The ghosts of Mobitelea have returned to haunt billions out of Telkom Kenya
Helios Investment principal partner Pierre Heinrich (right) speaks during the acquisition deal signing of the sale of shares held by Orange East Africa in Telkom Kenya to Jamhuri Holdings limited at treasury buildings in Nairobi on June 10, 2016. Looking on are former Investment Principal Secretary Esther Koimet (centre) and former National Treasury Cabinet Secretary Henry Rotich.
As we try to unpack the story of the Sh6 billion Telkom Kenya payment to a UK-based private equity fund, I think it would be essential to recall the other story of Mobitelea Ventures – a briefcase company that emerged out of the shadows of the Moi regime and before we could understand what was happening, it had a 10 per cent stake in Safaricom.
For those who may have forgotten, let me bring you up to speed. If some things are unclear, they were not meant to be – and still, we might never know the individuals behind Mobitelea, one of the biggest scandals of the Moi era.
If you are startled that Treasury paid Sh6 billion to buy back shares for Telkom Kenya to an entity whose officials are not in public knowledge, just know we could either be dealing with repeat offenders or characters who wanted to mimic the bad manners of the Mobitelea age.
The story starts around 1999 when Kenya decided to liberalise the telcoms sector. Then some shady characters emerged, and when Parliament asked for the names, they were taken through bureaucratic denials as unknown shareholders got a stake in one of the most promising companies.
The facts are that when Kenya was pushed by the International Monetary Fund and the World Bank to sell the giant Kenya Post and Telecommunication Corporations (KPTC) in 1999, it divided the company into Communications Commission of Kenya (CCK), Telkom Kenya and Postal Corporation of Kenya (PCK). An avenue had been created to mint billions in the lucrative world of kickbacks. What we know is that ahead of the privatisation, some people had lined themselves along the paths of interest.
Before KPTC was split, it had created a department known as Safaricom Limited, offering limited mobile services to the super-rich. However, by the time of the split, Safaricom was left in the hands of Telkom Kenya, which was clueless about mobile telephony. So, it started negotiating with UK-based Vodafone Group Plc for a strategic partnership to run Safaricom.
A year before the Telkom-Vodafone Group PLC deal was inked on January 25, 1999, a briefcase company known as Shomoro Limited had been registered in Nairobi on February 3, 1998.
Those dates are important because they show that somebody was laying the ground. By the time Vodafone Group Plc was ready to sign the Safaricom deal, this Shomoro Limited had changed its name to Vodafone Kenya Limited.
We were told that Shomoro was now a wholly-owned Vodafone Group Plc company. Soon, Shomoro Limited’s registry records disappeared, and if any monetary transactions occurred between them and Vodafone headquarters, we might never know.
At the end of the transaction, Vodafone Kenya Limited acquired a 30 per cent shareholding in Safaricom from Telkom.
An illegality
Records show that they did not pay immediately. They traded with the company and paid a year later. The Public Investment Committee (PIC) would later hear that the shares were paid for in 2000.
Vodafone demanded an additional 10 per cent shareholding, which brought to 40 per cent of Vodafone Kenya’s stake in Safaricom.
This was approved despite the fact that government policy directed that foreign companies could only own up to 30 per cent.
That was an illegality — but the person behind Mobitelea was very powerful. Parliament was told that this transfer was done after a ‘verbal request’, and the Telkom Kenya board was only informed later. Until 2006, as the PIC established, “neither Safaricom nor Vodafone Kenya Ltd was filing its annual returns”.
In 2002, and in return for some unexplained help, Vodafone Group Plc purported to offer an entity known as Mobitelea Ventures 25 per cent of its stake in Vodafone Kenya Limited, which was a 10 per cent stake in Safaricom Limited. The deal was done as Kenya went to the elections and when President Moi’s term was coming to an end.
