Telkom Kenya workers demand urgent state bailout as investor hopes fade

The halls of Telkom Kenya, once a symbol of national telecommunications prowess, are now echoing with the growing frustration of its workforce. Employees of the state-owned telco are increasingly vocal, pushing for an urgent state bailout as hopes for a strategic investor dwindle. This plea comes after years of unfulfilled promises and failed attempts by the Kenyan government to secure a viable partner for the troubled firm, a situation that employees contend has plunged the company into a profound crisis.

Since 2020, the government has grappled with the elusive task of finding a new strategic investor for Telkom Kenya. Promises of revitalizing the company through fresh capital and expertise have remained just that – promises – leaving the workforce in a perpetual state of uncertainty and anxiety. The delay has not only stalled operational improvements but has also directly impacted employee welfare, with crucial Collective Bargaining Agreements (CBAs) left unimplemented, ostensibly tied to the elusive arrival of a new investor.

A Troubled Legacy: From Monopoly to Marginalization

To truly understand Telkom Kenya’s current predicament, one must look back at its storied past. Originally known as the Kenya Posts and Telecommunications Corporation (KPTC), Telkom Kenya was the sole provider of telecommunications services in the country for decades. It held a monolithic position, controlling everything from landlines to nascent mobile services. This era, while characterized by slow service and limited innovation by today’s standards, laid the foundation for Kenya’s communication infrastructure.

However, the liberalization of the telecommunications sector in the late 1990s and early 2000s marked a turning point. The entry of new players, particularly Safaricom in 2000, shattered Telkom Kenya’s monopoly. Safaricom, with its agile approach, aggressive marketing, and crucial innovation in mobile money (M-Pesa), rapidly gained market share, leaving Telkom Kenya struggling to adapt to the fierce competition.

The shift from fixed-line dominance to mobile-first communication caught Telkom Kenya off guard. Its extensive but aging fixed-line infrastructure became a liability rather than an asset in a market rapidly embracing wireless technology. While it did venture into mobile services, its offerings often lagged behind competitors in terms of network coverage, data speeds, and the compelling value propositions that Safaricom and, later, Airtel Kenya brought to the table. This historical context is vital, as it highlights a fundamental difficulty for Telkom Kenya in transforming from a state-run utility into a nimble, market-driven telecommunications company capable of competing in a dynamic sector.

The Privatization Saga: A History of Unfulfilled Hopes

Telkom Kenya’s journey to find a strategic investor is a convoluted narrative spanning over two decades, marked by ambitious partnerships that ultimately failed to deliver the promised turnaround.

The Orange Era (France Telecom)

One of the most significant attempts at injecting private capital and expertise into Telkom Kenya came with the entry of France Telecom (now Orange S.A.) in 2007. The French telecom giant acquired a 51% stake in Telkom Kenya for a reported $390 million, a move that was heralded as the dawn of a new era for the struggling telco. The company was rebranded as “Orange Kenya,” aiming to leverage Orange’s global brand, technological prowess, and operational experience.

The partnership saw investments in network infrastructure and new product offerings, particularly in the mobile segment. However, Orange Kenya continued to face an uphill battle against Safaricom’s entrenched dominance and the rapid expansion of its mobile money platform. Despite efforts to innovate, including launching its own mobile money service (Orange Money), it failed to gain significant traction. The challenges were multi-faceted: intense competition, significant infrastructure investments required to catch up, regulatory hurdles, and perhaps an underestimation of Safaricom’s market grip and the unique consumer behavior driven by M-Pesa. After several years of persistent losses and limited market impact, Orange S.A. eventually decided to divest its stake.

The Helios Investment Group Chapter

Following Orange’s exit, a new chapter began with Helios Investment Partners, an Africa-focused private equity firm, acquiring a 70% stake in Telkom Kenya in 2015. This was another attempt to bring in private sector efficiency and capital. Under Helios, Telkom Kenya underwent another rebranding, shedding the “Orange” moniker and reverting to its original “Telkom” identity. The focus shifted towards leveraging its existing fixed-line infrastructure while trying to rejuvenate its mobile and data services.

Helios aimed to modernize the network, particularly expanding its 4G coverage and investing in fiber optic infrastructure. While there were some improvements in service quality and data offerings, the financial performance remained challenging. The sheer scale of investment required to compete effectively with Safaricom and Airtel, combined with the legacy costs and operational inefficiencies, proved to be a formidable obstacle. Ultimately, this partnership also did not result in the desired financial turnaround, and Helios too began seeking an exit.

The Elusive UAE Bid: ICA

The most recent saga, and the one directly contributing to the current employee frustration, involves a potential takeover by a United Arab Emirates (UAE) based firm, Infrastructure Corporation of Africa LLC (ICA). In 2023, the National Treasury revealed that ICA was poised to acquire a majority stake from London’s Helios Investment Partners. This appeared to be the long-awaited lifeline for Telkom Kenya, with the government seemingly settling on ICA as the new majority shareholder.

