* Telkom Kenya/Airtel merger could challenge Safaricom
* Regulator sounded out about closer cooperation - source
* Spectrum allocation could be an issue
(Adds competition authority, rewrites)
By Duncan Miriri
NAIROBI, April 10 (Reuters) - Telkom Kenya plans to merge
operations with Indian-owned Bharti Airtel's local
unit as a first step to acquiring all of Airtel's assets,
sources said on Tuesday, creating a stronger challenger to
market leader Safaricom.
The two operators have a combined 23 percent of Kenya's 41
million mobile subscribers, but have long struggled to compete
with Safaricom, which has a 71.9 percent market share.
The disparity is even wider in revenue terms, with
Safaricom, which is 35 percent held by South Africa's Vodacom
, enjoying more than 90 percent in both voice and short
Data from the Communications Authority (CA) regulator showed
Safaricom also has close to 90 percent of the annual revenue
from the Internet access business.
It also has a commanding lead in mobile phone money transfer
with its M-Pesa service, which is regulated by the central bank.
A source at CA said the two firms have been engaging
officials over the plan to share outlets and infrastructure like
transmission assets, before Telkom acquires Airtel Kenya at an
"They are yet to make a formal application (to the telecoms
regulator) disclosing all the details," the source told Reuters.
Wang'ombe Kariuki, the director general of the Competition
Authority of Kenya did not comment on the deal, saying both
firms were yet to lodge a merger application.
Telkom Kenya, which is controlled by Africa-focused,
London-based Helios Investment declined to comment. Airtel Kenya
also said it would not comment.
Industry executives said that if a deal to acquire all of
Airtel Kenya's assets goes through, it would help both firms
make significant savings and acquire the scale to compete
effectively with Safaricom.
"This is a cold, calculated business strategy," said a
telecoms executive who did not wish to be named.
Bharti Airtel has been examining a flotation of a minority
stake in its African operations but has said it remains
committed to the continent.
Sources said the combined entity could however create
concerns because it will enjoy a large slice of prime spectrum.
A merger of Telkom and Airtel will result in a new company
with 77 megahertz of spectrum, compared with just 47 for
They said that will create a new challenge for the sector
regulator, which had commissioned consultants Analysys Mason to
review competition in the industry.
That study caused controversy after a leaked draft showed it
recommended the breaking up of Safaricom to boost competition,
forcing the government to pledge no operator would be broken up.
Executives said a joint venture between Telkom and Airtel
could render the report useless.
"The competition study they had done becomes toilet paper,"
said the industry official who did not wish to be named.
(Editing by Keith Weir)
First Published: 2018-04-10 09:43:49
Updated 2018-04-10 11:43:11
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