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Telkom pulls out from merger talks with Airtel Kenya

By Fredrick Obura | August 5th 2020
Telkom CEO Mugo Kibati

NAIROBI, KENYA: Telkom Kenya has withdrawn from the intended merger with Airtel Kenya citing hurdles in getting regulatory approvals.

The telecommunications company also said it has suspended redundancy notice issued to its workers in July last year.

The merger was announced on February 8 last year and the two entities have been pursuing the various approvals required to complete the transaction.

A standard article cited National Treasury as the hurdle in between the merger that was expected to crystallise in December last year.

The merger was presented as the saving grace for the troubled telecommunications firm Telkom that has for years struggled to grow market share and turn a profit.

Telkom had even announced the retrenchment of hundreds of workers, some of whom had been told they could reapply in the new entity to be formed between Airtel and Telkom Kenya.

“Considering the challenges experienced in getting all the approvals required to complete the transaction, the company has simultaneously been evaluating alternative strategic options to strengthen its position and offering within the market,” said company Chief Executive Officer Mugo Kibati.

“After carefully reviewing the available options, Telkom has opted to adopt an alternative strategic direction and will no longer be pursuing the proposed joint venture transaction. This decision has mutually been agreed with Airtel Kenya,” he added.

Probably aware of the challenges ahead in sealing the deal with Airtel, Telkom has been engaged in alternative partnerships aimed at boosting its financial status and increasing its competitiveness in the cutthroat telecommunications industry.

Telkom Kenya comes third after Airtel Kenya and Safaricom in terms of market share. Recently it enters into a deal with Alphabet’s (Google parent company) Loon to beam Internet to underserved areas using high-flying balloons equipped with artificial intelligence.

According to Telkom Kenya, the partnership is meant to expand the network’s fibre capacity and connect more subscribers to high-speed Internet, opening up broadband access to millions.

“This mobile Internet service will be available to any Telkom subscriber within the identified coverage area, with a standard 4G/LTE enabled device and SIM card,” said Kibati.

“The user will connect automatically just as they would from a terrestrial base station and our customers will not even realise they are being connected to the Internet via the balloons.”

Telkom says the partnership with Loon is in line with the government’s ambition to connect more Kenyans to the Internet.

This is important because while medium to high-income earning families in the country have access to a variety of connectivity and devices options, the majority of the population contends with little or no access to a stable broadband connection.

According to the 2019 population census by Kenya National Bureau of Statistics, only 9.8 million out of the country’s 43.7 million residents reported having used the Internet in the last three months and only 4.5 million used a desktop computer or tablet.

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