Bharti Airtel inches closer to buying Telkom Kenya

Bharti Airtel has commenced talks with a view to buying out Telkom Kenya. Sources in government indicate the talks involve Helios, the majority shareholder, and top officials from both the ministry of Information, Communications and Technology as well as Telkom Kenya.

Bharti Airtel chairman Sunil Mittal is in the country to take part in the talks, Business Today has learnt.

Reuters also reports that Bharti Airtel initiated the move after a proposal to merge the two telcos in order to take on market leader Safaricom collapsed last year.

“Airtel is in the driving seat. They are leading the talks. Helios is partially cashing out,” Reuters quoted one of its sources as saying.

President Uhuru Kenyatta is also said to be keenly following the matter. The deal is expected to be completed by the end of this quarter, according to sources.

Helios Investment Partners, an Africa-focused, London-based equity fund, owns 60% of Telkom Kenya, which it acquired from France’s Orange in 2016. The Government owns the other 40%.

Both Airtel Kenya, a subsidiary of Indian-based Bharti Airtel and Telkom Kenya have for long been seeking to have Safaricom declared a dominant player to no avail.

M/S Analysys Mason, which was tasked by the Communications Authority of Kenya to conduct a Telecommunications Competition Study, last year concluded that Safaricom enjoys an upper hand based on strong presumption of dominance based on market share of subscribers, volume and value confirmed by analysis of qualitative factors. It, among others, proposed a reduction of M-Pesa charges.

The report showed that apart from boasting of more subscribers, minutes and revenue, Safaricom also benefits from a very high share of on-net traffic, paying out less than Airtel.

It also recommended prohibition of on-net discounts and individually tailored loyalty schemes so as to reduce the barriers to entry for smaller players.

Its proposal to split Safaricom from M-Pesa, its most profitable unit, was flatly rejected by the government with ICT Cabinet Secretary Joe Mucheru saying it would have been tantamount to punishing success.

Safaricom, Airtel and Telkom have, however, since implemented M/S Analysys Mason’s proposal for mobile money interoperablity by agreeing to allow subscribers transfer cash without incurring any charges.

The sector has been difficult to manoeuvre for small players with Yu Mobile being forced to cease operations in 2014, selling off its assets and subscribers to its competitors, Airtel and Safaricom for around US$100 million from its parent company, the Indian group Essar.

The deal saw Airtel take over Yu’s 2.7 million connections, while Safaricom took control of Yu’s network.

Safaricom PLC boasts of 64.2% of the market share while Airtel Networks has 22.3% and Telkom Kenya 9.0%, according to latest statistics from Communications Authority of Kenya.

READ: NEW EACC CEO VOWS TO MAKE LIFE DIFFICULT FOR THE CORRUPT

When talk of a possible merger between Airtel and Telkom ensued last April, there were concerns that the new entity will enjoy a large slice of prime spectrum as it would have accumulated 77 megahertz of spectrum, compared with just 47 for Safaricom.