[kictanet] Telkom's new licence, Sh69b debt and layoffs

[Mike Theuri]

The Standard reports the following excerpts in part:
http://www.eastandard.net/hm_news/news.php?articleid=1143972525&catid=14

++++++++
*Telkom Kenya plans major debt and project swaps to rid it of liabilities
amounting to Sh68.8 billion as part of restructuring before privatisation.
*========

The debt burden itself is astounding given the sum of US$1bn. The
government's promise to hand over TKL with a clean balance sheet ought to
invite offers far in excess of the said $50m that was said to have been
offered by some bidders. While debt swap is a novel idea, the tax payer
should not inadvertently become the party to whom the debt is swapped to,
directly or indirectly.

*++++++++
Mr Solomon Kitungu, Director of Reforms in the Ministry of Finance, said the
Government has already factored the funding initiatives in the current
budget, with Sh41 billion made available towards the process.*
=======
It appears that the Kenyan taxpayer is bound to be saddled with heavy debt
obligations far more than the previously thought Ksh 20bn. The government
would do well to inform Kenyans at large just as it did for the potential
bidders as to what is in it for them and the country were the sale of TKL to
be successful considering it is our hard earned taxes that are paying for
this privitization

+++++++
*This in addition to Safaricom interconnection interest of Sh1.3 billion,
Paris Club and other loans paid by Government amounting to Sh3.8 billion.
There is also the Government debt on telephone and data lines amounting to
Sh3.4 billion, new mobile license (US$55m), which requires Sh3.9 billion and
liquidity and investment support of Sh3.5 billion.
*=======

It now appears that TKL is set to transition from a fixed wireless provider
for which it was already licensed, to a fully fledged mobile provider at par
with Safaricom and Celtel. Whether the complaints against TKL generated more
than the providers bargained for (ie the mere payment of excise and VAT
taxes vs a new mobile operator on equal operational footing) remains to be
seen. Clearly TKL with its basket of licences will be a formidable provider
once privatized considering it will be able to offer competitive and bundled
services (wireless + wireline + internet + IPTV etc etc). The $55m mobile
licence fee presumably will again be footed by the taxpayer. Is the
government in effect throwing this arena wide open to any RWA operator by
licencing TKL as a mobile operator? This would be a big plus for the
consumer and other entrants eager to tap the market.

Hopefully the Kenyan taxpayer who is likely to be bearing this $1 billion+
burden will not be short changed when it comes to the offer amount. TKL's
management had reportedly asked for 5 years to run TKL, 5 years might be too
long but atleast 2-3 years ought to have been fair. I believe TKL if given a
chance would alleviate the debt burden to be passed on to taxpayers by
leveraging its new services and restructured organization so as not to
unfairly burden the Kenyan taxpayer and unduely reward foreign entities
coming on board. Hopefully we will get to see consortiums that include local
partners bidding for the sale. The government should be willing to reject
bids that do not reflect the true value of TKL after the Ksh 69 billion debt
offload. With a clean balance sheet, TKL ought to be worth in excess of the
range Rothschilds once valued it at: $800m - $1.3bn. Why the Government did
not seek to ask the bidders to assume part of the debt remains to be seen,
though it does make the sale very attractive. Also to be seen is whether the
government intends to undertake measures to ensure that the Nation's
national security is not compromised as a result of the sale.

Mike Theuri
-------------- next part --------------
An HTML attachment was scrubbed...
URL: <https://lists.kictanet.or.ke/pipermail/kictanet/attachments/20070807/9f8297c5/attachment.htm>