Security council was behind Telkom deal

Dr. Joseph Kinyua

Former Head of Public Service boss Joseph Kinyua at a past function.

Photo credit: File | Nation Media Group

 The decision to have the government fully acquire Telkom Kenya was made by the National Security Council (NSC) and approved by the Cabinet in 2022, according to government documents presented in Parliament.

The NSC decision was made on April 1, 2022 and it followed a memorandum that was jointly but separately presented to the council and the Cabinet by then National Treasury Cabinet Secretary Ukur Yatani and former Attorney-General Kihara Kariuki.

The documents presented to the Finance and National Planning, and Communication, Information and Innovation committees of the National Assembly that are jointly investigating the acquisition, show that following the NSC approval, the matter was taken to the Cabinet for consideration. The Cabinet endorsed the NSC decision on May 10, 2022 and the acquisition processes were triggered.

This saw the government pay Helios Investors LLP Sh6.2 billion to acquire its 60 per cent shareholding in Telkom, in addition to its 40 per cent shareholding it has.

The payment was, however, flagged by the Finance and National Planning Committee chaired by Molo MP Kuria Kimani as it considered the proposals by Treasury on the supplementary budget for the 2022/23 financial year. Treasury was seeking to have the payment regularised as it had been done without the approval of the National Assembly.  But the Kimani-led committee in its recommendations to the Budget and Appropriations Committee declined the request, which was upheld by the House on February 28 as it passed the supplementary budget.

The documents further show that the government paid Helios Investors LLP Sh105.44 million, which was above the Sh6.09 billion that was tabled in the National Assembly for regularisation in the supplementary budget.

The documents indicate that the same day NSC made the decision, Mr Joseph Kinyua, the Head of Public Service at the time, wrote to then Treasury Principal Secretary Julius Muia, then Planning PS Torome Saitoti and former Solicitor-General Ken Ogeto informing them of the decision.

On May 9, 2022, a day before the Cabinet approved the NSC decision, Mr Kinyua again wrote to Dr Muia, Mr Torome and Mr Ogeto informing them of Mr Yattani’s brief to the Cabinet on the status of Telkom and the proposed exit of Helios.

“The president has considered the memorandum and noted the contents, concurred with the request in the memorandum subject to ratification by the Cabinet and directed the CS for National Treasury and Attorney-General to take appropriate action,” wrote Mr Kinyua.

Article 240 of the constitution establishes NSC,  with the President mandated to preside over its meetings. Other members of the council are the Deputy President, Cabinet secretaries in charge of Defence, Foreign Affairs and Internal Security, Attorney-General, Chief of Kenya Defence Forces, Director-General of the National Intelligence Service and Inspector-General of Police.

The briefs to NSC and the cabinet indicated that Telkom operates critical national security assets and services including mobile telephone services, money transfer services, data centre assets and National Fibre Optic Infrastructure operation and maintenance. The others are management of critical government services and Fibre Right of Way Subsea Assets.

“Hellios/Jamhuri HL have now notified the government of Kenya of their decision to exit Telkom by exercising their put option—their right to sell their stake in the company to the government as provided for in the shareholder agreement,” Mr Yattani wrote in the memo to NSC and Cabinet.

Mr Yattani cited “frustrations” as the reason Helios wanted out of Telkom noting that “this offer is considered a good deal for the government considering that the total shareholder loan outstanding to Helios as at December 31, 2022, was Sh33 billion and the value of shares”.

The frustrations the investors went through, according to Mr Yatani, include failure by the government to institute regulatory interventions necessary to “remedy” the structural imbalances in the telecommunications business environment that “continue to make the sector less competitive much to the disadvantage of the rest of” the operators and consumers.

NSC was also told that failure by the government to approve the joint venture between Telkom and Airtel Kenya, which would have involved the merger of the two companies’ telecommunications business saw Helios make the move.