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Telkom-Airtel merger abandoned

blamed on challenges in getting approvals

In Summary

•This decision has been mutually agreed with Airtel Networks Kenya Limited, Telkom CEO Mugo Kibati said.

•Kibati says  Telkom’s new direction is bolstered by the accelerated digital transformation brought about by the recent dynamics of the Covid-19 pandemic, which has seen increased demand for data and broadband.

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

Telkom Kenya and Airtel have abandoned merger plans that kicked off moe than a year ago citing challenges in regulatory approvals.

In a statement yesterday, Telkom cited “challenges experienced in getting all the approvals required to complete the transaction,” a deal that was first announced on February 8, 2019.

It had intended to merge its mobile, enterprise and carrier businesses with Airtel Networks Kenya Limited, a move that would have created a new business called Airtel-Telkom.

 

The company has been pursuing various approvals required to complete the transaction, including a green light from the Competition Authority of Kenya(CAK) and the Communication Authority.

CAK approved the deal in December, but under conditions, among them being that the merged entity was not allowed to sell itself for the next five years, and must honour any existing contracts with government bodies.

Telkom was also required to retain staff.

The two appealed at the Competition Tribunal which allowed the sale of up to 40 per cent of their merged business.

The National Treasury was however said to be holding back the merger as the government assessed the viability of the sale of its 40 per cent stake in Telkom.

“Considering the challenges experienced in getting all the approvals required to complete the transaction, the company has simultaneously been evaluating alternative strategic options to strengthen its position,” Telkom said.

The decision has been mutually agreed with Airtel Networks Kenya Limited, CEO Mugo Kibati said.

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

 

Kibati said Telkom’s new direction is bolstered by the accelerated digital transformation brought about by the recent dynamics of the Covid-19 pandemic, that has made both businesses as well individuals, acutely aware of the need to review direction.

“This accelerated digital transformation is particularly important within the telecommunications sector, owing to an increased demand for data and broadband,” Kibati said.

Consequently, the notice of redundancy issued by the Company on July 31, 2019, which would have sent home at least 575 workers, has been withdrawn and the earlier envisaged redundancies no longer apply, the company said.

“The new, bold and exciting direction the company is now embarking on, offers all Telkom employees the opportunity for greater career progression, as the company commences the new phase of its development, to establish itself as an essential player in the new digital world order,” Kibati said.

 UK-based Helios Investment Partners owns a majority stateke of 60 per cent in Telkom.

The merged entity had been expected to rival Safaricom which has dominated the country's telecommunication sector.

Safaricom's market share is at about 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.