Mr Mugo Kibati

Kenya’s telecom firms announce merger plans to challenge the market leader

By Jean-Pierre Afadhali

Mr Mugo Kibati
Mr Mugo Kibati

Kenya’s telecom companies Telkom Kenya limited and Airtel Networks Kenya limited have announced merger plans, a move that could increase the competition to Safaricom, the market leader in the East African country.

On Friday two operators revealed the signing of an agreement that will see shareholders of two companies enter into an agreement to merge their respective mobile, enterprise and carrier services business in Kenya to operate under a joint venture that will be named Airtel-Telkom.

According to a news release issued yesterday Telkom Kenya Limited’s real estate will not be part of the combined entity.

However, the final shareholding will be determined at the closing of the transaction. Telkom Kenya Limited said it has the option of holding up to 49 percent of that shareholding. This means Airtel Limited could get the remaining 51 percent.

The statement on the announced merger said the new telecom venture will be chaired by Telkom Kenya Limited CEO Mr.  Mugo Kibati, while Airtel Networks Kenya Chief Executive, Mr. Prasanta Sarma will serve as Chief Executive Officer.

The merger finalization and closure of the transaction will be subject to the approval from the Competition Authority of Kenya.

If the agreement is given a green light it could therefore hand two operators a combined share of 33.3 percent against market leader’s Safaricom’s 64.2 percent.

Kenya’s National Treasury Cabinet Secretary Mr. Henry Rotich said: “this move is well aligned with the government’s agenda to optimize the value of assets that it holds in trust, on behalf of Kenyans, while cementing the country’s position not only as a regional business hub but also as an international investment magnet.”

Meanwhile telecom firms have said there will be no immediate changes to their operations. Similarly, there will be no change to the current respective leadership, management, legal, organizational, and staffing structure.

According to the news release, service delivery to the respective companies’ customers as well as management, with all business partners of both companies will continue to operate as usual.

The merger agreement says both partners will combine their businesses in Kenya and establish an entity with enhanced scale and efficiency, larger distribution network and strategic brand presence, thereby enhancing the range and quality of products and service offerings in the market, greater choice and convenience to the consumer.

Companies said the merger will see “sustained investments in networks to further accelerate the roll out of future technologies”.

Commenting on the announced merger, Kenya’s ICT Cabinet Secretary Joe Mucheru said:” ICTs remain a vital link to achieving Kenya’s economic goals and our national development agenda, particularly will respect to service delivery,”

Mr. Mucheru added that such mergers have a positive impact on the development of the sector and service levels to consumers in the market.

Latest data from Communications Authority of Kenya (CA), the local telecom regulator, covering three months to September showed, Airtel the Kenyan subsidiary of Indian telecom giant Bharti Airtel, had a market share of 22.3 per cent while Telkom had nine per cent.

Safaricom is still the market leader but the merger could reduce its share in future.

In the local voice market, Safaricom accounted for 8.93 billion minutes while Airtel and Telkom had 4.78 billion minutes and 619.4 million minutes.

“We look forward to this merger leading the introduction of new technologies and telecommunication products with, in turn support to meet the growing locally and beyond,” ICT Cabinet secretary in a statement.

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