Telkom Kenya to lease masts after selling them to US firm for Sh17bn

Telkom Kenya employees take selfies with Mombasa Governor Hassan Joho in August. The company is selling most of its assets. PHOTO | KEVIN ODIT | NATION MEDIA GROUP

What you need to know:

  • Asset stripping refers to selling off property in order to improve returns for equity investors.
  • Two years ago, the firm confirmed that it was selling properties in Nairobi, Kisumu, Nyeri, Nakuru, Gilgil, Nambale, Moiben and Malindi.
  • Top on the list was a three-storey building in Kisumu that was to be sold for Sh260 million.
  • Another was a 1.733-acre plot in Embakasi, Nairobi, that was offered for Sh146 million.

Telkom Kenya has sold its 723 masts for Sh17.16 billion to an American firm as the asset stripping of properties once owned by Kenya Post and Telecommunications Corporation continues.

Asset stripping refers to selling off property in order to improve returns for equity investors.

Telkom Kenya — owned 60 per cent by Helios, a Nigerian London-based firm — will then lease the towers from the US company.

Helios was founded by Mr Tope Lawani, who holds a bachelor’s degree in chemical engineering from MIT and law degree from Harvard, and Mr Babatunde Soyoye, an electrical engineer who previously served at the Equity Bank board.

It bought Telkom Kenya shares previous owned by France Telcom.

While the disclosure on the amount has not been made locally — it is now contained in official filings by the American Tower Company (ATC) to the US Securities and Exchange Commission.

DEAL REACHED

The filings indicate that the deal was reached on October 1 and it will give the US giant a footprint in the Kenyan market after making similar acquisitions in Uganda and Tanzania a decade ago.

Kenya will be the fifth African country the American firm has moved in, and the 17th worldwide.

According to ATC, some money "was paid in cash and a portion will be paid in instalments, subject to the satisfaction of specified conditions”.

Neither the Treasury nor Telkom Kenya could confirm or deny the amount by the time of going to the press.

Already, the Competitions Authority has cleared the transfer to the Kenyan subsidiary — ATC Kenya Operations Ltd — through a gazette notice signed by director general Wang’ombe Kariuki.

Mr Kariuki confirmed the approval in a November 13 statement.

MARKET SHARE

“The proposed transaction involves the acquisition and lease back of TKL’s passive infrastructure assets comprising a majority of its towers, related tower assets and contracts. The proposed acquisition translates to acquisition of a majority of the target’s towers,” the statement said.

“The transaction is unlikely to lead to substantial lessening or prevention of competition in the market for telecommunication towers. Further, it did not raise any public interest concerns over assets and contracts.”

The US firm will now control 97.2 per cent of Telkom Kenya Ltd towers and 14 per cent of the towers market share — which is dominated by Safaricom at 64 per cent and Kenya Towers Ltd at 21 per cent.

The authority said the US firm “will face credible competition from the other main players”.

Experts have always said the taxpayers did not get value for their money in the 2007 Telkom Kenya privatisation when the government sold 51 per cent of the firm to France Telecom for $390 million (Sh26 billion) a month to the General Election.

While the deal is expected to enable the third-placed mobile service provider a chance to strengthen its balance sheet, it will also raise questions on why the Treasury remains tight-lipped on the amount paid and how much the government is to get.

HUGE DEBTS

Privatising Telkom Kenya was controversial as the government had to write-off a Sh68.8 billion debt, which included Sh36 billion owed by the firm to Kenya Revenue Authority, plus millions of shillings paid to transaction advisers.

In its five-year strategy, the company intends to invest Sh15.2 billion ($150 million) in its 3G and 4G networks as well as mobile financial services and customer experience.

Telkom Kenya inherited properties strewn across the country and has been selling them privately.

Two years ago, the firm confirmed that it was selling properties in Nairobi, Kisumu, Nyeri, Nakuru, Gilgil, Nambale, Moiben, Malindi and other towns.

Top on the list was a three-storey building in Kisumu that was to be sold for Sh260 million.

Another was a 1.733-acre plot in Embakasi, Nairobi, that was offered for Sh146 million.

Also on offer was a five-storey building in Karatina that was to be sold for Sh120 million while another building on the Nyeri-Nanyuki Road is quoted for sale at Sh108 million.