Court Clears Regulatory Hurdle for Stalled Telkom, Airtel Kenya Merger

Telkom and Airtel Kenya’s merger plan came to a halt in August last year following a series of regulatory hurdles.

Last year, the company announced that it had agreed with Airtel Networks Kenya to stop merger talks after failing to comply with several regulatory burdens imposed by the Ethics and Anti-Corruption Commission (EACC) to clear the deal.

The EACC had ordered Telkom Kenya to stop disposing of its property and recover those already sold to complete the transaction as part of the many requirements.

In a court ruling, the High Court has termed the decision by the EACC illegal, clearing way for the dropped merger talks.

The EACC had ordered the Communications Authority of Kenya to suspend the deal as it continued to probe the Telkom Kenya’s transactions.

A high court judge said the EACC’s decision was “unlawful because it is tainted by all or either of the grounds of illegality, irrationality and procedural impropriety.”

“This implies that it is only by a court order that any of the assets disposed of by the applicant may be recovered and it is only through the same means that the applicant may be restrained from further disposing of its property,” the court ruled.

EACC lawyers said the said order to the CA that stalled the merger talks was just a request. However, the court order doesn’t prevent the EACC from looking into the transactions, which has been ongoing for years.

Telkom Kenya, 40 per cent owned by the government, had announced merger plans with Airtel Kenya in February 2019.

After regulatory hurdles, the telco reached a consensus with Airtel Kenya to stop the transaction. Telkom said, was due to “the challenges experienced in getting all the approvals required to complete the transaction.”

“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,” the Mugo KIBATI, Telkom Kenya’s Chief Executive Officer. He said, adding that it was mutually agreed between the two parties.

The Airtel-Telkom merger also faced other issues, including a request by rival Safaricom to the CA to block the transaction until the two cleared a combined debt of Ksh 1.3 billion. An Airtel-Telkom merger would have created a more potent competitor that can challenge long-term market leader Safaricom which controls over half of the market.

The deal was also to receive approval from the National Treasury, which was still pending, due to the government’s 40 per cent stake in Telkom Kenya.

It remains to be seen if the companies would be interested in reviving the merger talks. As it stands, both parties seem to have moved on. Telkom restructured its business after the fallout, and Airtel almost instantly launched its free streaming app days later.

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