Kenya’s second and third largest mobile phone operators are merging to create a stronger challenger to the market leader, Safaricom.
Indian-owned Bharti Airtel and Telkom Kenya announced a deal to operate under a joint venture company that will be named Airtel-Telkom. The two companies said the deal comprises their corresponding mobile, carrier, and enterprises services but won’t include Telkom Kenya’s real estate portfolio and specific government services. Telkom Kenya is 60% owned by private equity firm Helios and 40% owned by the Kenyan government.
The two entities will continue to run independently but will combine efforts to enhance their range of products, marketing services, and offerings to customers. The closure of the transaction is subject to regulatory approval.
Talks on the two telcos merging surfaced last year but ultimately didn’t succeed because Airtel reportedly walked out. The last time a deal of such magnitude happened in Kenya’s telecoms sector was in 2014, when Safaricom and Airtel struck a deal to buy India’s Essar Telecom, which operated under the Yu brand, for about $100 million. Under the deal, Airtel took Yu’s subscribers while Safaricom took up the frequency and phone masts.
Yet even the current Airtel and Telkom merger, it would be hard to challenge Safaricom’s market dominance. The company has almost 30 million out of Kenya’s 46.6 million phone subscribers, double the 14.4 million users of Airtel-Telkom. Safaricom also leads in the voice calls and SMS traffic, and its dominant mobile money platform M-Pesa is by far the leading mobile transfer service with 24.2 million subscriptions.
As Kenya’s biggest firm by market capitalization, regulators and legislators have at times called call for the break-up of Safaricom’s businesses, which could potentially weaken its position in the market. Yet plans to break up the operator are yet to come to fruition even after a leaked report by a global consulting firm in 2017 recommended a split.
And Safaricom, in a bid to become a telecoms operator of the future, deepen its presence, diversify its operations and wade off competition, has also invested in or launched a number of innovative products in the past few years. It made pacts with global remittances Western Union and PayPal, launched ride-hailing and music streaming services, an e-commerce platform, besides a WeChat-like app that integrates chatting with mobile payment services.
And if the company has any worries about the new Airtel and Telkom merger, it’s currently not showing: last month, CEO Bob Collymore welcomed the unification of the two firms saying the deal would only enhance competition in the sector.
Quartz