Liquid Telecoms, the new owner of Kenya Data Networks (KDN) and Swift Global, is seeking regulatory approval to merge the two firms to counter stiff competition in the sector.
The merger of the firms, previously owned by Naushad Merali, would mean consolidation of the managements and may lead to some positions becoming redundant.
It was not possible to ascertain which positions would be affected as officials from KDN said the consolidation awaits regulatory approval with an official communication expected before the end of March.
Communications Commission of Kenya (CCK) Director-General Francis Wangusi confirmed in a telephone interview Thursday that the firm had sought approval to take over and merge the two units.
“The firm is seeking an approval from us and I believe they are also doing it concurrently with the Competition Authority. CCK will be looking at their shareholding—whether they have the 20 per cent local presentation,” said Mr Wangusi.
KDN offers wholesale data services to corporates such as banks, Internet Service Providers (ISPs) and telecommunication firms. Altech Swift Global (ASG) offers retail services such as voice over Internet protocol services and data services via VSAT and email access.
The merger is expected to consolidate the offerings and enable Liquid match competition from firms such as Safaricom, Jamii Telecoms, MTN Business and Telkom Kenya that offer such services under one roof.
In regulatory filings with the Johannesburg Securities Exchange (JSE) Altech said “Liquid intends transferring ASG (Swift Global) to KDN post the transaction.”
Liquid bought the entire shareholding in Swift Global where Altech owned 51 per cent while Sameer ICT owned by Mr Merali held the remaining share. Liquid Telecom currently owns 80 per cent of KDN and Merali 20 per cent.
(Read: Merali cuts KDN stake as South African firm exits)
A merger would help the UK firm to go around the 20 per cent shareholder limit given that the small-cap Swift Global—which it fully owns—will be a department within KDN.
Until September 2010, KDN used to offer both wholesale and retail internet services. However, in a bid to save the sister firm Swift Global hit hard by the entry of top tier companies in retail segment, KDN made a tactical retreat to wholesale.
The entry of the top-tier operators such as Safaricom, KDN and Telkom Kenya was made possible by CCK’s licensing regime early in 2010 allowing the firms to operate both as wholesalers and retailers.
The entry of the likes of Safaricom ate into the market share of the ISPs such as Swift Global largely concentrating on the bottom end of market.
In the meanwhile, KDN was left to concentrate on wholesale services through developing new products tailored for mobile operators, ISPs, financial institutions and other corporate organisations.
This is the market segment it controlled until it was hit by fresh crisis of big clients like Safaricom deciding to build their own fibre cables.