In a move that could see a more formidable competition to market leader, Safaricom; Telkom Kenya Limited and Airtel Networks Kenya Limited, today announced the signing of a binding agreement that will see the shareholders of the two companies enter into an agreement to merge their respective Mobile, Enterprise and Carrier Services businesses in Kenya.
The two will now operate under a joint venture company to be named Airtel-Telkom. In the agreement, Telkom Kenya has the option of holding up to 49 per cent of that shareholding. The merged company will be chaired by Telkom Kenya Limited CEO, Mr. Mugo Kibati while Airtel Networks Kenya Chief Executive, Mr. Prasanta Sarma, will be appointed Chief Executive Officer.
Important to note is that the finalisation and closure of the transaction is subject to approval by the relevant authorities.
So what does this mean?
Airtel Networks Kenya Limited (Airtel Kenya) and Telkom Kenya Limited (Telkom Kenya) will see no immediate changes to their operations which is expected to continue as usual for the time being. Similarly, there will also be no change to the current respective leadership and management, legal, organisational and staffing structures.
Also, both brands: ‘Airtel’ and ‘Telkom’, as well as their respective products and solutions, will continue to co-exist. Similarly, service delivery to the respective companies’ customers as well as engagement with all business partners of both companies will continue to operate as usual.
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 combined entity will see sustained investments in networks to further accelerate roll out of future technologies. 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.
Commenting on the agreement, National Treasury Cabinet Secretary, Mr. Henry Rotich said: “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.”
ICT Cabinet Secretary, Mr. Joe Mucheru commented: “ICTs remain a vital link to achieving Kenya’s economic goals and our national development agenda, particularly with respect to service delivery. Such mergers have had positive impact on the development of the sector and service levels to consumers in other markets. Similarly, we look forward to this merger leading to the introduction of new technologies and telecommunication products which will, in turn, support the growth of other business sectors of our economy, thereby spurring national production to meet the growing demand locally and beyond.”
A few aspects of the two companies however, won’t be part of the merger agreement. Telkom Kenya Limited’s real estate portfolio and specific government services for instance, will not form part of the combined entity. The final shareholding will be determined at the closing of the transaction.