Failed Airtel Kenya and Telkom merger leaves telcos limping

Failed Airtel Kenya and Telkom merger leaves telcos limping

Airtel Kenya and Telkom merger collapsed at the last minute after months of negotiations. When Airtel Kenya and Telkom Kenya announced plans to merge operations to take on market leader Safaricom two years ago, the deal was seen as key to the future survival of the two firms.

However, the merger collapsed at the last minute after months of negotiations primarily because the National Treasury, a majority shareholder in Telkom Kenya, withheld support.

Reportedly, Treasury failed to issue a letter of intent to Telkom Kenya and the Communication Authority of Kenya (CA), which eventually sunk the proposed merger. Aside from withholding the letter of intent, the State excluded key Telkom Kenya assets in the proposed merger, which weakened the value of the telco in the face of any prospective suitors.

Just over a year after the deal fell through, the impact is beginning to hit home, with both firms facing an uncertain future. And mobile subscribers remain the biggest losers as the two telcos have, as separate entities, failed to mount any serious competition against Safaricom, which continues to grow in leaps and bounds. READ MORE

An analysis by Financial Standard on the two firms’ financial reports and industry data indicates they are on the edge of a precipice.

According to Airtel Kenya’s latest financial report, the company made losses of Sh5.9 billion for the year ended December 31, 2020, more than double the Sh2.7 billion reported in the previous year.

This has pushed the firm’s accumulated losses to Sh77.4 billion as of December 2020, putting it in a net liability position of Sh43.7 billion.

Airtel Kenya further has Sh52.3 billion in shareholders’ loans, which the management says are enough for the liquidity necessary to maintain operations.

“After considering shareholder’s loans, there is sufficient liquidity to manage operations,” said the firm in a note to shareholders accompanying the financial statements. “Further, the unit has shown buoyant growth over the last three years with growth in revenue and reduction in net losses.” According to data from the industry regulator – Communications Authority of Kenya (CA) – Airtel Kenya had 17.3 million subscribers as of June 2021, a 13 per cent growth compared to the previous year.

However, with Kenya’s mobile penetration past the 100 per cent mark, the additional subscribers to the telco’s network in recent years could be as a result of multiple SIM card holders, who maintain their Safaricom lines.

Airtel Kenya made an average of Sh1,584 […]

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