India’s Bharti Airtel Kenyan unit has signed a binding agreement to merge its telecom business with Telkom Kenya.
The move is seen as a strategy to taken on Nairobi Securities Exchange (NSE) listed operator Safaricom which both firms have previously accused of enjoying a dominant position in the industry.
The merged unit will be operated under a joint venture company to be named Airtel-Telkom, subject to regulatory approvals by the Communications Authority of Kenya and the Competition Authority.
Under the deal, Telkom Kenya’s real estate portfolio and specific government services will not form part of the combined entity.
Latest data from Communications Authority showed, Airtel had a market share of 22.3 percent while Telkom had nine percent.
Telkom 60 percent owned by UK -based private equity firm Helios Investment Partners while the Kenyan government owns 40 percent.
A successful deal could therefore hand them a combined share of 33.3 percent against market leader’s Safaricom’s 64.2 percent.
“As per the agreement, both the partners will combine their operations in Kenya and establish an entity with enhanced scale and efficiency, larger distribution network and strategic brand presence, thereby enhancing the range and quality of products and service offerings in the market, and greater choice and convenience to the consumer,” the two firms said in a joint statement.
Upon approval, Telkom’s chief executive officer Mugo Kibati will serve as the chairman of Airtel-Telkom while Prasanta Sarma (Airtel Kenya CEO) will serve as the chief executive officer.
No time frame has been given for the deal, and both companies will operate as normal until the transaction is completed with no major disruptions.
Telkom said it has the option of taking up to 49 percent in the new entity if it hits undisclosed targets before the deal is sealed.
Kenya’s finance minister Henry Rotich welcomed the merger saying it would propel the government’s agenda of investing in the ICT sector.
“This move is well aligned with the government’s agenda to optimise the value of the assets that it holds in trust, on behalf of Kenyans, while cementing the country’s position not only as a regional business hub but also as an international investment magnet,” Rotich said.