Telecom operators Safaricom and Airtel have agreed to absorb 175 of exiting yuMobile employees as part of the Sh11 billion buyout deal expected to be concluded this week.
The agreement reached by the three parties will see Safaricom take over 150 yuMobile employees and Airtel 25.
yuMobile, which is owned by Indian conglomerate Essar, has 197 employees excluding the expatriates, meaning 22 employees will not be absorbed in the arrangement and will be paid to retire.
Safaricom last Friday announced plans to pay yuMobile Sh6.9 billion in respect of the company’s assets, including frequency spectrum, transmission towers and IT equipment. The deal is subject to shareholders’ approval.
Airtel Kenya has agreed to pay Sh4 billion for yuMobile’s subscribers and the operating licence, meaning Airtel will have two Global System for Mobile communications (GSM) licences once the deal is concluded.
The employee transfer arrangement comes as a relief to yuMobile workers, who went to court early this year seeking to block the sale of the company before their fate is known.
“The transaction is now almost coming into a conclusion. No deal has been signed yet but we expect this to be done either on Monday or Tuesday,” said a source privy to the negotiations.
Our source said that after signing the sale agreement the three parties will notify the Competition Authority of Kenya (CAK).
The fate of employees and subscribers and also how the business will be liquidated were among the issues the telecoms regulator put into consideration before approving of the deal.
“The authority is in agreement with your request to take over ‘Essar Numbering Ranges’ in order for the migrating Essar’s subscribers to retain their numbers,” Francis Wangusi, the Communications Authority of Kenya (CA) director-general said in an approval letter to Airtel.
The letter added that Airtel would be required to conduct an audit of all the numbers assigned to it and to release unused numbers from the system six months after the transfer of yuMobile numbers.
The acquisition of yuMobile subscribers will see Airtel’s subscriber base rise to 7.5 million from the current five million.
For its part, Safaricom will have the much-needed frequency spectrum to accommodate its growing subscriber base that hit the 21 million mark between January and March and to improve the quality of its voice service.
On Friday Safaricom issued a circular to its shareholders calling for a special meeting where their approval will be sought to acquire East Africa Tower firm owned by Essar Telecoms, the owners of yuMobile.
“The transaction is part of a larger one in which Safaricom is purchasing from Essar various assets, including but not limited to the right to use certain frequency spectrum currently used by Essar, subject to approval by the Communications Authority of Kenya,” Safaricom said in an advert.
Other than the proposed transfers, yuMobile employees had also agreed to a severance pay of 60 days for every completed year of service and a bonus pay of minimum one month salary.
A notice-pay and a pay-in-lieu-of-leave for the year 2013 to June 30, 2014 will also be en-cashed on the date of payment. The employees will also enjoy a medical cover expiring on August 31 until they get alternative medical covers with Safaricom or Airtel in the proposed restructuring transaction.
They will further benefit from a pension and issue a notice of withdrawal from the employees’ pension scheme within 30 days of the declaration of the redundancy.
Essar, the brand owner, is expected to similarly issue each employee with a certificate of service as required under the Employment Act.
Essar first entered the Kenyan market in 2008 with the purchase of Econet Wireless International – a company owned by Zimbabwean tycoon Strive Masiyiwa. The deal initially gave the Indian telecom firm a 35 per cent stake but that grew gradually to 70 per cent.
It later acquired an additional 10 per cent stake following a dilution of the local shareholders’ stake because they failed to contribute their share of equity required to fund the company’s growth.
In 2012, Essar bought out the remaining shares held by the local owners after they failed to inject capital into the company.
The sale of yuMobile reduces the number of mobile operators to three. The telecoms sector regulator in April licensed three providers, Equity’s Finserve, Zion Cell and Tangaza to offer voice, data and money transfer services, a move it said will increase competition in the sector.