APPROVED

Competition Authority greenlights Airtel-Telkom Kenya merger

In Summary

•The combined entity would create stronger competition for Safaricom, which now controls about two thirds of the market in terms of subscribers

•One last hurdle to the merger is the anti-corruption commission lifting a suspension it ordered in August while it investigated allegations about the misappropriation of public funds at Telkom

An employee of Telkom Kenya stands outside the company's shop near the company's headquarters in Nairobi, Kenya, July 27, 2018/FILE
An employee of Telkom Kenya stands outside the company's shop near the company's headquarters in Nairobi, Kenya, July 27, 2018/FILE

The merger between telecommunications companies, Telkom and Airtel has moved a step closer to completion after getting the nod from the Competition Authority of Kenya.

In a legal notice on Friday, CAK said the merged entity is not allowed to sell itself for the next five years, and must honour any existing contracts with government bodies.

“The merged entity shall not sell or transfer the following Operating and Frequency Spectrum Licences within the remaining duration of the said licenses,” the notice stated.

 

This is one less hurdle for the proposed merger after which has faced numerous blocks since it was announced in on February 8.

CAK had initially suspended its analysis on the proposed merger over investigations in past dealings at Telkom by the Ethics and Anti-Corruption Agency.

The merger, which was expected to be completed by the end of December is now left with one last hurdle which is the anti-corruption commission lifting a suspension it ordered in August while it investigated allegations about the misappropriation of public funds at Telkom.

Ongoing investigations are to scrutinize how the deal was brokered and past dealings at Telkom Kenya, which government has a 40 per cent ownership. It is 60 per cent (majority) owned by UK-based Helios Investment Partners.

The Communication Authority of Kenya(CA) had suspended the merger pending investigations by the anti-graft body.

The combined entity is expected to rival Safaricom which has dominated the country's telecommunication sector.

Safaricom currently has a market share of 62.4 per cent in mobile subscriptions. Airtel comes in second with a 26.1 per cent market share, while Telkom Kenya has 7.9 per cent.

 

Combined, the two will have 17.4 million subscribers, which will still fall below Safaricom’s 31.8 million.

Telkom's real estate business, mobile money and key government services will not be merged with Airtel.

France’s Orange bought a majority share in Telkom Kenya when it was privatised in 2007 but then sold its stake to London-based Helios Investment in 2015.

The two telcos agreed to combine their respective Mobile, Enterprise and Carrier Services businesses in Kenya into Airtel to be renamed Airtel-Telkom.

The merger will see at least 575 Telkom employees laid-off to pave way for the formation of a new joint venture—Airtel-Telkom.

Airtel Kenya had previously said the merger would not involve Telkom Kenya’s extensive real estate holdings and some government contracts for unspecified services. 

The joint venture will have Telkom Kenya as a minority partner with a 32 per cent stake in 'Airtel-Telkom', with an option of going up to 49 per cent.