Kenya’s second and third largest telcos Airtel and Telkom on Friday announced the signing of a binding agreement that will see the shareholders of the two companies enter into an agreement to merge their respective mobile, enterprise and carrier services businesses in Kenya to operate under a joint venture company to be named Airtel-Telkom.
Telkom Kenya Limited’s real estate portfolio and specific government services will not form part of the combined entity.
The final shareholding will be determined at the closing of the transaction.
Telkom Kenya has the option of holding up to 49% of that shareholding. The merged company will be chaired by Telkom Kenya Limited CEO Mugo Kibati while Airtel’s chief executive Prasanta Sarma will be appointed CEO.
Finalisation and closure of the transaction is subject to approval by the relevant authorities.
Airtel Networks Kenya Limited (Airtel Kenya) and Telkom Kenya Limited (Telkom Kenya) will see no immediate changes to their operations which will continue as usual.
In similar vein, there will also be no change to the current respective leadership and management, legal, organisational and staffing structures.
Additionally, both brands: ‘Airtel’ and ‘Telkom’, as well as their respective products and solutions, will continue to co-exist.
Service delivery to the respective companies’ customers as well as engagement with all business partners of both companies will continue to operate as usual.
As per the agreement, both the partners will combine their operations in Kenya and establish an entity with enhanced scale and efficiency, larger distribution network and strategic brand presence thereby enhancing the range and quality of products and service offerings in the market, and greater choice and convenience to the consumer.
The combined entity will see sustained investments in networks to further accelerate roll out of future technologies. The enterprise and carrier services businesses will get a boost with a larger fibre footprint and increased number of enterprise customers including both large corporations and SMEs who would have access to a diverse portfolio of solutions.
This means that Airtel-Telkom will boast of 31.3% of the market share (Airtel 22.3%, Telkom 9.0%) trailing Safaricom whose subscriber base account s for 54.2% of the entire market.
Further, the joint company will have enough subscribers and the necessary infrastructure to take on Safaricom.
Speaking after the deal was struck, National Treasury Cabinet Secretary Henry Rotich said the move is well aligned with the government’s agenda to optimise the value of the assets that it holds in trust on behalf of Kenyans, while cementing the country’s position not only as a regional business hub but also as an international investment magnet.
ICT Cabinet Secretary Joe Mucheru lauded the deal saying that it will have a great impact in the country’s economy.
“Such mergers have had positive impact on the development of the sector and service levels to consumers in other markets,” said CS Mucheru.