“You Sold Me An Empty Box”, France Telecom Tells Kenya Government

France Telecom has kicked up a storm with a claim that it is unable to trace some assets that were on the books of the former parastatal at the time it was put on sale.

“You sold to me an empty box,” is the claim by the French state-owned company – one of Europe’s leading telecommunications providers, which beat seven international bidders in 2007 to acquire a controlling stake in Telkom Kenya. The company now wants the government to compensate it to the tune of a massive Sh28.875 billion – an amount almost equal to what it paid for its 51 per cent share of Telkom Kenya.

As part of preparations for the sale of Telkom Kenya, all the information about the company, including assets and audited accounts for five years, was deposited in a data room to which all interested bidders were allowed access. Did unscrupulous individuals grab assets of Telkom Kenya between the time the data room was established and the time of the actual sale to France Telecom? Is the French company to blame for not having conducted a proper due diligence before signing on the dotted line?

These are the pertinent questions at the heart of a dispute that has cast doubts on the integrity of one of the largest privatisation transactions in the history of Kenya, in which the government pocketed a whopping Sh29.25 billion.

Both sides are still tight-lipped. A party who was involved in the transaction for France Telecom revealed that actual negotiations between the government and the French company were yet to begin. He pointed out that the view from his side was that the matter should be kept away from the media attention for now.

An e-mail with questions sent to France Telecom’s Michel Barre, who was said to be visiting Nairobi to engage the government on the dispute, went unanswered. Neither did the government side want to release details of the dispute.

But sources confirmed to the Nation that the government had engaged a Nairobi law firm to lead the negotiations with France Telecom. Negotiations begin in earnest on March 21. Aside from assets that the French company claims have disappeared from Telkom Kenya’s books, it is also accusing the government of non-disclosure of material contracts at the time of the transaction.

The French claim that after taking over, they stumbled on supplier contracts with huge liabilities that had not been disclosed in the data room at the time. More questions: Did some people in Telkom Kenya rush to commit the company to opaquely procured supply contracts between the time the data room was opened and the time France Telecom took over?

The French have reportedly questioned the integrity and accuracy of Telkom Kenya’s audited accounts lodged in the data room at the time of the transaction. Further, France Telecom is accusing the government of non-disclosure of material information with respect to tax liabilities, uncollectable debts, suspense accounts and unreconciled bank accounts.

Technically, the claims by the French are based on what is referred to in legal terms as warranties – where a party is allowed to claim monies from the seller if it turns out later that all facts were not fully disclosed before the transaction was concluded.

- Daily Nation