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Safaricom accused of interfering in Airtel-Telkom merger

Kenya , 05 Sep 2019

Safaricom accused of interfering in Airtel-Telkom merger

Kenya's dominant telecommunications services provider Safaricom has been accused of interfering in the planned merger of Airtel and Telkom.

In February 2019, ITWeb Africa reported on the planned merger of Airtel and Telkom in Kenya to establish a joint venture Airtel-Telkom. The newly formed entity would compete directly with Safaricom for market share.

Telkom Kenya's chief executive officer Mugo Kibati has accused Safaricom of meddling and referred specifically to correspondence from the telco to the Ethics and Anti-Corruption Commission (EACC) requesting the merger be stopped, citing concerns that should be addressed before granting approval.

Kibati said: "It is unfortunate that Safaricom now wants to delay this process that seeks to provide customers with more credible options. Does the dominant player not want to see this sector grow? Is the dominant player wary of competition, and even more precisely, wary of competitive pricing, choice and value for money for the consumer?"

"It is also unfortunate that the dominant player appears bent on denying Kenyans the chance to still enjoy the benefits brought by an alternative player, therefore choice. The presence of a strong second player is bound to give Kenyans value for their money."

Safaricom argues that if the merger succeeds, the entire market structure dynamics will change which would necessitate a new study on competition.

"We have our own reservations about the merger and we have submitted these to the regulator," said Safaricom's chief executive officer Michael Joseph. "I cannot divulge the details because the matter is between us and the CA."

EACC's investigation

The merger has been temporarily halted by the EACC which is investigating allegations bordering on misappropriation of public funds.

The Commission is specifically investigating circumstances surrounding the fate of the loan issued by the Treasury to Telkom Kenya when the operator acquired Orange Kenya. The loan was subsequently converted to equity when the carrier was acquired by Helios.

EACC is probing the transparency of Treasury's share in Telkom.

While EACC's investigations may delay the fruition of the goals set for the merger, its spokesman Yassin Amaro said the organisation is focusing on how Telkom plans to protect the interests of taxpayers in the merger.

"EACC is conducting investigations into allegations of misappropriation of public funds in the process of privatisation, recapitalisation and restructuring of balance sheets of Telkom Kenya Ltd," Amaro said.

No timeline has been announced for the investigations and the operators have said they would cooperate with the process.

According to the joint announcement by both companies, shareholders of Airtel and Telkom will approve the deal that will result in the emergence of a joint venture company that does not include Telkom Kenya's real estate portfolio and specific government services.

The merger was on the verge of completion and on track to secure approval by the Communications Authority of Kenya (CA), but recent developments such as Telkom's announcement of plans to lay off 575 employees, have thwarted the process.

Kibati views the merger as the only hope of survival for Telkom and expressed hope that the deal would be finalised before the end of 2019.

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