Telcos Airtel and Telkom Kenya rolled the dice on a merger deal in early 2019. The plan was to see the carriers combine some of their key businesses, including carrier, mobile and enterprise services to grow their reach in a market where the two telcos have otherwise done poorly – and have always played catchup with Safaricom that rakes in 90 percent of revenues milked from the state.
Why the merger is encumbered
The alliance has however stalled after two primary items emerged: to begin with, the EACC believes some public funds were misused when a loan issued by the Treasury to Telkom Kenya was turned to government equity. This happened back when Orange Kenya sold its business to Helios, a development that saw the carrier rebrand to Telkom Kenya. Secondly, Safaricom wants the two carriers to pay their dues that amount to KES 1.3 billion, of which Telkom Kenya owes the most at KES 900 million. The nation’s leading carrier wrote to the Communications Authority of Kenya (CA) to stop the merger, and Telkom responded by faulting Safaricom’s antics.
Safaricom would later explain its position, and detailed its concerns over the merger, including frequency allocations that would, should the CA sign the deal, give the two operators an unfair edge at 77.5 MHz for Airtel-Telkom and 57.5 MHz for the market leader. It is an issue that Safaricom is not taking lightly, bearing in mind it commands twice the number of subscribers at 31 million versus a combined 17.5 million for the other team.
The debt, which is attributed to interconnection and fibre services fees, is quite huge, and Telkom says the number is just not right. According to the carrier, which spoke to Business Daily, Safaricom inflated the debt – although Telkom has not revealed the exact amount it owes.
Safaricom: Pay now
Looking at the two carriers, Airtel has the upper hand by mere subscriber base, market reach, and robust services. After the merger, Telkom will have a smaller say, hence it will be challenging to channel funds to its creditors. It will essentially be smaller because its core businesses will be under the Airtel umbrella, a statement that has since been backed up by former Airtel Kenya employees who are seeking a KES 1 billion payout.
Telkom, on the other hand, says the merger is not a stumbling block to giving Safaricom its dues.
In the past, Telkom CEO Mugo Kibati admitted to paying hefty fees to other carriers just for termination services and requested for regulatory relief from the CA by scrapping the rates.
“We pay hefty termination fees to each other. However, the challenge is that we pay a lot more to the dominant player. A simple relief in these fees, which cannot harm the dominant player, can allow us to invest that money into network expansion,” he said.
Nevertheless, Telkom believes the merger will be official before the year ends.