However, as the Communication Workers Union of Kenya (COWU-K) highlights, this promise has gone unfulfilled. The deal, shrouded in a lack of transparency and clarity regarding its status, has remained in limbo. This prolonged uncertainty is the core grievance of the employees and union, who feel that their livelihoods and career progression are being held hostage by a perpetually pending transaction. The government’s caution in finding a “truly positive impact” investor is understandable given past failures, but the lack of communication regarding the ICA bid’s status has created a vacuum filled with anxiety.

The Human Cost: Employee Frustration and Union’s Plea

The toll of this prolonged uncertainty on Telkom Kenya’s employees is immense. According to Communication Workers Union of Kenya (COWU-K) General Secretary Benson Okwaro, the situation has derailed the implementation of two fully negotiated CBAs. These agreements, which would typically address salaries, benefits, and working conditions, have been tied to the arrival of the investor, leaving employees in a financial and professional purgatory.

“Telkom Kenya is a national asset, unless immediate and deliberate interventions are undertaken, we are headed towards a national communications crisis and the eventual collapse of this historic institution,” warned Okwaro. He painted a grim picture of widespread demoralization: “We are now entering the fifth year of waiting, employees remain in uncertainty, hope has faded, and anxiety continues to mount.”

The union’s statement underscores deep-seated issues within the company’s human resources. Many employees, some with vast experience and dedication, have reportedly been stuck in the same roles for over a decade. Promotions, skills development initiatives, and job reclassifications have all stalled, stifling career growth and contributing to a sense of stagnation. Okwaro’s plea is direct: “Professionals with vast experience and a passion for serving the Kenyan public have been reduced to spectators in their own careers. If the strategic investor is no longer in the picture, say so. If they are still coming, give us a timeline.” This demonstrates a desperate need for clarity and decisive action from the government and Telkom Kenya’s management.

“National Asset” Argument: Why Telkom Matters

COWU-K’s insistence that Telkom Kenya is a “national asset” is a powerful argument that goes beyond mere financial viability. This designation highlights several critical roles the company plays in Kenya’s socio-economic fabric:

• Critical Infrastructure: Telkom Kenya owns extensive fiber optic cable networks, landline infrastructure, and crucial spectrum licenses. This infrastructure is not just for its own customers but often serves as backhaul for other operators, backbone for internet service providers, and connectivity for government institutions. Its collapse could disrupt national communication networks, impacting emergency services, financial transactions, and general public connectivity.
• Alternative Network: In a market dominated by two large players (Safaricom and Airtel), Telkom Kenya provides a crucial third alternative. This competition, however limited, helps prevent monopolistic practices and encourages better pricing and service quality across the sector. Losing Telkom Kenya could reduce consumer choice and potentially lead to higher costs for telecommunication services nationwide.
• Rural Connectivity and Digital Inclusion: While its coverage may not be as extensive as its rivals, Telkom Kenya often provides services in areas that might be less commercially attractive for other operators. Its continued operation can support digital inclusion, ensuring that a broader segment of the population, including those in remote areas, has access to communication services.
• Strategic Importance: Telecommunication networks are vital for national security, data sovereignty, and overall economic stability. A state-owned or partly state-owned entity can play a role in safeguarding national interests within the digital sphere.

The union argues that safeguarding Telkom Kenya is therefore not just about protecting jobs but about preserving a vital piece of national infrastructure and ensuring a resilient, competitive communications landscape.

The Shadow of Competition: Safaricom and Airtel’s Dominance

Telkom Kenya’s struggles cannot be isolated from the broader competitive dynamics of the Kenyan telecommunications market.

Safaricom, a former joint venture between Vodafone and the Kenyan government (now majority-owned by the Kenyan government and public shareholders), has achieved unparalleled dominance. Its success is largely attributed to:

• First-Mover Advantage: Early and aggressive expansion of its mobile network.
• M-Pesa: The revolutionary mobile money service, launched in 2007, created a powerful ecosystem that locked in customers and became indispensable for daily transactions, remittances, and business. M-Pesa is not just a payment service; it’s a financial inclusion platform that drives mobile usage.
• Extensive Network Coverage: Safaricom boasts the widest network coverage across Kenya, including rural areas.
• Marketing & Innovation: Consistent investment in branding, customer service, and new product development (e.g., fiber to the home, enterprise solutions).

Airtel Kenya, part of the Bharti Airtel group, has positioned itself as the main challenger, often competing aggressively on price for voice and data services. While Airtel has made inroads, particularly with its competitive data bundles, it has not been able to significantly dent Safaricom’s market share or replicate the success of M-Pesa.

