Airtel, Telkom in talks to take on Safaricom

Airtel Kenya has revived talks with Telkom Kenya for a possible merger or buyout that is expected to create a financially strong outfit to compete with market leader Safaricom #ticker:SCOM.

Telkom Kenya CEO Mugo Kibati on Monday confirmed that the two companies are back on the negotiation table.

“It is common practice within the ICT industry to conduct exploratory conversations; to assess the market for areas of synergy, co-operation and partnership, with the intent of giving customers greater value and superior experience,” he said in an emailed response.

He, however, did not give an update on the progress of the discussions that come at a time the two firms have been making sustained gains on Safaricom’s market share.

“As has been our practice, we will continue to communicate significant developments in a timely manner, as we execute our business strategy,” said Mr Kibati who joined Telkom in November last year.

London-based Helios Investment, which owns a 60 per cent stake in Telkom, is looking to partly cash out of the investment which it entered in 2015, Reuters news agency reported, adding that the deal will be sealed by March. Successful talks will see the two firms seek regulatory approvals from the Competition Authority of Kenya (CAK).

On Monday, the Authority said it was yet to be notified of the proposed transaction.

“Parties are allowed to hold talks on possible mergers and acquisitions, but are required by the Competition Act to notify the Authority if the transaction meets the thresholds as provided for in the Merger Threshold Guidelines before implementation of a merger,” said the CAK.

The Authority considers merger applications mainly based on impact on competition and public interest concerns.

It can either grant approval unconditionally, grant with conditions or decline.

Latest data from Communications Authority of Kenya (CA) covering three months to September showed Airtel had a market share of 22.3 per cent while Telkom had nine per cent.

A successful deal could hand them a combined share of 33.3 percent against Safaricom’s 64.2 percent.

The talks come at a time Bharti Airtel chairman Sunil Bharti Mittal has concluded a deal with Tanzania government to cede part of Airtel Tanzania’s ownership to the state.

A section of the press reported that Mr Mittal was in Kenya to take part in sealing the Airtel deal through talks that will extend to government officials.

When the Business Daily reached out to ICT cabinet secretary Joe Mucheru, he neither denied nor confirmed this.

“The two companies should be the ones to give information — All our discussion between businesses and government are between us. We have no authority as government to talk about what our discussions are all about,” he said in a phone interview.

Last year, the two companies held merger talks but this ended with no successful outcome.

Safarciom chairman Nicholas Nganga then said the telco was following the deal closely.

Should the latest deal go through, it will see Kenya’s second and third-largest telecom operators command 14.6 million mobile subscribers, being 48.76 per cent of Safaricom’s 29.94 million as at end of September.

In local voice market, Safaricom accounted for 8.93 billion minutes while Airtel and Telkom had 4.78 billion minutes and 619.4 million minutes.

A merger will see the two have 5.6 billion minutes. Focus is also on the CA’s much awaited dominance report, which could also have far reaching impact on how the industry shapes up going forward.

Late December, the CA acting Assistant Director for Market Analysis and Tariffs said the board had already approved the report for release.

Sector players are still waiting to know whether or not CA will declare Safaricom a dominant player as had been recommended in the draft report by Analysys Mason, the UK firm that was contracted to evaluate competitiveness in the sector.

The report had also recommended that Safaricom stops on-net discounts and individually tailored loyalty schemes and also share its infrastructure with other networks to reduce barriers to entry.