ODM press release 14 November 2007

TELKOM FOR SALE. IN THREE QUICK WEEKS BEFORE ELECTION.

Official valuation, $200m. Real Worth, Up to $8bn
Opening statement by Hon Raila Odinga at press conference on sale of Telkom

Despite the intense pressures on our time at this stage of the campaign, and with the
presentation of the nomination papers barely an hour away, the Pentagon has nevertheless
hastily gathered here because we are alarmed about the latest government plot to unlawfully
siphon off yet again billions of shillings of Kenyans hard-earned money into the pockets of a few
well-connected individuals. 420 billion shillings will change hands in an exercise that is to last
only three weeks.

The brazenness of this plot is particularly breathtaking because there is seemingly no concern
that the exposure of this crime could lead even more Kenyans to vote against the PNU.
One can only conclude that the PNU leadership is aware that the election cannot be won and
has thrown all caution to the wind in order to have final feast for its cronies even as hunger,
joblessness and deprivation are the lot of the vast majority of our fellow Kenyans.

This crime is particularly reprehensible because it involves a theft of unprecedented proportions,

which makes Anglo Leasing look small by comparison. I appeal to the media to highlight this
massive theft so that Kenyans will demand that the sale of one of the country’s largest and most
valuable companies is conducted under the terms and protections laid out in the Privatization
Act.

I will now ask Hon. William Ruto to read out the text of the formal ODM statement.

FINANCIAL BIDS WILL BE OPENED, EVALUATED AND BIDDER

IDENTIFIED IN ONE DAY, on 16 November, 2007

Statement read out by Hon William Ruto

The government is about to undertake the privatization of another major parastatal as

part of its ongoing scheme to defraud Kenyans of tens of millions of dollars through the
sale of publicly-owned companies. The parastatal now being privatized is Telkom
Kenya, and the loss this time will come to a massive KShs 420 billion.

This new sale is designed to circumvent the delay imposed on the privatization of
Safaricom by an ODM-initiated court case. The new strategy to reap billions focuses on
selling for a song the giant mobile phone company’s parent company, Telkom, which
owns 60 percent of Safaricom stock. The sale will be carried out in the startlingly-
accelerated period of three weeks and conducted through underhand deals. This is
nothing less than another Anglo-Leasing scam in the making.

Why is the government in such an extreme hurry to sell Telkom before the election? The
opening of the bids was conducted on Monday, November 12, 2007; evaluation of
technical proposals is on-going and is scheduled to be completed tomorrow, November
15. That will pave the way for opening the financial bids, evaluating them and then
identifying the successful bidder on 16th November, 2007. Finalization of contract
documentation and signature is scheduled to be by 13th December 2007 and closing and
transfer of shares by 21st December 2007. According to this schedule, the successful
bidder assumes board seats and management role of in Telkom on 21st December 2007.

Indeed, in one single day, technically qualified bidders will be announced, financial
proposals will be opened and evaluated, notice given to the successful bidder, and the
deal closed between the bidder and the government. Given this scenario, it is obvious
that the so-called ‘strategic equity partners’ are part and parcel of abetting this
impending mega corrupt deal and their identities are already known. They include state
house operatives and local sleepers within the government-registered off-shore
companies in the manner of the mysterious Mobitelea - the original 10 percent
shareholders in Safaricom.

This circumventing of due process is designed also to hide both the identity of the local
owners of Mobitelea and the reason for their having been given ownership of 5 percent
of Safaricom shares. Why can’t the government wait for the court ruling before selling
Telkom? What is the role of the Communications Commission of Kenya, (CCK) when
licensing rules and procedures are being flouted with impunity?

A look at the financial figures gives an indication of the scale of the theft that is being
perpetrated. Telkom Kenya is valued at US$200 million (Ksh14 billion). With a
subscriber base of over 8 million, Safaricom is worth over US$8 billion (Ksh560
billion). Since Telkom owns 60% shareholding in Safaricom, Telkom’s share value is
therefore roughly US$4.8 billion (Ksh336 billion). Add to this to the value of its recently
acquired mobile service license, and the swindle‘s monstrous scope becomes evident.
Why, in fact, was Telkom offered this new mobile service license when its privatization
had had already been determined.

Telkom’s Safaricom share has since been transferred to Government without any
indication of Telkom Kenya benefiting. This casts doubt on the Telkom Kenya’s ability
to service its pension deficit and the syndicated loan. We are witnessing not only a
systematic theft of public resources organised by the government but a looming pension
crisis for thousands of employees as well.

We are aware that the shareholders agreement and the share purchase agreements were
grossly manipulated in favour of certain bidders who fell short of meeting the technical
requirements as spelt out in the original RFP. The Minister for Finance, the President’s
family, the finance PS and the Investment Secretary and the transaction advisors must be
pressed to disclose their interest.

Separately, Telkom’s debt is estimated at US$1 billion (Kshs 60 billion), according to

available information. The government wants to transfer this debt to the Treasury. That
means that after selling Telkom to themselves for only US$200 million, the government
wants the poor Kenyan to pay one billion dollar debt. This is yet another unconscionable
action by the government to punish its people in order to enrich itself.
The sale also intends to obstruct justice. The PIC report says that Telkom actually owned
70% shares in Safaricom in January 1999 and that 10% of its shares were fraudulently
given out to Mobitelea. At the current worth of Safaricom these shares are worth Ksh50
billion. The sale of Telkom without recovering this money is meant to obscure and
protect the owners of Mobitelea and the recovery of this money.

There is no need for the government to create another parastatal to manage the optical
fibre cables planned countrywide to extend ICT countrywide after selling off 51% of
Telkom Kenya.

For sometime now, ODM has been alerting Kenyans that the rush by this government to
conclude certain lucrative procurement deals is neither transparent nor accountable,
since it will cost the taxpayer loses in billions of shillings. All the rush is being done to
secure kickbacks for purpose of oiling the re-elections.

We also have credible evidence that all government procurement for the financial year
2007-08 has been brought forward to be finalized by the end of November. This will
enrich insiders within the outgoing government even as it leaves empty coffers for the
incoming government.

The conclusion is that Telkom is being sold to fraudsters at US$200 million. They will
then resell it at its actual value of about US$6 billion.

For those who have been incorporated in bidding as Strategic Equity Partners, ODM
wishes to tell them that they are unwittingly being used to camouflage the theft of
taxpayers’ money. They will be held accountable by Kenyans in the future.