Sh5.6 billion —meaning that Telkom Kenya is now valued at Sh14 billion.

The British firm is said to have tabled a number of proposals, including a strong financial bid as commitment to finance the turnaround of Telkom Kenya, in the meeting that ended at 11.30 pm. Such a high level leak means that the Government is doing its best to talk up the price that will be paid for Telkom Kenya.

"The consortium led by BT is the team to beat. They have a credible technical group and have the finances," an official, who attended the meeting, said. It is the second time that the Government is trying to sell a significant portion of its stake in Telkom Kenya, the first attempt having flopped after bidders placed financial bids that they ultimately could not back up with real money.

The Government had this time around included a condition that required bidders to have an annual revenue of $200 million (Sh14 billion), more than 500,000 voice subscribers and demonstrated experience in the deployment of broadband to avoid similar flops.

In recent months, Libyan firms, loaded with petrodollars, have been clinching lucrative deals in Kenya mainly on the infrastructure front including the upgrade of Kenya Petroleum Refineries. This has cemented close trade ties between Kenya and Libya that was recently pushed by President Kibaki's official visit to Tripoli.

The Government intends to sell its 40 per cent stake to a strategic investor who is expected to come on board before the end of the year. Analysts say that BT has been desperate to get a foothold in the lucrative Eastern African market through an acquisition, a pointer that the Telkom deal would turn their dream true.

Already, BT is well represented in the rest of the continent with its regional headquarters in South Africa to the Southern part of the continent. For the North African market, it has the Libyan office and the Nigerian office to serve the West African market.

"Safaricom has shown there is money to be made in this part of the world and everyone is now looking at getting a share of the market," James Rege, chairman, Capital Real Time, a telecommunication consulting firm.

Safaricom broke its earlier record to emerge as the most profitable firm in the East Africa posting Sh17.7 billion in profits, an increase of 39 per cent recorded a year earlier.

With Telkom already in the wireless voice market through their new service offering dubbed Telkom Wireless, which is set to be officially launched this Thursday, this could be big opportunity for BT to take a stab at a growing market.

Rege, a former permanent secretary in the information ministry, said BT looked the most credible firm to clinch the deal should it come through. This is not the first time the British telecommunications giant has made a bid at Telkom Kenya. Six years ago it indicated its interest in acquiring the state firm but it was disqualified during the preliminaries.

Other firms that are in the race to buy the stake include Indian mobile service providers Bharti Airtel, Reliance Communication, Tata Holdings and Vtel communication, who had won the licence to become the country's Second National Operator but were disqualified after failing to raise the required license fee.

American telecommunication giant AT&T pulled out of the race after the Government failed to buy into its demand where it indicated it would only buy a stake in the state firm if they were given a 51 per cent stake. This, they noted, was the only way they could get a free hand to turnaround the loss-making company.

South Africa-based Econet is also making a second attempt to enter the Kenyan telecommunications industry having won a licence for the third mobile phone operator that is subject of litigation. The recent attempt has seen potential bidders demand that the Government increases the 26 per cent stake it had initially planned to sell for them to consider the offer. But this has since changed as the stake to be bought by the strategic partners has been increased to 40 per cent and the government holding will stand at 49 per cent.

The remaining 11 per cent will be reserved to be sold to the public through the Nairobi Stock Exchange. Telkom is currently deemed to be unable to pass the Capital Market Authority (CMA) listing test. CMA regulations require that any firm keen on listing at the NSE must have posted profits for at least three in the five years to the listing.

But Telkom Kenya has been making losses for years, weighed down by huge staffing levels and growing competition from the wireless voice market. Figures sent to the potential investors show that Telkom financial performance has been declining over the last four years.

Its turnover has been declining at an annual rate of 10.5 per cent over the last three years as competitors eat into its market share to settle at Sh16.3 billion in 2006 from Sh20.9 billion in 2003.

The firm notes that it expects to make a loss of Sh1.18 billion, which is a reduction from last year's figure of Sh2.7 billion. While the special shares reserved for the public will be held in trust by the Government, dividend payouts from Telkom Kenya will stream straight into the State coffers.

According to Dr Bitange Ndemo, permanent secretary Ministry of Information, the revision had been informed by the need to go around the State Corporation Act in a move that was aimed at making the deal more suitable to strategic investors.

Had the strategic investor held a minority holding at 26 per cent and the Government holding a 64 per cent stake, Telkom Kenya would not run as a private company, but under the Act which guides the operation of parastatals.

At the moment the government is racing to clean Telkom debt ridden balance sheet as it prepares to bring the strategic partner on board as well as strike a better deal in the sale of the 40 per cent stake. The Government has already committed Sh26 billion to fix the pension and tax arrears with pensions taking Sh10 billion and the remaining Sh16 billion being taken by Kenya Revenue Authority. To keep the state firm afloat, the firm is set to complete a massive staff layoff that will reduce its work force to 3, 200 members down from 17, 000 by the end of August.

According to Permanent Secretary Bitange Ndemo, BT have also expressed interest in investing in the TEAMS fibre project. (SOURCE: Telegeography)

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