Safaricom Demands Kenyan Rivals Pay Debt Before Merger

(Bloomberg) -- Kenya’s biggest mobile operator asked the regulator to compel its rivals to pay debt it’s owed before approving their proposed merger.

Safaricom Plc demanded that Telkom Kenya Ltd. and Bharti Airtel Ltd.’s domestic unit pay a total of 1.3 billion shillings ($12.5 million) for services it provided including interconnection, co-location and fiber, Chief Executive Officer Michael Joseph said in an emailed statement. Safaricom, which controls more than half of Kenya’s mobile market, also asked the regulator to review spectrum allocations and ensure that the provisions are fair, he said.

Safaricom’s opposition is the latest obstacle to Telkom and Airtel’s plan to combine some of their operations into a rival entity that would effectively create a duopoly in the East African nation’s telecommunications sector. Last month, the Communications Authority suspended the deal pending investigations by the nation’s anti-graft agency into a 2012 decision to convert government loans to Telkom into equity.

READ: Telkom Kenya Confident of Airtel Deal Approval Amid Inquiry

The intended transaction will not affect the repayment of debt, Telkom said in an emailed statement in response to Safaricom’s demands.

“In fact, it will enhance Telkom’s ability to pay,” the company said. “As is usual in transactions such as this, many other vendors and suppliers have already signed the requisite documents to legally transfer their debt to the combined entity.”

After the proposed merger, Airtel and Telkom will hold more spectrum than Safaricom, yet the latter’s customer base is almost double that of its rivals, according to Joseph. Safaricom, partly owned by Johannesburg-based Vodacom Group Ltd. “wants equal treatment of operators” specifically “in relation to licensing and operations,” Joseph said.

Telkom is 60% owned by Helios Investment Partners LLP and 40% by the Kenyan government.

To contact the reporter on this story: Bella Genga in Nairobi at bgenga2@bloomberg.net

To contact the editors responsible for this story: David Malingha at dmalingha@bloomberg.net, Yinka Ibukun

©2019 Bloomberg L.P.