Telkom is poised to undergo a significant ownership change as the Infrastructure Corporation of Africa LLC (ICA), headquartered in the United Arab Emirates, is on track to acquire a 60% stake in the company from the London-based private equity firm, Helios.
This acquisition has been confirmed by the Treasury after a competitive process.
In a noteworthy development, the Kenyan cabinet has recently nullified a previous agreement between the government and Helios for the nationalization of Telkom Kenya.
This decision was made due to concerns over “governance challenges” associated with the earlier deal.
This alteration in ownership may introduce an element of uncertainty for foreign investors, as sudden shifts in government policies and the cancellation of established agreements are generally viewed unfavourably when a new administration takes office, according to legal experts based in Nairobi.
The Treasury clarified that it had chosen to abandon the nationalization plans for the company and had initiated a search for a new strategic investor in January of this year. After the evaluation process, ICA emerged as the selected investor.
The Treasury explained, “ICA’s offer includes injecting capital to support Telkom’s essential infrastructure and overall improvement of the company’s capabilities, as well as addressing some of the company’s outstanding debts.”
Under the revised arrangement, Helios will transfer the majority of its stake to ICA, and the financial specifics of this deal with the UAE company have not been disclosed.
As of now, Helios, which acquired the 60% stake from Orange in 2016, has not made any public statements regarding the government’s decision to revoke the previous agreement.
Additionally, the government, while retaining a 40% shareholding, intends to lead regulatory reforms aimed at rectifying imbalances in the telecommunications industry, as announced by the Treasury.
Telkom, despite being the smallest operator compared to Safaricom and Airtel, manages crucial assets vital for government communications, including a national fibre-optic network.
Its management has long advocated for industry reforms to reduce the dominance of Safaricom, which holds a significant share of revenue and users in the telecommunications sector.
