Airtel – Telkom Merger Called Off

Last year when Airtel and Telkom announced they were planning to merge, I called it a funny merger with a funny name. Today, Telkom Kenya has made public that the proposed deal has been called off. Reason given? Well in a statement by Telkom’s CEO Mugo Kibati, the company has pointed fingers at challenges experienced in getting all the approvals required to complete the transaction

The statement also says that the decision has been mutually agreed on by Airtel Kenya.

If you don’t remember the story, it’s because it has taken forever. It’s now over a year since the two companies announced intentions of a merger. This happened in February of 2019.

Though the two companies never shared much on what was to happen once the two companies came together, what we knew was that the new venture would be called Airtel-Telkom with Airtel’s CEO becoming the CEO of the new venture, and Telkom’s CEO becoming the Chair.

At that time, Airtel enjoyed 22% market share, while Telkom had 9%. Coming together, they would take on Safaricom’s 64% market share. It seemed like a reasonable idea for the two.

Things didn’t seem to be going as planned when in August of 2019, the Communication Authority of Kenya suspended the then still pending deal over graft allegations.

The then director of the Authority said, “We have advised the parties that, in light of government shareholding in Telkom Kenya, approval shall only be granted once all the conditions set out by the Authority are fulfilled and the transaction is cleared by the EACC.”

It emerged then that there was were investigations on

• Whether public funds were lost when the Kenyan Cabinet in 2012 approved a plan to convert the Treasury’s loans in Telkom Kenya into equity as part of a plan to recapitalise and restructure the balance sheet of the company, and
• on the circumstances under which Kenya’s Treasury ceded ownership of Telkom Kenya to French operator Orange

Telkom CEO said at that time that “(Telkom) welcome(s) the current investigations and [is] willing to cooperate with the Ethics and Anti-Corruption Commission.”

In September of 2019, Safaricom laid out demands for KES. 1.3 Billion before the Airtel – Telkom merger was approved. The market leader said that though they weren’t opposed to the merger, they wanted their bills owed by both operators settled before approval. They also questioned the Communication Authority allocation of Frequencies citing that the new company formed from the merger would hold 77.5 MHz of the spectrum against a customer base of 17.3 million, compared to their’s at 57.5 MHz with a 31.8 million customer base.

With the merger now effectively off the table, Telkom has said that they’re now more confident in their new direction, and that the changing times present them with a strategic advantage that allows them to better position their infrastructure asset base and services with cutting-edge technologies such as Loon.