Accesskenya Merges Two Subsidiaries

Mergers, Acquisitions and Financial Results

Telecommunications company AccessKenya has consolidated its two subsidiaries under one operating company in a move expected to cut operating costs and create a more effective management structure.

AccessKenya is taking advantage of a Communications Commission of Kenya (CCK) policy change introduced in 2009 that allowed telecommunication firms to hold a single license allowing for mobile telephony operations, internet services, and content distribution or broadcasting.

"We used to hold separate licenses for our network and internet services but the unified license has enabled us to convert AccessKenya from a holding company into an operating company," said David Somen, the director of strategy and special projects.

The two subsidiaries were Communications Solutions Limited and Broadband Access Limited. The corporate re-organisation has seen AccessKenya take up total assets worth Sh1.6 billion and total liabilities valued at Sh1.5 billion, leaving the firm with net assets of Sh174 million from the subsidiaries.

The company, which made a loss for the first time last year since its listing in June 2007, said it is betting on curbing costs to return into the profit territory. AccessKenya has paid value added tax (VAT) of Sh170.1 million to effect the consolidation.

The amount will be reclaimed gradually through tax deductions on a monthly basis. The integration of the subsidiaries is expected to boost operational efficiencies by having a single corporate entity, a move that will lead to marginal reduction of costs. Access IT, a standalone subsidiary of AccessKenya focused on computer services is also slated for integration next year.

Communications Solutions Limited had the bigger net value at Sh296 million compared to Broadband Access Limited's Sh17 million. "We have re-negotiated the terms of our Kenya Shilling borrowing which in turn made it feasible for us to convert most of our total borrowings into Shillings thereby removing most of the forex loss suffered in 2010," Daniel Ndonye, the firm's chairman told shareholders.

AccessKenya made a forex loss of Sh134.4 million last year, a fact that contributed significantly to the Sh7.9 million net loss recorded in the period. The firm also announced it had negotiated for lower prices from international and national internet wholesale firms, a move it says will protect its margins that have come under pressure from a vicious price war brought by more entrants into the data market, including mobile telephony firms.

Last year, the firm recorded revenues of Sh1.7 billion, down from Sh2 billion the previous year, attributed to reduced average revenue per user.