Airtel, Telkom reject market regulator’s merger conditions

The proposed merger between Airtel Kenya and Telkom Kenya is facing fresh hurdles as the two telecoms operators contest conditions set by the Competition Authority of Kenya (CAK).

The companies have filed an application with the Competition Tribunal to review the tough conditions set by CAK last year, including a requirement for the merged entity to retain all workers for two years and refrain from selling the company for at least five years.

“The merged entity, or part of it, is restricted from entering into any form of sale agreement within the next five years,” said the CAK in a notice detailing the merger conditions last December.

Telkom and Airtel want this condition set aside in its entirety.

CAK had also instructed the merged entity, Airtel-Telkom, to retain at least 349 of the 674 employees for two years from the date of the implementation of the merger, a condition the firms also want reviewed.

“Condition 7 imposed by the Competition Authority of Kenya…in relation to the retention period of employees of the target be reviewed and amended from two years to 12 months,” state the two firms in their joint application.

Last year, Telkom Kenya Chief Executive Mugo Kibati said the company’s employees would be catered for and that even the ones that would be laid off in the ongoing restructuring stand a chance of getting a job at the new Airtel-Telkom venture.

“We are merging certain businesses of Telkom with Airtel Kenya to create a joint venture and also leaving behind a much stronger company, profit and loss-wise, where we are going to build a technology and digital services company that will create new jobs,” he said.

The two firms are also protesting conditions for the spectrum resources owned by Telkom to revert to the State and want the right to have Airtel-Telkom bill the government at market rates to access the State-owned National Optic Fibre Backbone Infrastructure.

Telkom currently manages the cable, which cuts across most of the country, on behalf of the government and has preferential access to the network that currently supplies Internet to most county governments and State departments.

CAK has invited other interested parties to make submissions to the tribunal regarding the transaction that was supposed to have been concluded by December last year.

The merger has also faced objections from other stakeholders, including former employees of Telkom Kenya who have a pending legal dispute with the telco.

Safaricom had also objected to the merger, noting that Airtel and Telkom would default on some Sh1.2 billion they owed in mobile termination rates.

Airtel and Telkom have a combined market share of 32.7 per cent and while a merger would give them a third of the market, the merger will still be a distant second to Safaricom which had a share of 63.5 per cent as of June 2019.