Telkom, Airtel planned merger collapses


Telkom Kenya
Telkom Kenya

In Summary

  • The mutual termination of the planned combination of the two networks follows challenges experienced in the acquisition of requisite approvals to completing the transaction.
  • Telkom now sees its future growth from the acceleration towards digital channels forced upon by the Covid-19 pandemic which has brought an increased demand for data/broadband services.
  • The severed ties, mean Airtel and Telkom will not advance on market leader Safaricom which holds a sizable 64.5 percent share of mobile subscriptions in the country

Telkom and Airtel Kenya have mutually agreed to sever their planned merger with Telkom opting for a different strategic direction.

The mutual termination of the planned combination of the two networks follows challenges experienced in the acquisition of requisite approvals to completing the transaction.

“After carefully reviewing the available solutions, Telkom has opted to adopt an alternative strategic direction and will no longer be pursuing the proposed joint venture transaction,” said Telkom Kenya CEO Mugo Kibati.

Telkom now sees its future growth from the acceleration towards digital channels forced upon by the COVID-19 pandemic which has brought an increased demand for data/broadband services.

Subsequently the operator has withdrawn its notice of redundancies issued in July 2019 which would have seen over 500 staff sent packing.

“The transformation dynamic also presents Telkom with a strategic advantage , to better its infrastructure asset base and services, to support digitization, bridge the consumer divide and connect the unconnected by way of cutting-edge technologies such as Loon,” added Mr Kibati.

The termination marks an end to the operators’ months’ long spirited battle to merge operations on the most optimal conditions.

The pair for instance fought off stringent terms to merge issued by the Competition Authority of Kenya (CAK) which included the return of part of existing network licenses to the Communication Authority (CA) through the Competition Tribunal.

The two had equally rejected merger conditions granted by the CAK in December last year arguing the stringent conditions which further included the barring of the merged entities from entering new commercial transactions for five years, favoured market leader Safaricom.

Telkom CEO Mugo Kibati had claimed sabotage in the transaction as Safaricom demanded the immediate settlement of arrears amounting to Ksh.1.3 billion as a pre-merger condition in a letter to the CA.

The severed ties, mean Airtel and Telkom will not advance on market leader Safaricom.

According to CA data covering three months to March 2020, Airtel and Telkom held a combined market share by way of mobile subscriptions at 32.4 percent compared to Safaricom’s 64.5 percent market slice.

Airtel held the larger share of subscribers at 14.7 million compared to Telkom’s 3.2 million subscribers.

Safaricom further dominates the mobile money services front with M-Pesa holding a significant 98.8 percent of transactions.

The market leader moreover commands a 67.1 percent of voice traffic ahead of Airtel and Telkom at 29.2 and 3.4 percent.

The two however trounce Safaricom in minutes of use per call per operator. Telkom for instance has a higher average of 4 and 1.3 minutes of use for on-network and off-network calls compared to Safaricom’s 1.3 and 0.9 minutes.

With the planned merger of Airtel-Telkom networks now buried, Kenya will retain 5-telco operators including Equitel and Mobile Pay Limited.

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Story By Kepha Muiruri
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