Communications Authority of
Kenya Acting Director General Mercy Wanjau (left) with Telkom Kenya
Chief Executive Mugo Kibati (right) during the recent launch on the
Telkom 4G loon services in Ratat, Baringo County. [Courtesy]
The National Treasury is holding back the proposed merger between Telkom
Kenya and Airtel Kenya as the government assesses the viability of the
sale of its 40 per cent stake in the former.
It has been more than a year since Telkom Kenya and Airtel Kenya
announced plans to merge certain segments of their operations to create a
strong competitor for Safaricom, the country’s leading telco.
Industry insiders said the proposed merger, which was scheduled for
completion in December last year, ticks all the boxes but remains on
Treasury Cabinet Secretary Ukur Yatani’s desk.
“At the moment we are waiting for the go-ahead from the National
Treasury, which is required to sign off on all government-backed
transactions of this type,” said Communications Authority of Kenya (CA)
Director General Mercy Wanjau.
Ms Wanjau said the regulator has given the transaction the green light
after meeting its conditions, although a few other issues remain
pending.
The merger was presented as the saving grace for the troubled
telecommunications firm Telkom that has for years struggled to grow
market share and turn profit.
Telkom had even announced the retrenchment of hundreds of workers, some
of whom had been told they could reapply in the new entity to be formed
between Airtel and Telkom Kenya.
The delays in the merger pushed the telco, which is 60 per cent owned by
London-based Helios Investment Partners, into more trouble as it slowed
down new investments.
Recently, CA revealed that Telkom Kenya had started slowing down on new
investment in several of its business divisions in anticipation of the
merger.
Subscriptions
According to the latest industry statistics, Telkom shut down 25,589 of
its 28,106 T-Kash agent outlets over the last year. Investments in
mobile and fixed data were also scaled down, leading to an overall drop
in the number of total internet subscriptions in the country.
“During the third quarter of the 2019/20 financial year, total data or
internet subscriptions dropped by 0.7 per cent to stand at 39.3 million
from 39.6 million subscriptions reported in quarter two,” explained CA
in its recent industry report.
“This is mainly attributed to the decline in the number of mobile
subscriptions posted by Telkom Kenya Limited during the quarter as a
result of measures taken by the company to scale down on investments in
anticipation of the proposed Airtel-Telkom merger although this has
since changed.”
The delay in the merger and investment uncertainty has not helped improve Telkom’s market position.
The CA data further indicates the number of Telkom Kenya’s total
subscribers has fallen from 4.4million of the beginning of last year to
3.1million as of March this year. The company has also lost a third of
its mobile money subscribers in the past six months.
The transaction, whose value has not been revealed, was expected to have
Telkom and Airtel Kenya merge their mobile, enterprise and carrier
businesses under Airtel-Telkom.
Telkom’s real estate and some government services were excluded from the
merger, and the firm would have the option of holding a 49 per cent
stake in the merged entity.
The transaction would see both the State and the UK private equity fund,
Helios, reduce their stake in Telkom in exchange for much-needed
capital to revive the troubled firm.
Telkom also said more than 600 of its employees would be declared
redundant, but most would be re-assigned new roles in the merged
entity.
This arrangement is now in limbo as the transaction hangs in the
balance, with employees of both companies left guessing what’s next. “We
are yet to get the green light despite meeting all the merger
conditions and there is no explanation forthcoming from the regulator,”
said a senior official at Airtel Kenya who sought anonymity.
“This points to a lapse in regulatory oversight because once two parties
have decided to merge operations and have met the conditions set out,
it doesn’t make sense to turn around and block the transaction,” added
the official.
Earlier this year, Airtel and Telkom protested several conditions that
the Competition Authority of Kenya insisted must be met before the
merger, including a requirement for Airtel-Telkom to retain all workers
within two years and refrain from selling the firm for at least five
years.
No comments :
Post a Comment