International Finance

Investigation: Telkom Kenya, Airtel Kenya merger stalled

Merger suspended on the basis of recapitalisation and misappropriation of funds at Telkom

Kenya’s Ethics and Anti-Corruption Commission (EACC) has stalled Telkom Kenya and Airtel Kenya merger on the grounds of investigating the former’s recapitalisation and misappropriation of funds.

Airtel Kenya is a subsidiary of Airtel Africa owned by India’s Bharti Airtel. Bharti Airtel announced the planned Telkom Kenya and Airtel Kenya merger in February. Telkom Kenya is the country’s smallest telecommunications services provider.

There was anticipation that the Telkom Kenya and Airtel Kenya merger would pose a challenge to Safaricom. Safaricom is the largest telecommunications provider in Kenya — and one of the most profitable companies in the east and central Africa.

Telkom spokesperson told Economic Times, “Telkom has received a request for information from the Ethics and Anti-Corruption Commission (EACC), with regard to allegations made in 2014, and (it) has given the EACC all the information that the commission has requested and continues to cooperate with them on the matter.”

In 2005, France’s main telecommunications company Orange acquired Telkom Kenya and later sold it to  the UK private equity company Helios Investment Partners. Now, Helios Investment Partners owns 60 percent of Telkom Kenya, while the remaining 40 percent is owned by the Kenya government.

Media reports said that the merger is important to both Airtel and Telkom to compete with Safaricom. Currently, Safaricom owns 62.4 percent market share in Kenya. That said, Airtel Kenya and Telkom Kenya hold 26.1 percent and 8 percent market share respectively.

Telkom Kenya Chief Executive Mugo Kibati told the media that the company will do its due diligence to cooperate with the investigation.

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