HomeBusiness DigestAirtel, Telkom in new Kenya dominance deal

Airtel, Telkom in new Kenya dominance deal

Kenya’s telecommunications market is bracing for a possible change of ownership between two telcos, which have been struggling to compete with Safaricom, the region’s most profitable listed mobile service operator.

Although no official announcement has been made on the proposed deal between Telkom Kenya and Airtel Kenya, available information shows that the two telcos, with a combined market share of close to 33%, could be working on either a marriage of convenience or a buyout, with speculations pointing to

Airtel Kenya as the possible acquirer.

Even though the management of the two firms have decided to play their cards close to their chest, speculation is rife that the Indian telecom giant Bharti Airtel, through its Kenyan subsidiary Airtel Kenya, is contemplating a takeover of the struggling Telkom Kenya after a planned merger proposal collapsed in April 2018.

Telkom Kenya is majority owned (60%) by the UK-based private equity firm Helios Investment Partners.

The Kenyan government owns 40%. It still remains unclear who between Helios and the Kenyan government plans to exit the telco.

The British investors acquired their stake in Telkom Kenya from France Telecom in 2016, when it was trading as Orange SA.

Kenya’s telecom sector has proven difficult for small players to survive in. For example in 2014, yuMobile, which was owned by Indian investment group
Essar, exited the market after selling its assets to both Safaricom and Airtel Kenya, for an estimated US$120 million.

In the deal, Safaricom acquired yuMobile’s network, information technology and office infrastructure, while Airtel Kenya took over the company’s subscribers.

Although there have been frequent changes of ownership among the small telcos, with the hope of challenging Safaricom’s dominant position, the telco which is listed on the Nairobi Securities Exchange still has over 60% market share and generates millions of dollars’ worth of profit every year.

In the six-month period to September 30, 2018 Safaricom’s net earnings rose 20% to 31,5 billion (US$315 million) fuelled by revenues from its voice, data and money transfer (M-Pesa) business.

According to a market report by AIB Capital released last week, Safaricom’s market share dropped to 64% at the end of September 2018 from 72% in the same period in 2017, largely due to the telco’s relatively higher voice and data tariffs.

However, a majority of Safaricom’s customers who moved to other service providers still maintained their Safaricom lines to use for M-Pesa transactions, with dual-SIM card usage estimated to have risen to 50%. Safaricom is 35% owned by South Africa’s Vodacom and 35% by the Kenya government, while the British multinational Vodafone owns 5%. The remaining 25% shares are owned by retail investors through the NSE. National Treasury Cabinet Secretary Henry Rotich had earlier said that although Helios Investment Partners had come up with an attractive business plan to turn around the fortunes of Telkom Kenya, it was still difficult to anticipate when the telco would become profitable and pay a dividend.

Last week, Telkom Kenya chief executive Mugo Kibati said his company and Airtel Kenya were in discussions over the proposed share sale. — East African.

Recent Posts

Stories you will enjoy

Recommended reading