France Telecom eyes more Telkom Kenya directors’ seats
Business Daily By MARK OKUTTAH
Monday, January 21 2013
France Telecom will seek additional seats in the board of Telkom Kenya if the government fails to inject Sh2.4 billion by June to maintain its stake in the operator at 40 per cent.
The Treasury’s stake in Telkom Kenya stood at 49 per cent in November, but dropped to 40 per cent following a Sh34 billion balance sheet restructuring plan.
This will drop to 30 per cent if the government fails to inject Sh2.4 billion in next five and half months, the remaining half of the Sh4.9 billion it was required to inject in the operator’s Sh10 billion rights issue.
France Telecom has provided its share of Sh1.5 billion. Treasury has tied the release of the cash to ease in State budgetary pressures and performance of the loss-making Telkom Kenya, prompting France Telecom to seek review of the board composition to reflect the ownership shifts.
The government has four seats in the board while France Telecom has five. The shareholding changes will give the French firm a bigger influence in the management of the firm.
“At this stage, no decision has been to make any change to the composition of the board of directors of Telkom Kenya,” said Tom Wright, the press officer at France Telecom in an email response to the Business Daily.
“This situation might be subject to further discussion after June 30, 2013,” added Mr Wright in reference to the rights issue deadline.
The investment secretary at Treasury Esther Koimett said earlier that cash injection will be tied to Telkom Kenya’s ability to cut losses.
“The option for the government to retain a 40 per cent stake is still open, however, a decision whether to retain this (option) will be dependent on the availability of resources and the ability of the firm to return to profitability, “ said Ms Koimett.
But France Telecom reckons that the government will lose the right to acquire the additional shares should it fail to meet the June deadline, a move that will prompt France telkom to demand additional seats on the board.
Reduced voting rights and smaller board representation at Telkom is expected to make it difficult for the Kenya government to push its agenda in the firm, including its quest for job cuts, review of the management team and change of strategy.
Telkom made Sh9.2 billion in revenues in 2011 and returned losses of Sh18 billion in what it blamed on the price war in the voice calls market.
More recently, the huge losses forced the firm to rely on shareholder and bank loans, which raised its interest expenses to nearly half the revenues.