The confirmation of the union of Airtel Kenya and Telkom may have excited the market on Friday but a closer look reveals the future might not be so rosy for the two firms, their consumers and to an extent the industry.
The last time a deal of this magnitude was struck in the country’s telecommunications sector was in 2014 when Safaricom and Airtel agreed to snap up Essar Telecom.
Valued at $100 million (Sh10.3 billion at current exchange rates), the deal saw Airtel acquiring the 2.7 million yuMobile subscribers at a cost of $6.9 million (Sh710 million) while Safaricom took up the frequency and phone masts.
In less than two years Airtel had lost virtually all the yuMobile subscribers it had gained, leaving it worse off than it was before the acquisition, in addition to a Sh2 billion legal dispute with the Communications Authority of Kenya (CA) that was only settled last year in the telco’s favour.
Safaricom, on the other hand, got to keep Essar’s network infrastructure and frequency spectrum while at the same time getting rid of a competitor which, though struggling, was increasingly becoming attractive to young mobile users due to its rock-bottom rates.
Details of the merger announced on Friday indicate that Airtel might have gotten the short end of the stick yet again, casting doubts on the ability of the new entity, Airtel-Telkom, to present a serious challenge for industry leader Safaricom.
While the two entities have presented the deal as a union of equals, when viewed from certain angles, it appears as though it is tipped in favour of Helios – the Telkom Kenya majority owners.
The two firms are yet to give clarity on the shareholding structure with Helios’ front man Mugo Kibati serving as the chairman of the board of directors while Airtel’s CEO Prasanta Sarma will serve as CEO responsible for the day-to-day business.
In any corporate setting, management usually answers to a board, which represents the interests of the shareholders.