Home ECONOMY Blow to Safaricom as Tribunal Reverses Airtel- Merger Conditions

Blow to Safaricom as Tribunal Reverses Airtel- Merger Conditions

by biasharadigest

The Competition Tribunal on Monday overturned a majority of the conditions imposed on the Airtel- Telkom merger that had halted plans to join two major telecommunication firms seeking to take on the most dominant player in the market.

Monday’s development brings back to the table the merger conversation that had gone quiet meaning Airtel and Telkom can redirect their concentration to eating into Safaricom’s 64.8% market share.

In its ruling, the tribunal observed that several conditions did not augur well for healthy competition in the telco business hence putting Airtel and Telkom in good stead to see through their merger.

Airtel and Telkom have been allowed to keep their existing network licences in reference to a condition imposed by CAK that barred the two units as a merged entity from selling or transferring some of their operating and frequency spectrum licences until the merger duration expires.

“Upon expiry of the term of the merged entities’ operating license, the spectrum in the 900MHZ and 1800MHZ acquired from Telkom shall revert back to the Government of Kenya (GoK),” CAK had spelt out in one of its conditions.

The tribunal also threw out a condition barring the merged entity from entering into commercial agreements within the first five years of the merger but nonetheless allowed provisions that blocked the merged entity from being taken over or listing more than 40% of its stake.

Conversely, the tribunal also granted the two units the freedom to negotiate the terms of access relating to the 4,204 kilometers of fibre managed by Telkom on behalf of the government of Kenya.

The tribunal however maintained the provision requiring the merged entity to furnish the regulator with annual reports on the compliance with merger conditions for upto two years.

In the same vein, the regulator also stayed a condition stipulating that the merged entity should maintain at least 349 of Airtel and Telkom’s existing 674 employees.

Delayed Merger

Besides the conditions spelt out by the regulator, Safaricom also wanted the two units to pay up their dues before the merger process could be approved.

Safaricom wanted immediate clearance of Ksh1.3 billion in debt accrued by the pair and a rebalance of frequency allocations.

This prompted Airtel and Telkom to appeal the conditions in February.

Safaricom Dominance

Statistics posted by the Communications Authority of Kenya (CAK) show that Safaricom lost 765,038 subscribers between October and December 2019 but still remains the dominant player in the telecommunications sector commanding 64.8% of the market share.

CA’s statistics also show that Airtel gained slightly more than a million subscribers to boost its market share to 25.9% while Telkom lost 167, 297 subscribers, during the period under review to settle for 6.2% of the market while Equitel commanded 3.1% of the market at the end of December 2019.

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