Airtel, Telkom win appeal against CAK merger conditions


Airtel, Telkom win appeal against CAK merger conditions
Telkom Kenya CEO Mugo Kibati. PHOTO | FILE

In Summary

  • In its ruling made on Monday, the Competition Tribunal overturned the majority of the conditions placed upon the two units when the CAK approved their proposed merger on December 13.
  • The tribunal has lifted the prohibition barring the merged entity from entering into commercial agreements within the first five years including sale agreements but limits the entity from being taken over or floating more than 40 percent of its stake.
  • Previous conditions would have put a backstop, limiting the merged entity from advancing on market leader Safaricom which had in its part made demands to the CA including the immediate clearance of Ksh.1.3 billion in debt accrued and a rebalance of frequency allocations.

Airtel and Telkom Kenya have won their appeal against merger conditions instituted upon them by the Competition Authority of Kenya (CAK).

In its ruling made on Monday, the Competition Tribunal overturned the majority of the conditions placed upon the two units when the CAK approved their proposed merger on December 13.

Opposed to the tough conditions, the pair had moved to appeal the conditional merger rules in January.

The two companies have now been allowed to keep their existing network licenses in accordance to conditions imposed by the Communications Authority of Kenya (CAK) including the 900 megahertz (MHz) and 1800 MHz spectrum owned by Telkom.

Further, the tribunal has lifted the prohibition barring the merged entity from entering into commercial agreements within the first five years including sale agreements but limits the entity from being taken over or floating more than 40 percent of its stake.

Moreover, the pair has been allowed to negotiate terms of access relating to the 4,204 kilometres of fibre managed by Telkom on behalf of the government of Kenya.

Additionally, the tribunal has revised compliance rules by allowing the merged entity to furnish the Competition Authority with an annual compliance report on merger conditions for up to two years deleting the previous open ended clause.

However, the tribunal has retained conditions requiring the merged entity to retain atleast 349 out of its 674 employees over the next two years while absorbing 115 of the staff into the merged entity.

Previous conditions would have put a backstop, limiting the merged entity from advancing on market leader Safaricom which had in its part made demands to the CA including the immediate clearance of Ksh.1.3 billion in debt accrued by the pair and a rebalance of frequency allocations.

The demands sparked off rage from Telkom who accused the market leader of frustrating the merger process.

Safaricom’s then Acting Chief Executive Officer Michael Joseph however shrugged off the concern insisting of the firm’s support for change.

“While we are supportive of industry changes that seek to deliver greater choice and value to customers, we have raised valid concerns that we hope the regulator will consider and address as part of the approval process,” he said.

The pair of Telkom and Airtel Kenya has been eating into Safaricom’s market share in the recent past even as Telkom marks a contraction in new mobile subscriptions.

According to recent sector statistics from the CA, Airtel and Telkom hold a combined 32.1 percent of all mobile subscriptions while Safaricom leads the way with a distant 64.8 percent market share.

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Story By Kepha Muiruri
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