Orange Kenya may pay an extra Kshs 800 Million for Dragging Exit of Kenyan Market

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Late 2015, we announced that France Telkom Orange would offload its 70% in Telkom Kenya marking the exit of the player in the Kenyan market.  The move was initially announced by Finance CS Henry Rotich in October, who stated the talks were in the final round. Helios Investment Partners announced they would acquire the stake.  Viettel was another player interested in the stake but the government, which owns 30% of Telkom Kenya had its reservation over the ownership of Viettel as its a wholly state-owned company that is operated by the Vietnamese Ministry of Defence.

The announcement of the deal led to claims from the Communications Authority of Kenya demanding  Kshs. 1.5 billion debt to get approval for the sale. The debt comprises accrued frequency and operating fees for 2014 and 2015.  Safaricom also put up a demand of Kshs. 639 million for failure to pay interconnection fees, and some liabilities it inherited from a tower sharing deal with Essar Telkom Kenya, which is now non-operational. The other claimant was former Telkom Kenya employees laid off between May and June 2006 for which the company settled for Kshs. 1.8 Billion.

According to the Star Newspaper, the Communications Authority of Kenya may put a demand of Kshs. 800 million in addition to the Kshs. 1.5 Billion if Orange does not exit the market by the end of the financial year. The 800 Million will include frequency utilization fees as well as  licence fee paid by mobile operators. This may put total exit fees to CA at Kshs. 2.3 Billion.  Orange entered the market in 2007 having paid $390 million for the 70% stake with plans to make the firm profitable and then to take it public in five years. However, things did not go as planned.

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