Airtel Kenya abruptly ditches merger plan with Telkom Kenya

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Airtel Kenya has abandoned plans to merge with Telkom Kenya, a paln that was aimed at taking on market leading operator Safaricom.

The move would have let the Telco’s’ grab off sizeable market share from Safaricom with a leading subscriber share of 72.6% according to the latest regulator reports. Telkom and Airtel have a combined 23 percent of Kenya’s 41 million mobile subscribers.

According to the Standard, a source familiar with the negotiations says talks fell through at an earlier stage following the commencement of the restructuring of Telkom Kenya that started with the sale of some of the latter’s assets.

“Airtel felt that it would end up getting into a partnership with a shell,” said the industry source.

Telkom Kenya had recently announced the sale of its 723 towers to the American Tower Corporation (ATC). Aside from the sale of the key infrastructure, the owners are also looking at setting up a separate entity (jointly owned by Helios and the Government on a 60:40 ratio) which will manage Telkom’s real estate, mostly in prime areas across the country, leaving Telkom Kenya mobile network operator with minimal infrastructure. Once separated, Telkom Kenya mobile operator business was to merge with Airtel business on a 50:50 basis between the holding company and Airtel shareholders.

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Another source claims said the deal had been sabotaged by an external forces.
According to Reuters Joe Mucheru, C.S of Information and communication said he was aware of the walkout by Airtel.

“The proposed merger broke down over a number of issues, particularly Airtel resisting making a commitment to significant future investments in the company.” the industry source said. Communications Authority of Kenya, said neither Telkom nor Airtel had formally communicated with it about the deal.

How the merger would have benefited the two Telcos’

Through a joint venture, Telkom Kenya and Airtel would bring together their 1,581 and 1,548 base stations respectively. That means their base stations will be nearly close to Safaricom’s 4,000 base stations.

By operating more base stations, the two operators could boost their coverage to under served areas.

Furthermore, Telkom has a large data market share and Airtel is the second largest operator in mobile customer numbers. That means that they would have had the ability to offer their customers better packages if the deal could have gone through.

Source: Kenyanwallstreet

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