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Court clears hurdle for stalled Airtel-Telkom deal

NEWS
By Kamau Muthoni | February 11th 2021
Mugo Kibati-Chief Executive Telkom Kenya (PHOTO: FILE)

The High Court has cleared the proposed Telkom Kenya and Airtel merger in what could revive the stalled deal.

The court in Nairobi yesterday quashed a directive by the Ethics and Anti-Corruption Commission (EACC) barring Telkom from disposing of its assets, which was one of the reasons that saw the transaction fall through.

The telcos had announced the proposed merger in February 2019 but in August last year said the deal was off, with Telkom Chief Executive Mugo Kibati citing “challenges experienced in getting all the approvals required to complete the transaction.”

It also came on the back of the coronavirus pandemic that spread through the world, disrupting business value chains and stifling demand in many sectors.

EACC had asked the Competition Authority to suspend the deal, saying it was still investigating transactions around Telkom Kenya’s ownership.

By joining forces, the two companies had hoped to create a formidable entity that would have taken on market leader Safaricom. 

Although Justice Jairus Ngaah declined to block EACC from investigating the transaction, he said the letter written by the commission’s CEO Twalib Mbarak, asking Telkom to recall or suspend the sale of its assets, was not backed by any law.

EACC lawyers had told the judge that the letter was just a request.

“Thus, the only means known in law by which the respondent can protect and recover public property is through court action. This implies that it is only by a court order that any of the assets disposed of by the applicant may be recovered and it is only through the same means that the applicant may be restrained from further disposing of its property,” the judge ruled.

At the heart of the case is whether the government has lost billions over the years after shedding off its stake in the telco.

EACC had insisted that it was investigating the National Treasury officials for duping the government by committing to sign a recapitalisation and restructuring agreement for Telkom without ensuring adequate budgetary provision.

According to the anti-graft body, the investigations had been going on for five years now.

Safaricom had also objected to the deal, citing a combined interconnection debt of Sh1.2 billion and a review of anti-competition measures instituted in 2016 which denied the telco additional capacity.

These hurdles delayed the deal, which was initially set to be wrapped up by December 2019.

Treasury was also said to have pulled the plug on the transaction as it had the final say as the state is a minority shareholder in Telkom Kenya.

The two companies have since announced new growth plans, with Telkom announcing a new strategy that will see the telco concentrate on improving its digital infrastructure. Airtel also appeared to have moved on, unveiling Airtel TV, an entertainment streaming app, after the deal fell through.

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