French demand for $385m compensation over Telkom Kenya’s ‘vanished’ assets

France Telecom has kicked up a storm within government circles with a sensational claim that it is not able to trace some of the assets that were on the books of the former parastatal at the time it was put on sale.

“You sold to me an empty box,” is the gist of the claim by the French state-owned company — one of Europe’s leading telecommunications providers, which beat seven international bidders in 2007 to acquire a controlling stake in Telkom Kenya.

The company now wants the government to compensate it to the tune of a massive $385 million —­ an amount almost equal­ to what the French company paid for its 51 per cent share of Telkom Kenya.

As part of preparations for sale of Telkom Kenya, all the information about the company, including assets and audited accounts for five years — was deposited in a data room to which all interested bidders were allowed access.

Did unscrupulous individuals grab assets of Telkom Kenya between the time the data room was established and the time of the actual sale of the company to France Telecom?

Is the French company to blame for not having conducted a proper due diligence before signing on the dotted line?

These are the pertinent questions at the heart of a dispute that has cast doubts on the integrity of one of the largest privatisation transactions in the history of Kenya, in which the government pocketed a whopping $390 million — the largest sum ever obtained from the sale of shares of shares of a parastatal to a foreign investor.

Both sides are still tightlipped. A party who was involved in the transaction for France Telecom told The EastAfrican that actual negotiations between the government and the French company were yet to begin — pointing out that the view of his side of the divide was that the matter should be kept away from the media attention for now.

An e-mail with questions sent to France Telecom’s Michel Barre, who was reportedly visiting Nairobi to engage the government on the dispute, went unanswered.

Neither did the government side want to release the details of the dispute. But sources have confirmed to The EastAfrican that the government side has gone ahead and engaged a Nairobi law firm to lead the negotiations with France Telecom. Negotiations begin in earnest on March 21.

Disappearing assets

Aside from assets that the French company claims have disappeared from Telkom Kenya’s books, it is also accusing the government of non-disclosure of material contracts at the time of the transaction.

The French claim that after taking over, they stumbled on supplier contracts with huge liabilities that had not been disclosed in the data room at the time of the transaction.

More questions: Did some people in Telkom Kenya rush to commit the company to opaquely procured supply contracts between the time the data room was opened and the time France Telecom took over?

Second, the French have reportedly made claims questioning the integrity and accuracy of Telkom Kenya’s audited accounts that were lodged in the data room at the time of the transaction.