Negotiations for the sale of a 49% interest in Telkom Kenya have been suspended while some decisions are referred to the Kenyan government.
The Mount Kenya Communications consortium earlier beat competitors Malaysia Telecoms and Egyptian operator Orascom in bidding for the equity stake, which is up for sale as part of the process to privatise the state-owned enterprise.
The consortium involves Dutch operational partner KPN, Econet Wireless of Zimbabwe, and local parastatals Eskom Enterprises and Transtel.
However, the expected close of the deal has been delayed while transaction details are ironed out. A source close to the deal has confirmed that negotiations have been suspended for two weeks, as an agreement to give the consortium first option on the stake is referred to the Kenyan cabinet for approval.
According to the source, the price of the stake, a $225 million payment and guaranteed loans to the value of another $85 million, is not at issue, although it is believed that an offer by Orascom to increase its offer may have been partially to blame for the delay.
Some involved in the deal believe a faction opposed to the privatisation process may have manoeuvred a late offer by Orascom to increase its bid, in order to sink or at least hinder the transaction.
Others speculate that suppliers in a cosy relationship with Telkom Kenya were disturbed when the consortium indicated that future contracts will be awarded through transparent tenders, and that these businessmen used their political connections to delay the sale.
But according to Kenyan newspaper, the Daily Nation, the government is rethinking the entire deal as it scrambles for cash. According to the paper, negotiators for Mount Kenya left the country in a huff because the government flouted its own bidding procedures.
The Nation says rumours spread that a back door had been left open for other investors to usurp Mount Kenya, despite there being no obvious contenders. It cites a source which attended a meeting between government advisor Salomon Smith Barney, minister of finance Chris Okemo and minister of information, transport and communications, Musalia Mudavadi, saying Okemo told participants no deal would be signed until the government was convinced there were no better offers.
The offer of $225 million is considerably lower than that initially expected by the government.
Representatives of the consortium would not comment on the state of negotiations, but a spokesman for Econet Wireless confirmed that talks would continue.
Related stories:
Eskom to get stake in Telkom Kenya?
External links:
The Daily Nation - Intrigues of Telkom Kenya sale
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