The change of ownership at Telkom Kenya has set the troubled telco on a new journey that, ironically, offers little cheer.

While the entry of UK private equity firm Helios Investment Partners into Telkom has reignited optimism, Kenyan taxpayers hope the troubled telco will pay dividends soon.

READ: UK’s Helios now takes over Telkom Kenya
Helios is now the largest shareholder in Telkom after purchasing the entire France Telecom stake in the company and negotiating with the Kenyan government to own 40 per cent in a joint venture, a process that took about two years to finalise.

“We are happy with the business plan, but it is difficult to anticipate when the company will be profitable and pay a dividend,” said Henry Rotich, Kenya’s National Treasury Cabinet Secretary.

Dominant player
He added that the government is hoping the new Telkom, which has now dropped the Orange brand, will no longer turn to the Treasury for bailouts.

By the time France Telecom decided to exit Telkom, Kenyan taxpayers had pumped in excess of $95 million in bailouts into the company.

This was on top of $856 million spent in the privatisation process, mainly in compensating the company’s more than 16,000 former employees.

The company was also deep in loss — reaching a record of $173 million in 2011 — and continued to struggle in the mobile voice, data and mobile financial services market, in which Safaricom has remained the dominant player.

The EastAfrican has established that one of the conditions set for the new majority shareholder controlling a 60 per cent stake is to be in Telkom Kenya for the long haul.

In setting this condition, the government was anticipating the tendency of private equity firms seeking quick gains and exit the moment things do not work in their favour.

Although Helios has been in Kenya for years with investments in Equity Bank, Africa Oil, Wananchi Group, Acorn Group and Interswitch, the government wanted assurance the firm is committed to Telkom’s turnaround.

Telkom board chairman Eddy Njoroge said that unlike the tenure of France Telecom when most decisions including the appointment of top management were made in France with the board only required to rubberstamp them, there will now be a shift in the management of the company.

Rubberstamp
To turn around Telkom Kenya, the new investors are already seeking for help from the government to enable the company launch products and services that can compete and increase its market share which has stagnated at less than 10 per cent in the mobile telephony segment while its money transfer service remains insignificant.

Besides government assistance, the company has also unveiled a transformation programme anchored on five pillars: Culture and brand, sales distribution, network expansion, innovation and ensuring customer-centric products.

According to Mr Njoroge, industry regulator Communications Authority must implement a report whose findings were on dominance.

This was particularly on the issue of sharing infrastructure and mobile money inter-operability to facilitate fair competition.

The report has found Safaricom to be a dominant player although it does not abuse its status.

“There is a need for scrutiny in the sector to ensure fair competition because, how can investors get a return where a market is skewed?” Mr Njoroge asked.

Mobile money
On the issue of infrastructure sharing, although Helios has already invested $50 million in upgrading and intensifying its network, the company wants Safaricom to be compelled to allow deeper sharing of infrastructure like spectrum, switches, antennae, transmission equipment, transceivers, microwave equipment, steel towers and base transceiver station shelters.

On mobile money interoperability, Telkom wants users to be able to send and receive money from other users irrespective of the network, and the government has promised this will be rolled out in July.

Telkom is hoping the rollout will enable it to launch a vibrant and competitive mobile money service after Orange Money, which was terminated after it failed to make an impact on the market.

While Safaricom transacted $8.4 billion on its M-Pesa platform in the fourth quarter of last year, Orange Money only managed to transact $760,946.

“We want competition and have agreed with operators to deal with mobile money inter-operability. By end of July we should have it in place,” said ICT Cabinet Secretary, Joe Mucheru.

He added that the government will play its role in protecting investors and ensuring they get returns on their investments.