Telkom Kenya and Airtel Networks Limited have scrapped their plans to merge in favour of other strategic options to grow the business.
Telkom Chief Executive Officer Mugo Kibati in a statement seen by Khusoko on Wednesday said:
“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.”
“The transformation dynamic also presents Telkom with a strategic advantage, to better position its infrastructure asset base and services, to support this digitisation and, in the mid to long term, bridge the consumer digital divide; connecting the unconnected by way of cutting-edge technologies such as Loon,” reads Telkom Chief Executive Officer Mugo Kibati statement.
In July, the telco launched loon, 4G enabling balloons in partnership with the American tech giant, Alphabet, which it projects to expand its internet subscription by 4.8 million users.
On the other hand, Airtel through Raghunath Mandava, Airtel Africa CEO and MD,“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. Accordingly, Airtel Africa Plc and Telkom have decided to no longer pursue completion of the transaction.”
Consequently, the firm said its notice of redundancy issued by the firm in July 2019 is withdrawn, and earlier envisaged redundancies no longer apply.
“Conversely, the new, bold and exciting direction the company is now embarking on, offers all its employees the opportunity for greater career progression, as the company commences the new phase of its development, to establish itself as an essential player in the new digital world order,” said Kibati.
In April 2019, the two telcos agreed to merge combining their respective mobile, enterprise, and carrier services businesses in Kenya to operate as Airtel-Telkom.
Since 2016, Telkom Kenya has rebranded, invested KSh 14 Billion into its business to expand its network coverage, launched 4G services and its MFS platform, T-kash.
In June 2016, Telkom Kenya went through a change of ownership. Helios Investment Partners, the largest African only Private Equity firm, acquired a 60 percent stake in Telkom and the Government of Kenya increased its stake from 30 percent to 40 percent.
According to the latest data from the Communications Authority of Kenya, Safaricom controls more than 60 percent of Kenya’s mobile subscriptions market while Telkom Kenya has 26.6 percent market share.
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“Telkom Kenya has the capability to grow its data services – being the operator of the National Optic Fibre Backbone and with the latest deployment of Loon balloons. It has however underperformed its potential over the years.
Our immediate concern is whether the discontinuation of merger discussions could prompt the regulator to pursue recommendations from the dominance report in earnest; a development which likely to be negative for Safaricom,” Analysts from Standard Investment Bank commented.