MARKET SHARE TUSSLES

Telkom accuses Safaricom for delay in Airtel deal

CEO Kibati claims that Safaricom CEO Micheal Joseph urged the industry regulator not to approve the intended merger of businesses

In Summary

• Telkom Kenya chief executive Mugo Kibati has said Safaricom is sabotaging its awaited final approval to conclude the transaction, afraid of competition from the combined entity, Airtel-Telkom.

• However, according to a Safaricom official, the firm wrote to CA as a player in the industry but they are not out to sabotage the merge.

A Telkom shop in the central business district in Nairobi. /MONICAH MWANGI
A Telkom shop in the central business district in Nairobi. /MONICAH MWANGI

Telkom Kenya is accusing rivals Safaricom of having a hand in the delayed merger with Airtel Kenya.

Telkom Kenya chief executive Mugo Kibati said Safaricom is sabotaging its awaited final approval to conclude the transaction, afraid of competition from the combined entity. 

“We have no quarrel at all with our colleagues at Safaricom, we are simply trying to restructure and improve our own business and for the good of the industry,” Kibati said.

 

He went on: It is unfortunate, however, that Safaricom now wants to delay this process that seeks provide customers with more credible options. Is the dominant player wary of competition?”

But in a swift reaction, a Safaricom official who requested not to be named said the firm wrote to CA as a player in the industry and not to  sabotage the merger.

He said the  Safaricom memorandum followed a gazette notice by the Communication Authority  as part of the merger requirements inviting individuals or entities opposed to the merger on any legality to do so within 30 days. 

Kibati got it wrong. We actually raised three key concerns to the regulator but we are not objecting to the merger. We are actually pushing for it,” he said.

Kibati claims that Safaricom acting CEO Michael Joseph urged CA not to approve the merger, as it had concerns that it wanted addressed.

The merger between Telkom and Airtel was announced on February 8 with the firms intending to combine their respective mobile, enterprise and carrier services businesses and form an entity, Airtel-Telkom.

Lat month, CA wich had in May 10 granted the deal a conditional approval suspended the planned merger after the Ethics and Anti Corruption Authority raided issues on how the deal was arrived at.

EACC in a letter to Telkom said it was investigating whether public funds were lost when the Cabinet approved a plan in 2012 to convert the Treasury’s loans in Telkom Kenya into equity as part of a plan to recapitalise and restructure the balance sheet of the company.

“We have given the EACC all the information they have requested and will continue to cooperate on the matter up until a substantive conclusion is reached,” Kibati said.

He said the industry needed the presence of a second strong player to give Kenyans value for their money.

This industry is ailing and all stakeholders need to open their eyes to this reality. Competitive pricing does not exist due to existence of single major player," he said.

In the latest report by CA for the period between January -March , Safaricom had a market share of 62.4 per cent in mobile subscriptions down from 63.3 per cent registered in the previous quarter.

On the other hand, Airtel Networks Limited gained 2.7 percentage points to post a market share of 26.1 per cent during the quarter under review.

Telkom's market share dropped to 7.9 per cent from 9.0 per cent reported in the previous quarter.

This means a combined entity will grant the two a 34 per cent per cent control of the market.

Kibati expressed optimism the transaction would be completed by December.

“We expect to get all required approvals soon to be completed in due course,” he said.