The National Optic Fibre Backbone Infrastructure (NOFBI) is a project which was aimed at ensuring connectivity in all the 47 counties of Kenya. The target was to ease communication across counties as well as improve government service delivery to its citizens for example the issuance of national identity cards, passports as well as registration of birth and death certificates.
NOFBI was to be implemented in two phases. Phase 1 of the project was completed in 2009 and provided access points in most of the district headquarters and some border towns. The fibre backbone passes through 58 towns in 35 counties across the country with 4,300 kilometers of cable.
In 2010, Telkom was contracted by the Ministry of Information, Communication and Technology (MoICT) to offer Operational and Management services (O&M) for the NOFBI cable. According to the contract, the O&M cost was to be charged at Ksh. 20.3 Million on a monthly basis.
According to the telco, around 2013, the MoICT which was facing significant challenges in meeting the O&M costs sought to revise the terms of the original contract. The new terms were applied retrospectively, from June 1, 2011, for a period of five years, which ended on May 31, 2016. The revised contract gave Telkom the additional responsibility of commercializing the Cable under a profit-share arrangement with the Ministry. This revised scope, over and above operation and maintenance, now included customer acquisition. Additionally, Telkom, was to first recover its operational costs, and thereafter split the net profit earned with the Ministry on a 50-50 basis. The rates applied for the Cable’s commercialization were provided by the MoICT.
When the contract ended in May 2016, Telkom dutifully pursued the renewal of the contract by the MoICT. However, they did not get any feedback from the Ministry on the matter despite their numerous attempts. As such, Telkom made a decision to continue operating and managing the Cable as a means of ensuring continuity of service provision to the infrastructure’s customers. This was due to the fact that they were fully cognizant of the need for seamless connectivity to the Ministries, State Departments, and Agencies offering critical National and Economic Security services to the country, through NOFBI.
Telkom Kenya also indicated that rates applied for the Cable’s commercialisation were heavily subsidised in an effort to deepen the penetration of the digital economy across the country. Also, these rates as well as the O&M costs have never been varied since 2011 and as such are no longer reflective of evolving economic dymanics.
During the period when Telkom has been running NOFBI, other players offering similar services have since come in. However, these cables charge their services at market rates and as a result have been able to make steady profits and meet their O&M costs. However, despite this, Telkom, has continued to faithfully operate and maintain the NOFBI Cable, and meet all other contractual obligations within the MoICT’s contract.
Due to this, Telkom has been operating 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. The telco continues to bear the full cost of repair for this destruction, with no support from the Government Agencies or the entities responsible for the damage.
Recent media reports have indicated that Telkom has collected upto Ksh. 1.7 Billion from non government customers using the cable. As a response this, Mugo Kibati, the Telkom Kenya CEO released the following statement as a means of clarifying the issue;
“We confirm that the Cable’s revenues stood at KSh1.7 billion, against O&M costs of KSh2 billion. Telkom has therefore incurred a loss of KSh300 million. At the same time, while Telkom has provided connectivity using the Cable to Government offices offering critical services, Telkom does not bill government, whose usage of the Cable accrued a financial value of KSh.1.4 billion. Telkom continues to shoulder the O&M losses. During our submisisons to the PAC, Telkom went further to explain that had 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 O&M costs currently standing at KSh2 billion. Telkom would have realised a surplus of KSh1.1 billion, to be shared with the MoICT, as per the profit-share arrangement.”
He also added that, “Telkom acknowledges and appreciates the impact that infrastructure such as NOFBI, as well Telkom’s own Cable, has on the Kenyan economy, with respect to the provision of critical government services, and access to information, taking into account the need for accelerated digital transformation, fueled by the COVID-19 pandemic. As a home-grown and customer-obssessed Technology company, the only thing that could have been done by any responsible actor was to ensure that there was no disruption to service provision at all, as Telkom sought clarity on the way forward from MoICT. It is Telkom’s hope that all stakeholders will ensure Kenyans continue to get value from such investments, through the implementation of sustainable policy frameworks. Telkom remains confident that it shall still have a key and unique role to play, having successfully complemented NOFBI’s infrastructure with about 3,500 kilometres of its own fibre, given O&M support, as well as its robust expertise over the years, thereby ensuring continued service provision to the Cable’s customers.