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The government has reversed the controversial Sh6.1 billion full acquisition of Telkom Kenya Ltd from Jamhuri Holding Ltd (JHL) even before the investigating panel finalises a report on the matter.

In a dispatch from Cabinet, the nation’s top policy organ, Kenya Kwanza administration has directed the money to be wired back to the National Treasury, a decision likely to unleash a fresh legal battle between the State and shareholders of the firms that were bought out.

In a new development, Treasury Cabinet Secretary Njoroge yesterday said a competitive process set in motion in January to identify a new investor for Telkom, recommended that Infrastructure Corporation of Africa LLC (ICA) of the United Arab Emirates, be the new majority shareholder, based on the offer they put forward. He said the Cabinet approved the move to onboard ICA as the new majority shareholder in Telkom during its Tuesday meeting.

“In order to complete the process of onboarding ICA, GoK will work with Jamhuri/Helios to transfer their 60 per cent shareholding directly to ICA,” Ndung’u said in a statement. This process, he added, will inevitably require rescinding of the transaction documents already signed between government of Kenya and Jamhuri/Helios, among other necessary actions.

The Sh6.1 billion Telkom acquisition happened in 2022 in the dying minutes of the previous Jubilee regime with only the approval of the then Cabinet, which excluded both parliament and the Telkom board from consenting.

President William Ruto’s regime says the current decision will offer an opportunity to tap new strategic investors willing to resuscitate the loss-making Telkom, Kenya’s third-largest telco by market share.

“Jamhuri/Helios will refund to the Government of Kenya the amount paid as consideration for the takeover. Cabinet’s intervention will enhance the operational capacity of Telkom Kenya and make it a competitive player in the telecommunications market,” the cabinet memo reads in part.

Shareholding changes

Interested strategic investors will be forced to take over multibillion debts that Telkom accrued and inherited in the strings shareholding changes that intensified in 2016 after France Telecom, trading as Orange East Africa (OrEA), exited after selling a 70 per cent stake in Telkom Kenya to JHL. In the same period, Sh6.9 billion government debt was converted to equity, pushing its total stake to 40 per cent. 

Before the cabinet memo, the legal status of Telkom Kenya was in abeyance. The Telkom board insists the shareholding is split between JHL and the government at a 60:40, respectively, despite former National Treasury Cabinet Secretary Ukur Yatani maintaining Telkom was fully acquired by the state. “As board members, we have not been involved at all in the transaction and in view of the fact that we could be held personally responsible for our actions, we could also seek this comfort from the Attorney General,” Telkom Chairman Eddy Njoroge said in a letter dated August 20, 2022, to Yatani.

Preliminary investigation shows JHL, through its UK-based subsidiary Helios Investment, sold all the 60 per cent shares at only $1 (Sh147) token while the Sh6.1 billion transaction was instead an unclear loan repayment.

The payment was among the eight withdrawals, done between the 4th and 5th of August 2022, amounting to Sh22.43 billion that were hurriedly transacted as supplementary funding without the nod of the controller of the budget.

A number of Kenyan firms are believed to have benefitted from the proceeds of the acquisition through compensation for consultancy services rendered. These included key transaction advisors Stanchart Bank, Stanbic Bank, and John Ngumi, head of Eagle Africa Capital Partners Limited, who were all paid by JHL.