Telkom and Airtel Kenya plan to merge operations as a first step to acquiring all of Airtel’s assets, creating a stronger challenger to market leader Safaricom, Reuters reported, citing unnamed sources. A source at the communication authority said the two firms have been engaging officials over the plan to share outlets and infrastructure, such as transmission assets, before Telkom acquires Airtel Kenya at an unspecified time. According to the source, the two operators are yet to make a formal application to the regulator disclosing all the details.
The two operators have a combined 23 percent of Kenya's 41 million mobile subscribers, but have long struggled to compete with Safaricom, which has a 71.9 percent market share. The disparity is even wider in revenue terms, with Safaricom having more than 90 percent in both voice and messaging.
Data from the communications regulator shows Safaricom also has close to 90 percent of annual revenue from internet access. It has a commanding lead in mobile phone money transfers with its M-Pesa service, too.
Wang'ombe Kariuki, the director-general of the competition authority of Kenya, did not comment on the deal, saying both firms were yet to lodge a merger application. Telkom Kenya, which is controlled by Helios Investment, declined to comment. Airtel Kenya also said it would not comment.
Industry executives said that if a deal to acquire all Airtel Kenya’s assets goes through, it would help both firms make significant savings and acquire the scale to compete effectively with Safaricom. This, the source said, is "a cold, calculated business strategy". Bharti Airtel has been examining a flotation of a minority stake in its African operations but has said it remains committed to the continent.
The report said the combined entity could create concerns because it would have a large slice of prime spectrum. Any merger of Telkom and Airtel would result in a new company with 77 MHz of spectrum, compared with 47 MHz for Safaricom. It would create a challenge for the sector regulator, which has commissioned consultants Analysys Mason to review competition in the industry.
