Why Telkom is unhappy with rival Safaricom over Airtel merger talks

By Steve Umidha

 

Telecommunications Company, Telkom Kenya has hit at its rival Safaricom for intentionally delaying its merger plans with Airtel Kenya.

 

Telkom’s Chief executive said Tuesday that the deliberate tactics by Safaricom – the industry’s dominant player in terms of customers and revenue share, saying the move will hold back the sector’s growth and further deny customers an opportunity to choose their preferred marque of usage.

 

“We believe that our friends Safaricom wants to delay the process, it is the dominant player and clearly don’t want to see the sector grow,” said Mugo Kibati, adding that such a move would monopolize the sector and stifle smaller players’ survival.

 

Last year, Telkom Kenya and Airtel Kenya announced plans to merge operations whose outcome is expected to see the creation of a new entity that will have a 33 per cent subscriber base and the strongest competitor yet to market leader Safaricom.

 

The marriage between the industry’s number two and three respectively will also see the new entity control a market share of 14.4 million customers, with reduced cost in operations such as network rollout, maintenance and customer service.

 

However, the planned sale has come under headwinds from the EACC that in August instructed the sector’s regulator Communications Authority (CA) to put breaks on the transaction pending investigations into past transactions – over misappropriation of funds by Telkom Kenya.

 

Last week, Safaricom’s interim CEO Michael Joseph said the company had reservations about the proposed merger and further hinted that the industry needed another Telcoms Report on Dominance with the last one having been undertaken in 2016, and thus outdated.

 

Telkom Kenya had in April 2018 called for speedy efforts to amend the law to regulate market dominance in mobile telephony, warning the industry could be on the brink of collapse.

 

The firm had at the time termed the matter urgent, and called on the Communications Authority of Kenya (CA) “to move fast” to allow the industry to compete fairly.

 

“The regulator needs to move fast on this matter, the situation is urgent. We don’t want a single operator that can dictate industry operations,” said Mugo’s predecessor Aldo Mareuse at the same.

 

Delayed implementation of the 2016 Telcoms Report on Dominance —whose absence is threatening to level the playing field for small operators — is seen as a possible threat to planned mobile money interoperability test between Telkom and Safaricom cash transfer services, T-kash and M-pesa.

 

Safaricom and Airtel Kenya debuted cross network money transfer service in April of 2018, while Telkom was expected to join the fray.

Interoperability is expected to solve difficulties associated with mobile money transactions, where consumers have previously complained of costly and highly tedious processes of sending money across networks with the procedure often tilted in Safaricom’s favour owing to huge transactions tariffs set by the operator.

 

Small players have long maintained that Competition Authority of Kenya (CAK) and CA should split up Safaricom and M-Pesa into separate stand-alone business units in order to compete favorably and open the market.

 

Rather than pocketing the proceeds from its innovation, Safaricom has argued that, it has ploughed back revenues to transform itself into the multi-billion firm it is today.

 

Also standing is the way of the merger talks is the pending layoff of 575 Telkom Kenya staff which Kibati maintained yesterday that the decision was subject to regulatory approval.

 

Telkom Kenya is looking to retrench at least 575 employees who are now serving a one month notice to pave way for the planned merger with Airtel Kenya. In an internal memo early last month, Telkom Kenya CEO Mugo Kibati informed staff that the firm had informed the affected employees who have been declared redundant and the relevant authorities.

 

Communication Workers Union Secretary General Benson Okwaro confirmed being aware of the retrenchment, noting that the union has scheduled talks with the management on exit packages for affected workers.