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orange-france-telecomA Buyout Bid by Viettel Group, a Vietnamese firm that wanted to acquire a 70 per cent stake in Telkom Kenya has been dropped.

This means France Telecom is now looking for an alternative exit plan.

Telkom Kenya is jointly owned by the Treasury and the French telecommunications giant, which was in 2007 allowed to buy a majority stake in the loss-making company after undertaking to turn around its fortunes.

However, the company has remained in the red, costing taxpayers billions of shillings in cash calls made by the French telco which has struggled to compete against market leader Safaricom.

Viettel dropped its bid for a controlling stake in the Kenyan firm after the government refused to give in to some of its demands, including the immediate extension of all telecommunications licences held by Telkom Kenya for another 15 years.

The company had also asked the Kenyan government for additional 10 per cent stake in Telkom Kenya, a demand that would have left it with an 80 per cent stake in the company.

France Telecom, which owns 70 per cent in Telkom Kenya, has offered several reasons for its planned exit, including claims that industry regulator the Communications Authority of Kenya (CA) has not established a level playing field to help stop price wars.

Despite efforts by the two shareholders to clean up its books, Telkom Kenya has continued to make huge losses. The combination of losses and the drop in revenues has negatively impacted on Telkom’s cashflow, prompting shareholders to pump in more cash and write off its debts.

The firm has partly responded to this state of affairs with the sale of assets to boost cash reserves that have over time been eroded as competition intensified and tariffs dipped.

Source: CIO