NAIROBI (Halbeeg News) – Two major telecommunication companies are expected to gang up against Safaricom, the region’s most profitable listed mobile service operator.
According to an article published by The East Africa, Telkom Kenya and Airtel Kenya have been reportedly working on the ownership of the companies.
The two companies have a combined market share of close to 33 per cent.
The portal reports that although no official announcement has been made on the proposed deal between Telkom Kenya and Airtel Kenya, available information shows that the two telcoms could be working on either a marriage of convenience or a buyout, with speculations pointing to Airtel Kenya as the possible acquirer.
Telkom Kenya is majority owned (60 per cent) by the UK-based private equity firm Helios Investment Partners. The Kenyan government owns 40 per cent.
It still remains unclear who between Helios and the Kenyan government plans to exit the telco.
The British investors acquired their stake in Telkom Kenya from France Telecom in 2016, when it was trading as Orange SA.
Kenya’s telecom sector has proven difficult for small players to survive in.
Last week, Telkom Kenya chief executive Mugo Kibati said his company and Airtel Kenya were in discussions over the proposed share sale.
While the idea is meant to improve the competitiveness of the two firms and shore up their revenues, some analysts feel the move will not bear fruit until there is heavy investment by the two small firms to improve their level of efficiency and quality of the network.
“The dominance of Safaricom would still be a challenge because the two firms still suffer from high levels of inefficiency and poor quality of network,” said Daniel Kuyoh, an analyst at Alpha Africa Asset Managers.
“This share transfer is just a sign that the telecom market is saturated; I don’t see any benefit coming from it.”
According to the consultancy firm, Deloitte mobile subscriber growth is maturing and could saturate in the medium term in some markets if rural coverage does not increase.
It is argued that further growth in subscriber levels is likely to be driven by lower call prices, lower cost of ownership of handsets to serve the lower-income segments and better network coverage in rural areas and operating models adapted to serving such remote connectivity needs.
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