The Ethics and Anti-Corruption Commission (EACC) has suspended a planned merger between mobile network operators, Telkom and Airtel Kenya due to an ongoing probe into the misappropriation of funds at Telkom.

“They are conducting investigations into allegations of misappropriation of public funds in the process of privatization, recapitalization, and restructuring of balance sheets of Telkom Kenya Limited,” the agency spokesman, Yassin Amaro, said.

In a letter dated August 14, 2019, the anti-corruption body asked the Communication Authority of Kenya (CA) to stall the proposed merger between both telecoms companies pending an inquiry into how the deal was reached upon.

In line with this, EACC has called for questioning several senior managers at Telkom Kenya, the Treasury, the CA and the Competition Authority of Kenya (CAK). The agency has also requested to see the relevant documents containing information on shareholding of Telkom Kenya as well as the terms of the ongoing merger. The planned deal will need to be brokered adequately before further plans can be made.

Furthermore, another separate investigation is being held to ascertain whether public funds were lost in the conversion of the Treasury’s loans in Telkom Kenya into equity during the recapitalization and restructuring of the company’s balance sheet. The debt-to-equity conversion was approved by the Kenyan Cabinet in 2012.

Another reason for this suspension is a third and separate probe into the circumstances under which the Treasury gave ownership of Telkom Kenya to Orange, the French multinational, which later sold its stake to a UK-based private equity firm, Helios.

Telkom Kenya, which is 60 percent owned by Helios and 40 percent owned by the government of Kenya, had earlier sought the communications regulator’s approval to merge their mobile enterprise and carrier services to form a single joint venture company.

Until investigations are completed, nothing will be done to further the merger plan which, once completed, is expected to see both firms (as an entity) hold 34 percent of the telecoms market.

“We have advised the parties that, in light of government shareholding in Telkom Kenya, approval shall only be granted once all the conditions set out by the Authority are fulfilled and the transaction is cleared by the EACC,” the CA Director in charge of Communications and Public Affairs told Business Daily.