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Blow to Airtel, Telkom as Communications Authority Suspends Merger

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The merger between Airtel Kenya and Telkom has been put on ice after a suspension of the deal by the Communications Authority of Kenya (CA).

With the merger set to see the new Airtel-Telkom unit rival telecommunications giants  Safaricom, the completion of the deal will have to wait a little longer following the regulator’s intervention.

CA, as reported by Business Daily, has halted the merger between Airtel and Telkom pending investigations by the Ethics and Anti-Corruption Agency (EACC).

The anti-corruption watchdog’s probe centers on how the merger deal was brokered between Kenya’s second and third largest mobile phone operators.

CA is reported to have told Airtel and Telkom that it would not give requisite regulatory approval until the EACC investigations are concluded.

“We have advised the parties that, in light of government shareholding in Telkom Kenya, approval shall only be granted once all the conditions set out by the [Communications] Authority are fulfilled and the transaction is cleared by the EACC,” the CA director in charge of communications and public affairs, Christopher Wambua told Business Daily.

The Nation Media Group owned media outlet further states, “Business Daily has learnt that among officials lined up for questioning by EACC include senior managers at Telkom Kenya, the Treasury, the CA and the Competition Authority of Kenya (CAK).”

Ownership of Telkom Kenya is divided between UK-based Helios Investment Partners (60%) and the Kenya government (40%).

A separate EACC investigation into the circumstances under which Treasury ceded further ownership of Telkom Kenya to French telco Orange is also ongoing. It is Orange which sold its stake in the Kenyan mobile phone operator to Helios.

Airtel Kenya, on the other hand, is a subsidiary of Airtel Africa, itself owned by Indian global telco Bharti Airtel. Kenya’s second largest mobile phone operator by subscriber base has previously operated in the country under the names Kencell, Celtel and Zain.

The merger between the two telcos is seen as an attempted assault on Safaricom, the mobile phone operator king in the country that is listed on the Nairobi Securities Exchange (NSE).

Safaricom currently holds around 54.2% of the market share, with Airtel boasting approximately 22.3% and Telkom at a distant third with 9%. The merger, while not necessarily cutting down on Safaricom’s subscriber base, could boost the joint entity to about 31.3% of the entire market.

In the deal, a joint venture unit known as Airtel-Telkom will be formed, but which will exclude Telkom’s real estate portfolio and specific government services.

The merged company is expected to be chaired by Telkom Kenya Limited CEO Mugo Kibati while Airtel’s chief executive Prasanta Sarma will be appointed CEO.

Already, the merger between Airtel and Telkom has hit bumps on the road, with lawmakers raising the red flag over the deal.

At the same time, former employees of both firms have taken Airtel and Telkom to court, claiming inadequate compensation, and wanting the courts to stop the deal until their grievances are resolved.



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