Companies

Airtel, Telkom pull plug on merger plan

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Airtel and Telkom lines on sale in Nairobi streets. PHOTO | KANYIRI WAHITO | NMG

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Summary

  • The companies had entered into an agreement on February 8, 2019 to combine their mobile, enterprise and wholesale divisions.
  • This was in a bid to cut costs and enhance scale as they sought to better compete against Safaricom which dominates the mobile telephony business with a 64.8 percent market share.
  • The Competition Authority of Kenya (CAK) approved the merger on October 31, 2019 but with eight conditions including banning the would-be merged entity from selling itself to another party within five years.

Telecommunications firms Airtel Kenya and Telkom Kenya have abandoned their merger plan, citing unacceptable conditions placed on the proposed amalgamation besides delays in receiving regulatory approvals.

The companies had entered into an agreement on February 8, 2019 to combine their mobile, enterprise and wholesale divisions.

This was in a bid to cut costs and enhance scale as they sought to better compete against Safaricom which dominates the mobile telephony business with a 64.8 percent market share.

The Competition Authority of Kenya (CAK) approved the merger on October 31, 2019 but with eight conditions including banning the would-be merged entity from selling itself to another party within five years.

The combined business was also ordered to retain at least 349 employees. In addition, the merged entity was banned from transferring operating and frequency spectrum licences and it was also told that it would only access the 4,204 kilometres of fibre network managed by Telkom on behalf of the government at the current market rates.

The conditions, together with the approval of the merger, were published in the Kenya Gazette on December 13, 2019 against the wishes of Airtel and Telkom executives who had asked for more time to consult their superiors.

Airtel and Telkom — in which the government owns a 40 percent stake — went to the Competition Tribunal in January seeking to overturn the conditions placed on the merger.

In a ruling delivered on May 4, 2020, the tribunal upheld some of the conditions and varied others in a decision that left the two companies dissatisfied.

In separate statements, Airtel and Telkom said they were confident of pursuing growth independently.

“Despite Airtel Africa Plc and Telkom respective endeavours to reach a successful closure, the transaction has gone through a very lengthy process which has led the parties to reconsider their stance,” Airtel’s London-based parent company said in a statement.

“Accordingly, Airtel Africa Plc and Telkom have decided to no longer pursue completion of the Transaction.”

Airtel Africa chief executive Raghunath Mandava added that the Kenyan subsidiary is currently serving more than 14 million customers, “a number that is growing month on month, and in the last quarter our revenue numbers were up double digit in constant currency in Kenya.”