NEWS

Telkom Kenya has stepped up sale of its assets to boost cash reserves that have been eroded by rising competition and low tariffs in an increasingly competitive market.

 

The firm has issued a tender for the sale of 11 houses valued at Sh80 million in Gilgil, Nakuru County.

 

The company has also sought to sell 79 acres of land in Nairobi’s Karen area but the sale has been stopped by the courts over a commercial dispute.

 

 

 

However, analysts have also warned that the move risked being seen as an asset stripping exercise coming barely four years after the firm was sold to France Telecom.

 

More recently, the huge losses had forced Telkom Kenya to rely on shareholder and bank loans — a mode of operation that raised its interest expenses to nearly half the revenues.

 

Kenya’s telecoms operators have seen revenues thin out since August 2010 during which the cost of airtime has fallen by more than 50 per cent, halving subscribers’ monthly airtime budget.

 

“We need to bridge the deficit we have in our budget to enable us meet the capital expenditures,” Telkom CEO Mickael Ghossein told the Business Daily in an interview Wednesday.

 

Information PS Bitange Ndemo had earlier opposed the asset sale, arguing that Telkom Kenya could only sell parcels of lands it bought on its own and not what had been allocated to it by the government under a joint ownership agreement.

 

Mr Ghossein defended his decision to sell some pieces of land and houses saying real estate is not the core business of the company.

 

France Telecom had hoped to return the loss-making firm to the profit zone by 2010 and list at the Nairobi Securities Exchange by next year — a target that has been made impossible by its stay in the loss-making territory.

 

Telkom’s revenues dropped to Sh9.2 billion last year from Sh10 billion in 2010, with its net loss worsening to Sh18 billion from 4.3 billion in the same period.

 

The losses and reduced revenues have negatively impacted its cashflow position, prompting shareholders to pump in more cash and write off debts extended to the telco.

 

The government has converted its Sh4 billion shareholder loan into shares as France Telecom swaps its Sh15 billion debt into equity to ease the heavy debt burden on the firm.