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Airtel,Telkom merger set to shake up telecoms industry

Martin Mwita @MwitaMartin

Local telecommunications industry is set for a paradigm shift with the imminent merger of Airtel Kenya and Telkom Kenya as the two realign their businesses to take on market leader Safaricom.

The companies, which will now seek regulatory approvals from the Competition Authority of Kenya (CAK), announced the signing of a binding agreement that will see them operate under a joint venture company to be named Airtel-Telkom. This will be one of the industry’s strongest conglomerate in recent times

The latest development seems an answered prayer to Airtel which has continued to decry abuse of market dominance by Safaricom, though CAK has dismissed abuse of supremacy.

A merger will place them at a stronger position to challenge Safaricom which enjoys a market share of about 64.2 per cent of the total 46.6 million subscriptions in the country, as reflected in the Communication Authority of Kenya (CA)’s latest data.

They will have a combined market share of 31.3 per cent and a total subscription of 14.6 million against Safaricom’s 30 million. The closest, yet so far player, will be Finserve (Equitel) coming in after the two with a four per cent market share.

Although Airtel-Telkom will still fall behind Safaricom, they will be keen to capitalise on their competitive advantage to bridge the gap especially after successfully eating into Safaricom’s market share in the quarter ended June 2018.

Market share

Airtel’s subscribers rose 11.9 per cent from 8.7 million to 9.7 million to secure a market share of 21.4 per cent as Safaricom subscribers’ market share dropped from 72.6 per cent the previous year. Subscribers stood at 29.7 million in June.

During the quarter, Safaricom lost its market share by 1.6 percentage points while Airtel and Telkom gained by 1.7 and 0.2 percentage points respectively. Finserve Africa lost by 0.1 percentage points whereas the market shares for Sema Mobile and Mobile Pay Ltd remained unchanged.

As per the agreement, Airtel and Telkom will combine their operations 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 combined entity will see sustained investments in networks to further accelerate rollout of future technologies,” the two firms said in a joint statement on Friday.

“The enterprise and carrier services businesses will get a boost with a larger fibre footprint and increased number of enterprise customers – including both large corporations and SMEs who would have access to a diverse portfolio of world-class solutions,” they added.

As one of the biggest players in the data market, Telkom Kenya will be keen to stretch its data campaign to widen its customer base. With a combined effort with Airtel, the two are likely to prioritise innovation, gaining a sizable chunk of the data market.

Innovation trends

Telkom Kenya is expected to invest up to Sh1 billion in the expansion of its 4G and 3G network infrastructures before June this year. Mugo Kibati, the firm’s chief executive officer said improvement of the telco’s infrastructure is meant to catch up with the market innovation trends.

“It remains our objective to entrench our position as Kenya’s preferred data network,” he said recently.  Airtel on the other hand has been making inroads on the voice and data market with cheaper call rates and offers to customers.

A combined effort is expected to shake the market and change how business is done, even as they continue to lure consumers with data, voice and mobile money services products.

On mobile money subscription, the two will be keen to take on Safaricom’s M-Pesa which has a subscription of more than 24.2 million.

Airtel Money had 3.4 million as of September last year while Telkom’s T-Kash had 59,933 subscribers.

The final shareholding will be determined at the closing of the transaction. Telkom Kenya has the option of holding up to 49 per cent of that shareholding. The merged company will be chaired by Kibati while Airtel Networks Kenya boss Prasanta Sarma, will be the CEO. The deal, however, leaves out Telkom Kenya Ltd’s real estate portfolio.

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