Telkom does not need bailout – bosses

March 26, 2012
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The proposed business plan is set to run from 2012 to 2016/COURTESY
NAIROBI, Kenya, Mar 26 – Telkom Kenya says it is financially sound contrary to reports in a section of the media that it is facing a liquidity crisis.

Referring to the reports that indicated that the company is requesting for a Sh10 billion bailout from the government, chairman Eddy Njoroge said the writers were referring to the financing requirements proposed in a draft strategic plan that is still being reviewed by the board.

“I wish to assure all our stakeholders including our employees, suppliers, distributors, trade unions and other strategic partners that Telkom Kenya is a stable company that is here for the long haul and we will do everything possible to avert any risks to the business now or in the future,” Njoroge said.

The proposed business plan set to run from 2012 to 2016 should be approved in the next three weeks and is expected to drive the company’s growth prospects into the future, Njoroge disclosed.

When the plan is approved, there will be a clear picture of the extent of the funding gap and how it will be financed.

Njoroge was however quick to point out that the funding options are not limited to the shareholders alone, but they had other alternatives such as securing a loan from a bank.

Following the reports, questions were now being raised whether the privatisation of the operator- which cost the exchequer a tidy sum and led to the laying off of thousands of workers- was the right to do.

Asked whether it would consider the request, the Treasury, which holds a 49 percent stake in the company, had remained mum.

Maintaining that the report was ‘alarming’ Chief Executive Officer Mickael Ghossein however did acknowledge that the operator has a huge debt obligation to clear.

Currently, he said they owe their shareholders Sh42 billion and a further Sh2 billion to Standard Chartered Bank and the Kenya Commercial Bank.

The CEO downplayed default rumours saying they were promptly servicing these obligations in spite of the pressure from the high interest rates.

The interest paid on the loans amount to Sh230 million per month on the Sh2 billion loan they have with the banks, a situation he said was hampering their cash flow.

“We are paying all our dues and right now, we do not have any issue in paying them,” he emphasised.

An Extra Ordinary Meeting is scheduled for April 11 but the official remained mum on what will be on the agenda.

Theirs is a very capital intensive venture that has already gobbled up Sh30 billion that has gone into infrastructure development and Ghossein envisages that they will inject more as they eye their vision of becoming ‘one of the best operators’ in the region.

The firm is however a long way from making profits with the CEO urging for at least four more years before they can begin to recoup returns on their heavy investments.

“When you operate in such a competitive market and you are not a monopoly, you need at least eight years or more before you can begin to register profits.

We started in 2008 but now we are ready to fight,” he declared. Although things were looking up for them particularly in the fourth quarter of 2011, Ghossein contended that they were negatively impacted by the harsh operating environment characterised by a weak currency and high fuel prices.

This was in addition to the effect of the mobile price wars which saw voice revenues for many operators plummet as well as the huge losses in excess of Sh2 billion per year they had to incur to due to vandalism and cable cuts.

Despite the challenges however, the operator remains hopeful of a bright future supported by their strong parent company, France Telecom which holds a 51 percent stake in the telco and is one of the world leaders in providing telecommunication services to multinational companies.

Operating under the brand name ‘Orange’, France Telecom is one of the world’s leading telecommunications operators whose sales totalled 45.3 billion euros in 2011 while its customer base of was at 226 million during the same period. Telkom Kenya hopes to ride on this success to make it in the country.

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