CAK okays Airtel-Telkom merger, bars sale deals

The Competition Authority of Kenya (CAK) has given its greenlight for Airtel and Telkom Kenya to merge but has directed them not to make any new sale agreements over the next five years, marking a rare case of the regulator limiting transactions.

The move is seen as a bid by the regulator to ensure the telcos stick to their proposal of doing business as a combined entity and not use the merger as a stepping stone to other speculative financial deals.

“The Competition Authority has authorised the proposed transaction as set out herein on condition that … the merged entity, or part of it, is restricted from entering into any form of sale agreement within the next five years,” the regulator said in a notice.

“However, in the event of any indication of a failing firm within the period, the Communications Authority shall conduct a forensic audit at the cost of the merged entity.”

The decision means that the merged business will not be able to sell itself or part of its units over the next five years, whether or not suitors emerge.

Sources familiar with the matter told Business Daily that the regulator wants the parties to stick to the representations they made to justify the merger.

The companies argued that they needed to secure more telecoms frequencies to better compete with the market leader, Safaricom #ticker:SCOM. The frequencies belong to the government and the regulator wants to ensure they are not used to speculate.

“The decision was made to prevent a situation where someone acquires government assets and flips them over,” a source said.

Among the assets that Airtel/Telkom has been prohibited from selling include four frequency spectrum licences and five operating licences including a submarine cable landing licence.