Companies

Helios entry raises competition bar for Safaricom

telkom

A Telkom Orange shop in Nairobi. Helios is buying a 70 per cent stake in Telkom Kenya. PHOTO | FILE

The entry of Helios Investment Partners into Kenya’s telecommunications sector is expected to step up competition for Airtel and market-leader Safaricom, which dominates both the voice and data markets.

The deep-pocketed private equity fund is expected to inject into Telkom Kenya the required capital and bring in a strong management team that can turn the loss-making telco to profitability.

Safaricom CEO Bob Collymore, while acknowledging the competitive pressure expected from the revamped outfit, said his company nevertheless needs a strong competitor to raise the overall quality of services offered to consumers.

“Helios has strong financial backing and its entry is likely to make the competitor successful. The market needs a strong competitor. I trust Helios will bring in a strong management team that can turn around the firm,” Mr Collymore said in a telephone interview.

Helios is an Africa-focused private equity firm, which recently sold off its stake in Equity Group for billions of shillings. The PE fund is buying a majority 70 per cent stake in Telkom Kenya currently held by French multinational France Telecom. The other 30 per cent shares of Telkom Kenya is owned by the Treasury.

READ: Telkom to lay off 600 ahead of Orange’s sale of stake to Helios

Established in 2004 and led by co-founding partners Tope Lawani and Babatunde Soyoye, Helios is one of the largest investment firms focusing on Africa. The fund has invested in oil, financial and telecoms sectors in Africa.

In Kenya it has invested in Wananchi Group Holdings, a triple-play provider (Internet, TV and voice), among others. Kenya has three mobile network operators, Safaricom, Airtel and Telkom Kenya, following the exit of Essar Telecommunications that owned the yu Mobile brand late last year.

Safaricom is the only profitable operator with a market share of 66.3 per cent of the total 37 million mobile subscribers. Airtel has 19.4 market share while Telkom Kenya’s Orange has 11.8 per cent.

France Telecom announced earlier this year that it had signed a deal that will see Helios acquire its entire shareholding in the Kenyan firm. The Treasury has said it will remain a shareholder in the company after France Telecom’s exit.

France Telecom in 2007 acquired 51 per cent stake in Telkom Kenya for $390 million (then Sh26 billion) but convertible loans doled out to the loss-making telecoms operator saw that stake grow to 70 per cent.

Analysts at Standard Investment Bank (SIB) said Helios could use Telkom’s existing infrastructure to focus on wholesale and Internet business while also making money by sharing its towers.

“We do not think it will be a major disruptive force in the industry but will aim to turn around the company to profitability,” said SIB.

“It could also target mobile virtual network operators (MVNOs) looking to launch in the Kenyan market.”