Government, Helios scale down investment in Telkom Kenya
The EastAfrican has learnt that Helios is offloading up to a 20 percent stake, while the Kenyan government wants to keep less than 10 percent shareholding in the new deal, that will see Telkom merge segments of its operations with Airtel Kenya.
Airtel Kenya and Telkom Kenya now hope the new entity coming out of the merger, Airtel-Telkom, will gain traction and deliver what each failed to do on its own. The quest is to create a stronger challenger to market leader Safaricom.
The proposed merger is, however, still subject to regulatory approvals, and is expected see the two telcos transfer their mobile, enterprise and carrier services businesses in Kenya to a joint venture company. Telkom Kenya’s real-estate portfolio and specific government services are however excluded from the combined entity.
News of the merger did not come as a surprise to followers of Telkom’s operations, coming after Kenya’s National Treasury had said improving the company’s performance would not be a walk in the park, even with the coming on board of a deep-pocketed investor.
Airtel is expected to pump in capital into the new operation in line with the shareholding it is about to acquire. The Indian telecommunications giant late last year raised $1.25 billion through a placement of shares to six global investors, and followed that up with another placement worth $200 million to Qatar Investment Authority.
Over the years, Airtel and Telkom have failed to gain traction in the Kenyan market, largely because of their inability to match Safaricom’s substantial investment in its operations’ that allows it to lock customers in its ecosystem.
“The problem is, it’s just a product currently, and large investments would be required to build the entire network from infrastructure to agents to merchants and to convince customers of its superiority,” said SIB.
Price increases may not necessarily be through direct tariff increases but could also come in the form of less (voice minutes, SMS or data) for the current prices (certain packaged products),” SIB said.
Competition in the data market is what analysts say will be the game changer given that the three firms have various innovative products, and the Airtel-Telkom merger is expected to produce a formidable force against Safaricom.
SIB however warns that the overall evolving of Safaricom’s ecosystem will be a major challenge to penetrate unless the new entity comes up with unique and essential offers that are not available on the Safaricom platform.
“We do not expect a ‘collusive’ duopoly given the historical rivalry against Safaricom and the possibility of intervention by regulatory agencies. Competition will increase in this segment although Safaricom is investing heavily through mobile 4G and fibre to maintain the lead in coverage and quality of its data network,” the analysts said.