Telkom Kenya, caught between these two giants, has struggled to find a sustainable niche. Its efforts to switch ATC Sites (American Tower Corporation) across the country, while aiming for network optimization, also caused disruptions that further eroded customer trust and market share. The challenge for Telkom has always been attracting new subscribers and retaining existing ones in a market where network reliability, service innovation, and mobile money dominance are key differentiators. Without significant, sustained capital injection and a clear strategic direction, competing effectively remains an uphill battle.

The Bailout Dilemma: A Path Forward or a Temporary Fix?

COWU-K’s call for a “government bailout or revival package” presents a complex dilemma for the Kenyan state.

Arguments for a Bailout:

• National Interest: As argued by the union, protecting a strategic national asset and its infrastructure.
• Job Protection: Safeguarding thousands of direct and indirect jobs, preventing social and economic displacement.
• Market Competition: Maintaining Telkom Kenya as a third player helps ensure a competitive market, potentially benefiting consumers in the long run.
• Legacy Responsibility: Acknowledging the government’s historical role in the company and its responsibility towards its employees.

Arguments Against a Bailout (or concerns):

• Taxpayer Burden: Bailouts represent a significant expenditure of public funds, which could otherwise be used for essential services like healthcare, education, or other infrastructure projects.
• Moral Hazard: Repeated bailouts can create a moral hazard, where poorly managed companies expect government intervention rather than focusing on efficiency and sustainability.
• Inefficiency Concerns: If the underlying operational and competitive issues are not addressed, a bailout might only be a temporary fix, delaying an inevitable collapse and consuming more public funds.
• Fair Competition: Concerns from competitors about unfair state aid distorting the market.
• Lack of Long-Term Solution: A bailout without a concrete, viable long-term business plan might simply prolong the agony rather than providing a cure.

The government is in a difficult position, balancing the economic and social ramifications of Telkom Kenya’s potential collapse against the financial prudence required in managing public resources. Cabinet Secretary for ICT William Kabogo would face immense pressure to make a decision that protects national interests without creating an unsustainable financial precedent.

Beyond Bailouts: Long-Term Viability and Strategic Options

If a bailout is indeed considered, it must be part of a larger, well-defined strategy for Telkom Kenya’s long-term viability, rather than just an emergency injection of funds. Several options could be explored:

1. Niche Market Focus: Instead of trying to compete head-on with Safaricom and Airtel across all segments, Telkom Kenya could focus on specific niches where it has a competitive advantage. This could include:
   • Enterprise Solutions: Leveraging its fiber infrastructure to provide connectivity and data solutions to businesses and government institutions.
   • Fixed Broadband: Expanding its fiber-to-the-home (FTTH) services in urban areas, capitalizing on the growing demand for reliable home internet.
   • Wholesale Services: Becoming a robust wholesale provider of network infrastructure and capacity to other smaller operators or ISPs.
   • Rural Connectivity: Partnering with the government to provide affordable connectivity in underserved rural areas, potentially under a public-private partnership model.
2. Asset Monetization: Strategically monetizing some of its non-core assets, such as real estate or unused spectrum, to generate capital for re-investment in core areas.
3. Aggressive Restructuring: A complete overhaul of its operational model, including streamlining its workforce (potentially with voluntary early retirement schemes), optimizing its cost structure, and investing heavily in modernizing its IT systems and customer service.
4. Public-Private Partnership (PPP) with Clear Mandate: If a strategic investor is still sought, the terms must be clear, with a robust legal framework that ensures commitment to investment, technology transfer, and long-term sustainability, while protecting government and employee interests.
5. Digital Transformation: Embracing a rapid digital transformation, not just in network but in customer engagement, internal processes, and new digital services that leverage its unique assets.

The union’s willingness “to work with stakeholders to revive the company” is a crucial olive branch. Any sustainable solution would require collaboration between the government, management, and employee representatives to ensure buy-in and a shared vision for the future.

Conclusion: A Crossroads for Kenya’s Oldest Telco

Telkom Kenya stands at a critical juncture. The frustration of its employees, vocalized by COWU-K, is a stark indicator of the urgency required. The company’s historical significance, coupled with its role as a national asset and a vital contributor to market competition, means its fate extends beyond its balance sheet; it impacts Kenya’s digital future and the livelihoods of thousands.

The decision facing the Government of Kenya, the Ministry of Information, Communications and the Digital Economy, and Telkom Kenya’s management is profound. Whether it’s a direct bailout, a re-energized search for a strategic investor with new terms, or a radical internal restructuring, time is undoubtedly running out. The call for candid engagement and decisive action from Cabinet Secretary William Kabogo resonates deeply, as the collapse of this historic institution would indeed endanger national infrastructure and jeopardize thousands of jobs. The path chosen in the coming months will determine whether Telkom Kenya can reclaim a meaningful role in Kenya’s vibrant telecommunications landscape or fade into the annals of its past.

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Photo source: Google

By: Montel Kamau

Serrari Financial Analyst

26th June, 2025