The civil society, by then quite vocal, wondered why Vodafone PLC was rewarding a company for services in a country where it had already established itself. What we know is that finally, Mobitelea got a 10 per cent stake in the giant Safaricom.
Could these be the 10 per cent shares that had been transferred from Telkom Kenya without the board’s approval, and were they paid for? We don’t know. There were demands that the 10 per cent stake that had been ‘sold’ without board approval revert, but that never happened.
On January 29, 2007, Gavin Darby, the CEO of Vodafone Americas, Africa, China, and India wrote to the Clerk of the Kenyan Parliament explaining that the 25 per cent offer was made to Mobitelea “in return for its valued advice”. In essence, Vodafone was allowed to introduce a third party into the shareholding structure without informing the other partners.
Darby explained that whenever Vodafone Group PLC invests in “new territories”, it is not uncommon for the company to work alongside “a partner who typically gives advice on local business practices and protocols and the various challenges associated with investing in a new market”.
But Mobitelea was not a Kenyan company — neither were we told who it represented and the expertise it offered. It was an entity registered in Guernsey, a tax haven where the rich, the powerful, the thieves and the swindlers hid their loot. Guernsey was popular.
Here, privacy was guaranteed, and chances of knowing who was behind which briefcase company were nil. Guernsey was the love of oligarchs. It did not levy capital gains taxes and used a variable corporate tax rate that left many businesses without a tax liability. As a result, it was ranked one of the 10 most secretive banking islands in the world.
One year after the Mobitelea transaction and at a time when the government projection was that 25 per cent of Safaricom shares was Sh50 billion, Mobitelea sold back five per cent of its stake in Safaricom to Vodafone Group Plc, meaning it could have minted billions.
However, then Safaricom boss, Michael Joseph, told PIC that he could not tell who were the direct or indirect owners of Mobitelea. So, if the Safaricom CEO was in the dark – who wasn’t?
Most Profitable
From its five per cent shareholding in Safaricom, Mobitelea continued to make hundreds of millions in dividends as Safaricom became the most profitable company in Kenya.
When Paul Muite was chairman of the departmental committee on Administration of Justice and Legal Affairs and Justin Muturi was chairman of the Public Investment Committee, they tried to unravel the mystery of Mobitelea. But, unfortunately, they did not go far.
Vodafone refused a formal request from the PIC to reveal who owns Mobitelea, and Muturi had threatened to ask the UK Serious Fraud Office for assistance. Now that Muturi is Attorney-General, he should tell us the truth. Until Mobitelea was brought into the picture, it was assumed that Safaricom was a 60:40 joint venture between government-owned Telkom and Vodafone.
Indirect shareholding
Mobitelea’s real owners remained hidden between two nominee firms, Guernsey-registered Mercator Nominees Ltd and Mercator Trustees Ltd. According to an article in The Guardian, the directors were named Anson Ltd and Cabot Ltd, based in Anguilla and Antigua. During the year ending March 31 2009, Mobitelea sold their remaining indirect shareholding in Safaricom to the Vodafone Group. So they had made their money perhaps after investing nothing. Still, we have many questions about the shadowy figures who would get shares for a song.
This is the murky world that Telkom Kenya is finding itself in once again. The company has become the site of bad manners, where individuals hide behind shadowy companies to make money through paperwork. Mobitelea showed how money could be made in the sector.
Now we are told that a company, Helios Investment Partners, bought Telkom shares through an entity known as Jamhuri Holding Limited. That this company wanted to exit, so the controller of the budget approved the transfer of Sh6.014 billion to Telkom Kenya to facilitate the exit of Helios.
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Postscript: In the Oxford Handbook of Kenyan Politics, the editors — Nic Cheeseman, Karuti Kanyinga and Gabrielle Lynch — argue that peace in Kenya is tied to cross-ethnic elite relations. That means there is “temporary” political stability as long as the elite agree on how they will continue eating. This is the sad story of a Kenyan populace under siege from the elite.
[email protected] @johnkamau1
