May 24, 2024

Safaricom mulls writing off Sh1.5bn debt owed toTelkom and Airtel

2 min read

Telcom company Safaricom mulls writing off Sh1.5 billion debt owed by rival telcos companies; Airtel and Telkom after it made provisions for loss of the funds.

Telkom and Airtel owe Safaricom Sh 1-5bn for using its infrastructure; co-location and interconnection fees from cross-network calls.

The giant telco company said it has provisions on a conservative basis when there are delays in getting dues which have increased the company’s expected loss.

The Provision is an accounting practice where firms set aside part of their profits when they expect a decline in the value of their assets and are unable to collect their dues.

Safaricom has not disclosed the breakdown of how much each of its rivals owes it. However, In a letter to the Communications Authority of Kenya before the failed merger of Telkom and Airtel, Safaricom disclosed that two companies owed it Sh906.6 million and Sh390.7 million respectively for co-location, interconnection, and fiber services.

Safaricom PLC made Sh4.9 billion in interconnection fees for the year 2020 compared to Sh4.6 billion in 2019.

According to its annual report, the company also made Sh1.8 billion in co-location fees in a similar period up from Sh1.7 billion in 2019.

However, it’s not clear whether Safaricom intends to pursue its rivals through the courts or the Communication Authority of Kenya. Safaricom had earlier raised the issue of legacy debts when its two rival companies attempted to merge.

The firm raised it again during the failed attempt when Michael Joseph wrote to the Communications Authority of Kenya asking Sh1.2 billion before approving the merger deal.

Michael Joseph said since Airtel explicitly said it wouldn’t take up Telkom’s liabilities, then it would be difficult to recover the debts after the merger.

In 2015 Safaricom PLC also blocked the sale of Orange Group’s majority stake in Telkom Kenya to UK-based, Helios Investment Partners, over the fears it won’t be able to recover the funds owed by Telkom.

It said it was afraid of not being able to collect the Sh639.8 million owed by Telkom Kenya if Orange Group transferred its 70 percent stake to Helios.

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