Airtel and Telkom merger approved

CAK

Kenya’s telecommunication sector is set to become a duopoly after Airtel and Telkom Kenya received approval from the Competition Authority of Kenya (CAK) to merge their businesses.

The firms however have to wait for approval from the Communications Authority of Kenya (CAK), which might take awhile as the industry regulator is currently facing a leadership crisis following nullification of the board of directors appointed earlier this year.The merged operator, which will be renamed Airtel-Telkom, will now battle it out with Safaricom once the transaction is concluded.

CAK yesterday gave the firms a go-ahead to merge their operations but with tough conditions, including a requirement not to sell for a period of five years.

“The merged entity, or part of it, is restricted from entering into any form of sale agreement within the next five years. However, in the event of any indication of a failing firm within the period, the Communications Authority shall conduct a forensic audit at the cost of the merged entity,” said CAK in a notice that detailed the conditions that the two firms needed to fulfill on merging.

The firm, which is expected to be firmly in place next year, will also have to pay market rates to use the State-owned National Optic Fibre Backbone Infrastructure (Nofbi).

Telkom currently manages the cable, which cuts across most of the country, on behalf of the government and has preferential access to the network.

Nofbi is among the facets of the Telkom business that will not be transferred to the merged operator. The companies will also retain the licences that they currently own while Telkom will have to surrender one of its spectrum to the government when it expires.

CAK has however approved the plan by the two firms to lay off a substantial chunk of employees. The merged entity will have 349 employees, including those that will be forwarded to its network partners.

 

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