Airtel-Telkom Now A Go, Safaricom The Biggest Winner In the Merger

The Competition Authority of Kenya (CAK), has approved the planned merger of Airtel Kenya and Telkom Kenya, The firms still have to wait for approval from the Communications Authority of Kenya (CA) but this go ahead deal that could challenge market leader Safaricom’s dominance in the country’s telecoms industry was set up on Safaricom’s terms.

On September 3rd, Safaricom acting CEO Michael Joseph demanded the pair to clear a debt of Ksh.1.3 billion for the provision of various services which accrue back, distinctively, to the two operators.

It is therefore not a surprise that while greenlighting the merger, the conditions set in place will notably favour safaricom. The merged entity, to be named Airtel-Telkom will be restricted from entering any other sale transactions in the next five years. “However, in the event of any indication of a failing firm within the period, the Communications Authority shall conduct a forensic audit at the cost of the merged entity,” the CAK notice states.

This condition will seek to block any other telco merge with Airtel-Telkom thus seeing Safaricom retain its market leader position.

Telkom will also have to surrender one of its spectrums to the government when it expires, that is its 900 megahertz (MHz) and 1800MHz in Safaricom’s favour. Safaricom had sought to see the rebalancing of frequency allocations in a manner consistent with market share as the market leader denoted the higher allocation of spectrum to Telkom-Airtel against their lesser share of mobile subscriptions, a move which Telkom said was set out to frustrate the process as a means to sabotage the proposed deal.

Airtel and Telkom are expected to retain at least 349 staff from the current pool of 674 with Telkom being ordered to keep a minimum 114 members of its staff.

The firm, which is expected to be firmly in place next year, will also have to pay market rates to use the State-owned National Optic Fibre Backbone Infrastructure (Nofbi), which is among the facets of the Telkom business that will not be transferred to the merged operator.

Combined Airtel-Telkom will have a market share of 32.7 pc, a third of the market,  Safaricom will have 63.5 pc, this is going by a survey by the CA as of June this year.