Kenya’s second and third largest telecom operators Airtel and Telkom are back to pursuing a merger that was hinted sometime in April 2018.
Telkom Kenya plans to merge operations with Indian-owned Bharti Airtel’s local unit as a first step to acquiring all of Airtel’s assets, sources said on Tuesday, creating a financially strong outfit to compete with market leader Safaricom.
The two operators have a combined 23 percent of Kenya’s 41 million mobile subscribers, but have long struggled to compete with Safaricom which has a 71.9 percent market share.
According to the first announcement of the merger, it was reported that Telkom was planning to acquire Airtel Kenya’s assets and retain the Telkom name. However, it has emerged that the reverse could happen, where Airtel will take over Telkom Kenya with a 50 percent stake, 40 percent for Helios (Telkom) and 10 percent for the government of Kenya.
“As has been our practice, we will continue to communicate significant developments in a timely manner, as we execute our business strategy,” said Mr Kibati who joined Telkom in November last year.
London-based Helios Investment, which owns a 60 per cent stake in Telkom, is looking to partly cash out of the investment which it entered in 2015. Successful talks will see the two firms seek regulatory approvals from the Competition Authority of Kenya (CAK)
On Monday, the Authority said it was yet to be notified of the proposed transaction.
“Parties are allowed to hold talks on possible mergers and acquisitions, but are required by the Competition Act to notify the Authority if the transaction meets the thresholds as provided for in the Merger Threshold Guidelines before implementation of a merger,” said the CAK.
The Authority considers merger applications mainly based on impact on competition and public interest concerns.
It can either grant approval unconditionally, grant with conditions or decline.
Data from the Communications Authority (CA) regulator showed Safaricom also has close to 90 percent of the annual revenue from the Internet access business.
It also has a commanding lead in mobile phone money transfer with its M-Pesa service, which is regulated by the central bank.
The talks come at a time Bharti Airtel chairman Sunil Bharti Mittal has concluded a deal with Tanzania government to cede part of Airtel Tanzania’s ownership to the state.
A section of the press reported that Mr Mittal was in Kenya to take part in sealing the Airtel deal through talks that will extend to government officials
In local voice market, Safaricom accounted for 8.93 billion minutes while Airtel and Telkom had 4.78 billion minutes and 619.4 million minutes.
A merger will see the two have 5.6 billion minutes. Focus is also on the CA’s much awaited dominance report, which could also have far reaching impact on how the industry shapes up going forward.
Late December, the CA acting Assistant Director for Market Analysis and Tariffs said the board had already approved the report for release.
Sector players are still waiting to know whether or not CA will declare Safaricom a dominant player as had been recommended in the draft report by Analysys Mason, the UK firm that was contracted to evaluate competitiveness in the sector.