Telkom Kenya has disclosed that it incurred a loss of KSh 300 Million after offering operational and management services for the state-owned fibre optic cable.
The National Optic Fibre Backbone (NOFBI) was a project aimed at providing connectivity across all 47 counties in Kenya.
“We confirm that the Cable’s revenues stood at KSh1.7 billion, against operational and management cost of KSh2 billion. Telkom has therefore incurred a loss of KSh300 Million,” said Mugo Kibati, Telkom Kenya CEO.
This disclosure follows recent reports in sections of the media, indicating that the telco has collected up to KSh1.7 billion from non-government customers using the Cable.
Telkom contract to manage fibre optic cable
In 2010, the telco was contracted by the Ministry of Information, Communication and Technology (MoICT) to offer Operational and Management services (O&M) for the NOFBI cable.
The operational and management cost was pegged at KSh 20.3 Million per month.
Three years later, the MoICT was facing significant challenges in meeting the O&M costs – revised the terms of the original contract.
The new terms were applied retrospectively, from June 1, 2011, for five years, which ended on May 31, 2016.
This revised contract gave the telco additional responsibility of commercialising the Cable under a profit-share arrangement with the Ministry.
This revised scope, over and above the O&M, now included customer acquisition. Additionally, Telkom was to first recover its operational costs and split the net profit earned with the Ministry on a 50-50 basis.
The MoICT provided the rates applied for the Cable’s commercialisation.
At the lapse of the contract in May 2016, Telkom pursued the contract’s renewal by the MoICT.
With no guidance forthcoming from the Ministry on the matter, and despite numerous but fruitless efforts to obtain the same, Telkom continued to operate and manage the Cable, to ensure continuity of service provision to the infrastructure’s customers.
“This 4,300 kilometre NOFBI Cable is further complemented by Telkom’s own infrastructure to the tune of 3,496.9 kilometres of linear distance,” said Kibati.
The telco says it has continued to operate and maintain the NOFBI Cable and meet all other contractual obligations within the MoICT’s contract, one that it remains uniquely equipped to manage.
“Telkom has operated the Cable at a loss, due to the market dynamics and contractual limitations in force. Further losses continue to be incurred as a result of regular damage and cuts to the Cable, due to civil works, vandalism and road construction,” said Kibati.
Available figures indicate that bill for Government usage of the Cable has accrued to KSh 1.4 billion.
“Telkom continues to shoulder the operational and management services losses,” said Kibati.
Telkom was recently invited by the Public Accounts Committee (PAC) to respond to questions concerning the management of NOFBI, arising from the Auditor General’s report for the financial year 2017/2018.
During its submissions to the parliamentary accounts committee, Telkom said that were all users of the Cable – specifically Government users – paid up for their connectivity usage, Telkom would have collected a total of KSh3.1 billion, out of which it would have recovered its operational and management services costs currently standing at KSh2 billion.
The telco would have realised a surplus of KSh1.1 billion to be shared with the MoICT, as per the profit-share arrangement.
The telecommunications provider is credited with having successfully complemented NOFBI’s infrastructure with about 3,500 kilometres of its fibre and its robust expertise over the years, thereby ensuring continued service provision to the Cable’s customers.
The telco says it continues to bear the total cost of repair for this destruction, with no support from the Government Agencies or the entities responsible for the damage.
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