Telkom-Airtel merger status

Telkom Kenya plans to transform into a technology company once the merger of its mobile telephony business with that of Airtel Kenya is complete.

Appearing before the ICT senate committee to provide a progress report on the merger, Telkom Kenya Chief Executive Officer Mugo Kibati said the Telkom Kenya brand would, however, remain as an independent entity even after the formation of a new joint venture company.

However, the two-telecommunication companies are urging the government to hasten regulatory approvals on the proposed deal to bring it to completion by the end of the year.

In February, Airtel Kenya and Telkom Kenya signed a binding agreement to merge their mobile, enterprise, and carrier services to create a joint venture company to be named Airtel-Telkom.

Six months later, the deal appears to be in limbo after the Ethics And Anti Corruption Commission (EACC) instituted investigations into alleged misuse of public funds invested in Telkom Kenya shortly after it was privatized in 2007 through the sale of a majority stake to French Telco, Orange.

A sticking point that Telkom’s management is blaming the government for which holds a 40% stake in Telkom Kenya.

Mugo Kibati, CEO, Telkom Kenya said that it is important that this committee entrust the same sense of urgency since we gave approval from the majority shareholders but the minority shareholder who is the GOK is delaying the approval. We need it yesterday because it is one of the things delaying regulatory approval.

Safaricom also objected to the proposed merger deal owing to debts of well over 1 billion shillings owed by Telkom and Airtel Kenya arising from interconnection through its network – a move that was seen as yet another delaying tactic on the proposed merger.

Safaricom further contends that the transaction will create a disproportionate imbalance in the spectrum allocation, which will be inconsistent with market share.

This notwithstanding, Telkom Kenya’s CEO says any further delay in approving the merger is robbing consumers of the benefits of more competition in the local Telco space.

Mugo Kibati added that the benefits to the consumer are a second credible competitor who will allow for a fair competition innovation and value for money. For Telkom Kenya is the ability to continue as a thriving business as opposed to a limping one that has been the case in the last 10 years.

Telkom Kenya plans to retain its real estate portfolio and the management services of the national fiber optic backbone infrastructure.

Once the deal is sealed, the resulting entity Airtel-Telkom- is expected to control an initial ten percent of the total industry revenue.

The new entity will also control a combined market share of 32.7% of mobile subscribers in Kenya, as of June this year.

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