Safaricom scores sizable win from Telkom, Airtel merger approval


Safaricom scores sizable win from Telkom, Airtel merger approval
Safaricom CEO Michael Joseph. PHOTO| COURTESY

In Summary

  • Coincidentally, the set conditions on the proposed merger align to Safaricom’s own demand as spelled out in its letter to the CA earlier in the year.
  • Central to CAK’s authorization is the barring of the soon to be merged entity- Airtel Telkom from entering any other sale transactions in the next five years but for the provision of a potentially distressed peer operator under the CA guide book.
  • Ironically, market leader Safaricom has its root as an understudy having been relaunched in the early 2000s’ as a partnership between the United Kingdom based Vodafone and the then Telkom Kenya.

Safaricom has scored a notable win from the conditional approval of the proposed Telkom-Airtel merger by the Competition Authority of Kenya (CAK).

This after the Friday approval by the regulator carried in it conditions akin to Safaricom’s own expectations to the approval process.

Central to CAK’s authorization is the barring of the soon to be merged entity- Airtel Telkom from entering any other sale transactions in the next five years but for the provision of a potentially distressed peer operator under the Communication Authority of Kenya (CA) guide book.

The condition essentially blocks the pair from making any further market consolidation efforts to largely see Safaricom retain its market leader position.

Further to the conditions is the reversion of Telkom’s 900 megahertz (MHz) and 1800MHz back to the government upon the expiry of license term.

The pair is expected to also honor all its existing contractual terms with government entities even as the CAK expects the pair to miss out on any preferential treatment in their access of shared telecommunications infrastructure.

At the same time, Airtel and Telkom are expected to retain at least 349 staff from the current pool of 674 with Telkom being ordered to keep a minimum 114 members of its staff.

Safaricom’s way?

Coincidentally, the set conditions align to Safaricom’s own demand as spelled out in its letter to the CA earlier in the year.

On September 4, the management of Safaricom cleared up its demand on the pair to include the immediate clearance of a net total Ksh.1.3 billion for the provision of various services which accrue back, distinctively, to the two operators.

Moreover, Safaricom sought to see the re balancing of frequency allocations in a manner consistent with market share as the market leader denoted the higher allocation of spectrum to Telkom-Airtel against their lesser share of mobile subscriptions.

Safaricom however fought off Telkom’s suggestion of the market leader want to frustrate the process as a means to sabotage the proposed deal.

“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,” noted Safaricom’s Acting Chief Executive Officer Michael Joseph.

Customer wars

Safaricom remains largely embroiled in battle with the pair of its closest competitors with a greater market share seemingly sitting at the centre of the faceoff.

The market leader has however rejected the suggestion of holding fears to the Airtel-Telkom merger even as it largely bleeds out its large customer base to the competition.

Safaricom’s market share by absolute individuals has continued to grow against the thinning percentage of hold.

Latest data from the CA as of June 2019 for instance shows Safaricom’s market share at 63.5 percent or an equivalent 31.8 million customers to mirror a drop in the subscriptions share from 65.4 percent in a similar review period in the last year.

Five years ago, Safaricom held an even larger share of 68 percent but has seen this scope narrow as Airtel-Telkom gains to 32.7 percent or an equivalent 17.4 million customers as at the end of June 2019.

In a statement issued Friday, Telkom said it remains engaged with all regulators on the capture of requisite approvals to the proposed merger.

“We are continuing to engage all the regulators as well as other critical stakeholders in the transaction process to facilitate receipt of requisite approval and appropriate conditions required to progress the funding,” read part of the statement.

The infighting between the operators is expected to feature widely ahead of the conclusion of the deal.

Ironically, market leader Safaricom has its root as an understudy having been relaunched in the early 2000s’ as a partnership between the United Kingdom based Vodafone and the then Telkom Kenya.

The government of Kenya owns a notable share of 35 and 40 percent in Safaricom and Telkom respectively.

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Story By Kepha Muiruri
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