Telkom Kenya and Airtel Kenya have consensually halted their merger talks. The two announced that the mutual pullout was due to regulatory delays.
Telkom and Airtel Kenya started discussing a potential merger in February 2019, and succumbed to a series of regulatory hurdles along the way.
The merger would have given the duo a better fighting chance against industry leader, Safaricom PLC.
Regulatory Hurdles
Although Kenya’s competition regulator, the Competition Authority of Kenya (CAK), had approved the merger plans it issued follow-up restrictions. The merger approval came in handy with a five-year block in any share sale deal. But both parties appealed and won the tussle in court.
Furthermore, Kenya’s largest telco, Safaricom, had also required the two to pay hundreds of millions each before the merger.
Besides, the merger had to go through approval from National Treasury, which was still pending, considering the government’s stake in Telkom. Telkom is 40 percent owned by the government and the majority company’s stock is owned by a private equity firm (Helios Investment Partners) based in the UK.
Pulling Out
“After carefully reviewing the available options, Telkom has opted to adopt an alternative strategic direction and will no longer be pursuing the proposed joint venture transaction. This decision has been mutually agreed with Airtel Networks Kenya Limited,” Telkom said.
“Despite Airtel Africa Plc and Telkom’s respective endeavours to reach a successful closure, the transaction has gone through a very lengthy process which has led the parties to reconsider their stance,” Airtel said in a press release.
“Accordingly, Airtel Africa Plc and Telkom have decided to no longer pursue completion of the transaction.”
The Future
The hang-up on Telkom’s side means the company won’t be laying off 72 percent of its workforce – equivalent to 575 workers. Telkom issued a redundancy notice on July 31, 2019.
Moving forward, both telco companies are now refocusing their energy to serve the market better.
Airtel Kenya is focusing on growing its market as well as pulling in revenue. Airtel currently serves 14million Kenyans and its market share has been slowly but steadily growing. Recent Sector Statistics report from the CA ranks Airtel at number two with a 26.6 percent market share.
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