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Safaricom increases offer in yuMobile infrastructure acquisition deal

Kenya , 07 Aug 2014

Safaricom increases offer in yuMobile infrastructure acquisition deal

Kenya’s largest mobile network Safaricom has offered to acquire yuMobile’s infrastructure across the country at KES 10.5 billion from its initial bid of KES 8 billion after the Communications Authority of Kenya (CA) relaxed terms it had imposed before approving the deal.

This is according to statements on Wednesday from Safaricom’s chief executive Bob Collymore in the United States, where he is attending the US-Africa Summit.

“Safaricom expects its joint acquisition of rival yuMobile to be completed within months at a cost of about $120 million,” Collymore was quoted by Bloomberg.

The acquisition deal has previously been marred with controversy, after those involved in the deal -- namely Safaricom, Airtel and yuMobile -- gave conflicting information on the progress of the buyout, with Safaricom previously having said that the deal was no longer ‘attractive’ because of ‘tough’ terms required by the CA before approval.

“I said last week and still maintain that Safaricom is no longer interested in this deal. The decision we must make is whether to come back to it or not,” Collymore told journalists back in April.

Collymore; however, did not on Wednesday explain the reason for why there was a shift in its initial position on the matter, and why the telco was willing to pay more for the same deal.

In the deal, Safaricom is expected to acquire yuMobile’s infrastructure including base stations spread across the East African nation, in a bid to strengthen its network coverage. Airtel on the other hand was expected to boost its market share from 17.6% to 25% by acquiring yuMobile’s 2.7 million subscribers.

Commenting on this new development, Shadrack Karanja, an acquisitions specialist at investments firm Baobab Capital said that the opportunity cost of the deal may have forced Safaricom to reconsider its initial position.

“Negotiations can be very tricky, and once in a while, you may find yourself going back to the first option that may have seemed unappealing,” Karanja told ITWeb Africa.

“This may or may not have been the case in the Safaricom deal. With the telco offering a whopping KES 2 billion more could mean that they have negotiated for something better in terms of what is to be acquired, apart from the initial agreement where they were to get yuMobile’s infrastructure,” Karanja continued.

Unconfirmed reports in the media have said; though, that Nigerian investors have offered to buy yuMobile’s operations in the country at $200 million, something that yuMobile’s top management have since denied.

“It’s hard to know whether counter offers by other interested parties could have led to Safaricom to be willing to pay more, but I think what is on Safaricom’s mind is to strengthen its network in the country at the lowest cost possible, and at the moment, acquisition of yuMobile’s infrastructure could be the cheapest option available, even if it comes at an extra cost,” Karanja said in conclusion.

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