Saturday, 29 February 2020

Airtel and Telkom to fight regulator’s merger terms

by Harry Baldock, Total Telecom
Tuesday 04 February 20

The Competition Authority of Kenya (CAK) imposed strict terms on the deal back in December

In December last year, the CAK approved the merger of the second and third largest MNOs in Kenya, Airtel Kenya and Telkom Kenya.    Between them, the two companies currently control around 30% of the Kenyan market, with around 14 million customers.   However, the conditions imposed on the merger were austere…

In December last year, the CAK approved the merger of the second and third largest MNOs in Kenya, Airtel Kenya and Telkom Kenya. 
 
Between them, the two companies currently control around 30% of the Kenyan market, with around 14 million customers.
 
However, the conditions imposed on the merger were austere, with the CAK notably seeking to ensure that the newly formed Airtel–Telkom would retain at least half of its staff for at least two years.
 
Additional stipulations said that the new entity would not be allowed to enter into any additional sale deal within the next five years and would be barred from buying and selling spectrum licences until their duration expires. They must also return the Telkom-owned spectrum to the government upon its licence’s expiration. 
 
Two months after the decision, the two companies are set to contest all of these key terms, specifically seeking to reduce the staff retention clause to just one year, remove the five-year sales restriction, and have the right to bill the government at market rates for access to the state-owned national optic fibre backbone infrastructure, for which Telkom currently receives preferential access due to its support of government infrastructure. 
 
A number of stakeholders have objected to this merger, including a number of Telkom’s former employees, who are also embroiled in a legal dispute with the company. Safaricom, the market leader in Kenya, also objected, noting that the merging companies would default on over $2 million in mobile termination rates. Safaricom has seen its market share drop slowly but surely in the last decade, having fallen from 84% in March 2008 to 67% ten years later.
 
The review will be weighed over the next month, with interested parties invited to “make submissions/proposals/comments to the Tribunal in regard to the application for review within the next 30 days," according to Stephen Kipkenda, the chairperson for the tribunal.  
 
 
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