Mystery surrounds the ownership of the little known Dubai-based Infrastructure Corporation of Africa LLC (ICA), the company that is set to acquire a 60 per cent stake in Telkom Kenya.

The company is causing ripples after the government cancelled a deal with private equity firm Helios on the ownership of the telco that is considered a strategic national asset. Telkom Kenya owns and operates sensitive security infrastructure in addition to owning large tracts of land in prime locations across the country.

Little is known about ICA, raising questions about its technical expertise and background given that it is set to become a major shareholder in Telkom Kenya. This is set to be a significant development given that past attempts to merge the third largest telco and its rival, Airtel Kenya, has been frustrated by various players, including industry rival, Safaricom, as well as the National Security Advisory Committee (NSAC).

In objecting to the proposed merger, Safaricom had argued that the two firms owed it hundreds of millions of shillings in call termination charges and there was no guarantee that the new entity would take over the debt.  NSAC on the other hand, said that Telkom Kenya controlled critical digital security infrastructure used by government Ministries, Departments and Agencies (MDAs) that hold crucial information with national security implications.

Decision revoked

In the run-up to last year’s election, the National Treasury bought back shares worth Sh6.1 billion from Jamhuri/Helios, reverting the company to government ownership through a transaction brokered by John Ngumi, a banker with over 35 years in the sector, specialising in growing financial markets in Africa.

Earlier this year, Ngumi went to court to seek anticipatory bail fearing that he would be arrested over his role in the transaction, which was also subject to investigation by the National Assembly. MPs are yet to release their report on the same.

 This week, the Cabinet revoked the decision by the then Treasury CS, Ukur Yatani to pay Jamhuri/Helios Sh6 billion for 60 per cent of Telkom Kenya’s stake. “By dint of this decision by Cabinet, Jamhuri/Helios will refund to the Government of Kenya the amount paid as consideration for the takeover,” said a Cabinet brief dispatched late on Monday night.  “The decision by Cabinet offers Telkom Kenya an opportunity to source and onboard another strategic investor, subject to the receipt of all regulatory approvals”. According to the brief, the intervention by the Cabinet was meant to enhance the operational capacity of Telkom Kenya and make it a competitive player in the telecommunications market. A day later, Treasury CS Njuguna Ndung’u said that a competitive process to find a strategic investor had identified ICA to take over that role after nine months of searching.

Yesterday, a search by the People Daily team established that ICA has a minimal online presence, with its website being created just last month and updated recently, adding to the mystery surrounding the company’s credentials, capabilities and beneficial ownership.

The online search for information about ICA yielded no digital footprints, which is likely to raise questions about the background and credentials of the company that is now set to become majority shareholder of Kenya’s third largest mobile phone company after Safaricom and Airtel. Surprisingly, its website was created only last month and updated this week.

More questions

A domain search indicated that infracorpafrica.com was registered on September 11, which raises more questions than it answers, given the large amount of money involved in the deal should Jamhuri/Helios agree to refund the money in the first place.

  Although the registration of the domain name does not imply that that was the day the company was formed, it could indicate that it was likely that it was formed for the sole purpose of consummating the Telkom Kenya deal even as Treasury said the firm was competitively sourced. Follow up questions to the Treasury were yet to be answered by the time of going to press last night.

Earlier, on Wednesday, Treasury had said: “A competitive process to identify the new investor was set in motion in January 2023, resulting in an evaluation process that recommended the Infrastructure Corporation of Africa LLC (ICA) of the United Arab Emirates, to be the new majority shareholder in Telkom, based on the offer they put forward”.

Treasury says part of the offer includes capital injection to fund Telkom Kenya’s critical infrastructure and the overall upgrade of its capabilities. Part of the money will also be used settle some of the outstanding debts.

Telkom Kenya’s customer numbers have been falling over the years, partly due to poor quality of services. A cash injection, if it comes, would, therefore, go a long way in giving it leverage to invest in installing or renting masts to improve the quality and reach of its mobile phone services. In the past, the firm, which owns and operates one of the most extensive fibre cable network in Kenya, has been relying on this strength to sell internet broadband as its main revenue stream.  The question now is whether the steps the government has taken will turn around the struggling parastatal.

Jamhuri/Helios, the outgoing majority shareholder, has maintained a studious silence regarding the new development although earlier in the year it sent lawyers to give its side of the story when MPs were inquiring into the July 2022 transaction.

Now, the government says the transaction raised “governance challenges”, hence its decision to revoke the buy-back and insist that the stake held by Jamhuri/Helios be transferred to ICA.

 By retaining a 40 per cent share in the troubled telco, which owes tens of billions of shillings in back taxes, unpaid pensions and other statutory deductions, the government says it will use this to spearhead regulatory reforms aimed at correcting perceived imbalances in the telecommunications sector.

Share price

Telkom Kenya also owed billions of shillings to Helios, part of which was converted from debt to equity, thus raising the fund’s stake in the telco.

Legal experts have warned that coming a year after the government’s acquisition of shares from UK-based private equity fund, Helios Investment Partners, it raises legal questions about the feasibility of undoing a completed share sale. What happens next will, therefore, depend on what steps Helios will take next.

The Cabinet Office did not disclose the specific reason for the reversal, but concerns about the share price have been raised. Ordinarily, according to one lawyer, a share sale can only be reversed if there are vitiating factors such as fraud or misrepresentation. No such evidence has so far been presented in the Helios case. The situation is further complicated by the potential circumvention of privatisation and public asset disposal laws if or when the shares are returned to Helios before the sale to ICA can be consummated. This raises questions about transparency and accountability in the subsequent transaction(s).

“The question that arises is whether it is legally possible to reverse a sale of shares once completed. Can the government recall a deal entered into one year ago and demand a refund?” asked the lawyer.  Treasury’s announcement also raises concerns about the potential implications for foreign investors, who harbour reservations about abrupt policy changes, especially when sealed deals are revisited by new administrations.