Safaricom’s plan to buy yuMobile assets hits a snag
Mr Madhur Taneja, yuMobile country manager, at a past function. He has admitted that delayed completion of the company’s buyout transaction had heightened anxiety among employees and customers. Photo/FILE
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Safaricom is reported to have said that the transaction had become less attractive because ‘fundamentals of deal had changed significantly’.
The firm on Wednesday confirmed that doubts were creeping in on its bid to acquire the fourth mobile operator’s assets citing the the Communications Authority of Kenya’s (CAK) apparent reluctance to support the deal.
Safaricom said that the longer the regulator took approving the transaction the less attractive it becomes for both parties.
A cloud of uncertainty was yesterday left hanging over Safaricom’s plan to acquire rival yuMobile’s assets after it emerged that the market regulator had not approved the deal nearly three weeks after the application was made.
Safaricom, which is Kenya’s leading telecoms operator with nearly 67 per cent of market share, was reported to have said that the transaction had become less attractive because ‘fundamentals of deal had changed significantly’.
Safaricom on Wednesday confirmed that doubts were creeping in on its bid to acquire the fourth mobile operator’s assets citing the the Communications Authority of Kenya’s (CAK) apparent reluctance to support the deal.
People familiar with the deal said Safaricom’s worries are linked to the fact that should Airtel pull out of the buyout plan the regulator would have strong grounds to cancel the transaction.
This is because Airtel’s exit would leave Safaricom as the sole candidate to acquire yuMobile’s subscribers and assets — a development that would push its market share to 75.3 per cent raising the sticky subject of market monopoly.
Airtel spokesman Michael Okwiri said he was not aware of any change in position by Kenya’s second-largest operator and refused to comment further.
Safaricom said that the longer the regulator took approving the transaction the less attractive it becomes for both parties.
“The envisaged transaction involves a number of players and each player has placed a specific premium on an aspect of it,” said Safaricom’s corporate affairs director Nzioka Waita.
“With the passage of time and the lack of clarity on the regulatory direction of our application, some aspects of the transaction are starting to look less attractive to interested parties, thus undermining the collective premium of the overall transaction.”
Safaricom is eyeing yuMobile infrastructure, especially its spectrums, while Airtel has expressed interest in the mobile number prefixes together with the subscribers.
If allowed, the deal would enable Airtel to acquire the 2.7 million yuMobile users, lifting its subscriber base to 8.2 million or 26.4 per cent of market share.
It also emerged that delayed approval of the transaction had triggered uncertainty among yuMobile subscribers and risked dampening Airtel’s enthusiasm for it.
Madhur Taneja, the yuMobile country manager, admitted that delayed completion of the transaction had heightened anxiety among the company’s employees and customers but denied any subscriber flight.
“We are extremely disappointed with the delay in getting a response from the regulator and I am not sure what kind of message we are sending to the parties involved in this transaction or to our employees and subscribers,” Mr Taneja said, adding that the deal could still be salvaged by a quicker response from the regulator or a policy decision that allows consolidation of the operators in the market.
yuMobile has been scouting for a potential buyer for the last 14 months. The latest CAK quarterly report shows it is the only mobile operator that lost subscribers in the three months to September.
yuMobile, which is owned by India’s Essar telecoms, shed 9.3 per cent of its subscribers to remain with 2.7 million customers or 8.8 per cent market share down from the previous 10.9 per cent.
During the period under review, Airtel gained the most subscribers — 5.5 per cent — to reach 5.5 million customers from the previous 5.2 million or 17.6 per cent market share (by subscriber base).
Safaricom gained 3.3 per cent to reach 20.8 million subscribers up from 20.1 million in the previous quarter (66.5 per cent) while France Telekom’s Orange has 2.2 million subscribers having expanded its market share by 3.6 per cent to 10.9 per cent.
Indian operator
Safaricom and Airtel’s latest pronouncements on the buyout deal come amid reports that political and government operatives are fronting for Megatech Engineering Limited, a Nigerian firm, to take over the Indian operator.
“I don’t want to comment on this. What I can say is that we have not met any credible telecommunications operator since we notified the regulator and no discussion has taken place or will happen at this stage and it does not matter who brings them,” said Mr Taneja in response to the questions on the matter.
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