Bharti Airtel rescinds decision to join forces with Telkom Kenya in creating a challenger to Safaricom

Bharti Airtel’s  Kenyan unit has halted plans to join forces with Telkom Kenya in taking on the East African nation’s market leading operator Safaricom, knocking out a move that could have seen to the formation of a fair opposition to Safaricom.

Industry and government sources on Monday confirmed that Indian global telecommunications services company had walked away from plans to merge with Telkom Kenya after it “developed cold feet.

In April, the Kenyan units of Airtel  and Telkom made a move to combine forces to pose a stronger challenger to Safaricom, a leading communications company in Kenya with the widest and strongest coverage that has 72 percent of the country’s telecommunications subscribers while both Telkom and Airtel have a combined 23 percent of Kenya’s 41 million mobile subscribers.

Safaricom is the most profitable company in the country, having dominated various segments in the telecommunications market including voice, mobile data and mobile cash transfers. Safaricom made a net profit of Sh55.2 billion in the year ended March, a 14.1 per cent rise from Sh48.4 billion the year before. The company declared a dividend of Sh1.1 per share or a total of Sh44 billion, representing an 80 per cent payout.

Although Airtel and Telkom Kenya is yet to confirm the report making rounds, Joe Mucheru, the minister for information and communication, said he was aware of the walkout by Airtel, report noted.

According to the industry source, a number of issues contributed to the failure of the proposed merger including Airtel’s refusal to make a commitment to significant future investments in the company.

The Communications Authority of Kenya (CAK) Director General Francis Wangusi noted that it has not heard anything regarding the matter from the parties involved as there has not been any formal communication.

“They had not officially requested us to approve a merger transaction … we heard about the merger but later also heard that Airtel had pulled out but they never came to us,” Wangusi told Weekend Business.

An unnamed source at office of the Communications Authority of Kenya (CAK) also told Reuters in April that Telkom Kenya plans to take over all of Airtel Kenya, though “they are yet to make a formal application to the regulator, disclosing all the details,” because Telkom Kenya is yet to decide on a structure.

Though Telkom Kenya declined to comment and Airtel Kenya had no immediate comment, this development is the latest report indicating that the Indian firm is reviewing its Africa strategy, considering overhauls and exits of its businesses in East Africa.

Prior to this development, reports making rounds was that Bharti Airtel plans to exit Kenya, Tanzania and Rwanda as a result of low performances in these African markets. Airtel rubbished the reports, saying it has no plans to exit its operations from these African countries, though it confirmed it is open to a merger or acquisition to rescue its non-profitable businesses in Africa.

“We had stated that we are open to consolidation opportunities either through acquisitions or mergers, to create a viable business in these three (Kenya, Rwanda and Tanzania) markets,” Airtel Africa said in a statement. “It was never said that we were looking at exiting these markets.”