Ruto government cancels Sh6bn Telkom buyout deal with Helios
From left: Then ICT Cabinet Secretary Joe Mucheru, his National Treasury counterpart Henry Rotich and Helios Investment principal partner Pierre Heinrich during the sale of Telkom Kenya shares held by Orange East Africa to Jamhuri Holdings Limited at Treasury buildings in Nairobi in mid-June 2016.
What you need to know:
- Cabinet rescinded the July 2022 decision which saw Helios paid Sh6.091 billion following its exit from the struggling telecommunications company.
- Helios, through its special purpose vehicle, Jamhuri Holdings, exited its investment in Telkom Kenya in July 2022.
The Kenya Kwanza government has overturned a decision by the Uhuru Kenyatta-led Jubilee government to take over control of Telkom Kenya.
According to a Cabinet despatch sent Tuesday evening, President William Ruto's government has also cleared Telkom Kenya to proceed and scout for a new strategic investor to pump in capital and support future plans for growth and expansion.
In its meeting, the Cabinet rescinded the July 2022 decision which saw Helios, a London-based private equity fund, paid Sh6.091 billion following its exit from the struggling telecommunications company.
Helios, through its special purpose vehicle, Jamhuri Holdings, exited its investment in Telkom Kenya in July 2022 through exercising a put option which was part of the purchase agreement.
The put option implied that Helios’ investment was based on policy and regulatory interventions being realised failure to which JHL had been granted the right to require GoK to buy out its stake.
“In addressing the governance challenges posed by the nationalisation of Telkom Kenya Limited in the run-up to last year’s General Election, Cabinet rescinded the decision that the Government of Kenya shall purchase from Jamhuri/Helios 60 per cent of the ordinary shares of Telkom Kenya”, the despatch states.
Helios exited its investment in Telkom Kenya following failure by the government to honour commitments that it says would have injected commercial viability into Kenya.
The collapsed bid for a joint venture between Airtel Kenya and Telkom Kenya in 2019 was one of the main reasons that prompted the London-based private equity fund to exit its investment.
“The government of Kenya proceeded to unlawfully expropriate the prime property of Telkom Kenya Limited situated along Ngong’ Road Nairobi measuring approximately 79 acres valued at over Sh10 billion without Telkom’s or Jamhuri Holding Ltd's consent and without any compensation being committed or paid," the letter from Paul Cunningham dated March 20, 2023, addressed to the Office of the Clerk of the National Assembly indicates.
The government is now demanding a refund from Helios for the transaction which was consummated just a month before the August 2022 general election.
“By dint of this decision by Cabinet, Jamhuri/Helios will refund to the Government of Kenya the amount paid as consideration for the takeover. The decision by Cabinet offers Telkom Kenya an opportunity to source and onboard another strategic investor, subject to the receipt of all regulatory approvals. Cabinet’s intervention will enhance the operational capacity of Telkom Kenya and make it a competitive player in the telecommunications market”, the Cabinet states in its Tuesday despatch.
The July 2022 Sh6.091 billion payment to Helios was one of the payments flagged by the Controller of Budget as having been undertaken without due regard for the provisions of Article 223 of the Constitution on Supplementary Budget expenditures.
Additional reporting by Daniel Ogetta
