Mobile phone firms Safaricom and Airtel are set to pay billions to acquire yuMobile. PHOTO | FILE | NATION MEDIA GROUP
What you need to know:
Airtel will use the yuMobile brand for the next two years, and in the event that it wants to fully own the brand pay more money to Essar.
Airtel will retain the yuMobile brand for the next two years as per the sale agreement signed with India’s Essar Group that will see the mobile operator run two brands concurrently. This is part of the joint Sh11 billion sale agreement signed between yuMobile, Airtel and Safaricom.
Airtel is set to pay Sh4 million to acquire yuMobile subscribers and its operating licenses, while it will cost Safaricom Sh7 billion to acquire yuMobile assets that include the building that houses Essar located in Westlands and its frequency spectrum.
Airtel will use the yuMobile brand for the next two years, and in the event that it wants to fully own the brand pay more money to Essar. “Airtel will be the first mobile operator to run two brands in one market, and this is mainly driven by the fact that that the yuMobile brand is specially associated with the youth, a factor that Airtel is said does not want to lose,” said a source who is privy to the sale agreement.
The deal now pushes Airtel subscribers to 7 .5 million from the previous 5 million it had, narrowing the gap on Safaricom which has 21 million customers. “Airtel will have to pay Essar extra money in the event that they want to fully own the yuMobile brand,” added the source.
The three parties will now have to seek approval from the Competition Authority of Kenya to conclude the deal. The regulator, Communications Authority of Kenya (CA), is expected to publish in the Kenya Gazatte intention of Airtel to acquire Essar’s operating license.
Safaricom and Airtel have agreed to absorb 175 of exiting yuMobile employees, with the leading mobile provider, taking 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 have to be paid off.
The exit of yuMobile now reduces the number of mobile operators to three, with the third operator Telkom’s Kenya majority shareholders, France Telecoms also said to be in sale talks with a number of suitors that include Vietel, a Vietnamese firm and some Nigerian investors.
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 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.
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