Safaricom Compels Telkom and Airtel to Pay KES 1.3 Billion Debt Before Merger Deal

Safaricom interim CEO Michael Joseph and Chairman Nicholas Nganga

Safaricom interim CEO Michael Joseph and Chairman Nicholas Nganga

The merger deal between Airtel and Telkom Kenya has evoked a series of issues in the last couple of days. ICT regulator the Communications Authority of Kenya (CA) revealed it found the transaction without a fault, but that did not materialize after the EACC started investigating Telkom for an alleged case of misuse of public funds. You can find out more about the concerns here.

Now, yesterday, Telkom Kenya held a press event to clarify the matter. Several insights were drawn by the carrier’s CEO Mugo Kibati, who further accused Safaricom of frustrating the merger after the nation’s largest operator wrote to the CA to stop the transaction until Telkom and Airtel adhere to some demands.

Safaricom has now highlighted its side of the story. Essentially, Safaricom has no issue with the merger provided the industry regulator introduces some checks and balances to ensure competition is fair. Safaricom also wants to be paid what Telkom and Airtel owe them because the merger may complicate things. The same issue was raised by former Airtel employers whose exit package hits a KES 1 billion mark. The case is still in court.

More on the debt: according to Safaricom interim CEO Michael Joseph, Telkom and Airtel Kenya owe it KES 1,297,448,468.88 that was incurred for the provision of various services including interconnection, co-location and fibre services. Furthermore, Safaricom says the debt is due and payable, based on the agreement to provide services entered into with the two carriers as distinct businesses. Safaricom wants that debt paid before the merger happens.

Secondly, Safaricom has an issue about how the CA will manage frequency allocations. Should the merger go through, Airtel-Telkom will hold 77.5 MHz spectrum against Safaricom’s 57.5 MHz. Safaricom has near 32 million subscribers compared to 17.3 million under the Airtel-Telkom umbrella.

“Given the size of Safaricom’s customer base in comparison to the current spectrum holdings, it is apparent that the transaction will create a disproportionate imbalance in the spectrum allocation, which will be inconsistent with the market share,” says Michael Joseph.

Lastly, Safaricom wants all carriers to be treated equally. The CA has been asked to create a level playing field in the space, mainly through licensing and operation requirements.

Safaricom’s demands were not mentioned during Telkom’s press event, so it is good that the carrier has gone ahead to detail the contents of the letter it dropped at the CA. Whether the issues are genuine or otherwise is a matter of individual perception. Each operator has, for the most part, not received preferential treatment from the CA. Safaricom is also, and obviously wary of its position because the new entity will pose a threat to its dominance – but shouldn’t that be the case, bearing in mind it will push for additional innovation and price drops in the industry, of which subscribers will benefit in the long run?


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