France Telecom, the majority owner of Telkom Kenya, has sold 95 per cent of its stake in a Ugandan telecoms operator, turning attention to its planned exit from Kenya.

The French firm, which operates as Orange, on Monday announced that it had struck a deal to sell its stake in the Ugandan operation to Africell, pending regulatory approval.

Orange told the Business Daily in an email that it is considering a similar review of the Kenyan operation that could lead to taking new partners on board to stave off a looming financial crisis.

READ: Intrigues rock Kenya telcos market as weaker players exit

France Telecom said that after six years of operation, the Ugandan business had not met the group’s criteria in terms of performance and value creation.

Orange’s search for new partners in Kenya comes against the backdrop of multi-billion-shilling court cases filed by Telkom Kenya employees who are seeking to stop the exercise until a case they have filed in court is heard and determined.

“Orange is conducting a similar review with regards to its activities in Kenya. One option would be to find new partners to ensure that the necessary financial and operating resources are available to maintain investment and support the continued development of operations,” France Telecom’s press officer Sebastian Audra said in an email.

That statement means France Telecom is considering moving to a new dispensation in which the government is not the sole partner in the business.

That is only possible if the French firm sells part of its 70 per cent stake to another partner or exits the business altogether. Some insiders have said that Orange could sell as much as a 19 per cent stake to a third party.

Telkom Kenya, the country’s third-largest telecoms operator, is 30 per cent owned by the government, which has lately been reluctant to invest additional funds in the business.

Justice Njagi Marete recently barred Telkom Kenya from entering into any sale agreement with a third party until it settles the multi-billion- shilling award that the Court of Appeal granted 997 former workers nearly three years ago.

The judge directed the former employees, though their lawyer Antony Oluoch, to present the orders to Telkom Kenya and Attorney-General Githu Muigai. The 1,000 Telkom Kenya retirees are seeking payment of Sh3.2 billion in severance benefits from their former employer.

The retirees, who were retrenched in 2006, claim that Telkom Kenya has started disposing of its prime properties in the face of a biting financial crisis that could render it bankrupt.

Most recently, Telkom Kenya issued a tender for the sale of 11 houses valued at Sh80 million in Gilgil, Nakuru. The company has also sought to sell 79 acres of land in Nairobi’s Karen area, but the sale has been stopped by the courts.

France Telecom had hoped to return the firm to profitability by 2010 and list it on the Nairobi Securities Exchange by end of this year, a target that has been made impossible by persistent loss-making.

Telkom Kenya’s revenue for 2013 declined to Sh9.7 billion (83 million euros) from Sh10.2 million (86 million euros) in 2012 according to Orange Group’s financial results.

Orange Uganda, which was born in 2008, is the third telecoms operator in Uganda with 620,000 clients at the end of December 2013.

“In the case of Uganda, a review was recently carried out that led the Group to conclude that after 6 years of operations, the subsidiary had not met the group’s criteria in terms of operational performance and value creation,” Orange said.

“Orange has agreed to sell its 95 per cent stake in the Uganda subsidiary to Africell as part of a rigorous optimisation plan where Africa and the Middle East remain a strategic priority,” France Telecom said in an email response to our questions. 

Other than Orange, Kenya’s fourth mobile operator yuMobile has sought approval from telecoms industry regulator, the Communications Authority of Kenya (CAK) to sell its business to rivals Safaricom and Airtel.

READ: Will Kenya end up with two or three major mobile operators?

The exit of Essar Group and possible exit of France Telecom from Kenyan is expected to open a new chapter in the history of wireless communication, which is currently dominated by Safaricom -- the only operator that is making a profit.

Latest industry statistics indicate that Orange has the lowest number of subscribers, with 2.2 million (or 7.1 per cent market share) compared with Safaricom’s 20.8 million (66.5 per cent).

The combination of losses and drop in revenues has negatively impacted on Telkom’s cash flow position, prompting shareholders to pump in more cash and write off its debts.