Kenya Grants Conditional Approval for Sale of Essar Telecom

Kenya’s telecommunications regulator granted conditional approval to Safaricom Ltd. and Airtel Kenya Ltd.’s joint offer to buy Essar Telecom Kenya Ltd., two days after Safaricom threatened to pull out of the deal.

The acquisition can proceed subject to conditions including the payment by Safaricom and Airtel of license fees totaling $5.4 million each, Communications Authority of Kenya Director-General Francis Wangusi told reporters today in the capital, Nairobi. Essar Telecom is also required to pay all outstanding regulatory fees, he said.

Safaricom, 40 percent owned by Vodafone Plc, and Airtel, a unit of New Delhi-based Bharti Airtel Ltd. (BHARTI), plan to spend “in the hundreds of millions of dollars” acquiring Essar, which operates Kenya’s third-biggest mobile company, Safaricom Corporate Affairs Director Nzioka Waita said March 26. Safaricom threatened to to withdraw from the acquisition after the regulator failed to acknowledge receipt of the companies’ application, he said.

“The matter has received due attention from the authority,” Wangusi said today. “The parties have been notified of the decision of the authority.”

Safaricom plans to buy Essar’s network base stations and transmission equipment. The company failed to meet the regulator’s quality-of-service criteria in 2012-13, achieving a compliance level of 50 percent compared with the minimum of 80 percent, which the company must meet to obtain a new license, the regulator said in July. Safaricom’s permit expires in June and will cost $27 million to renew, according to the CAK.

Subscriber Boost

Airtel, the second-biggest operator, is set to take over Essar’s 2.75 million subscribers and licenses. That would boost Airtel’s Kenyan market share to 26.4 percent from 17.6 percent, according to Bloomberg Industries.

Other conditions listed by the regulator include Safaricom and Airtel submitting a plan on implementing a national roaming service and a written commitment on how mobile-phone users will benefit from the service, Wangusi said. In addition Safaricom has to share both its “passive and active” infrastructure with its competitors, he said.

“We have not given them difficult conditions that should make them say no,” he said.

Shares in Safaricom have gained 13 percent so far this year to 12.30 shillings at the close in Nairobi today.

To contact the reporter on this story: Eric Ombok in Nairobi at eombok@bloomberg.net

To contact the editors responsible for this story: Paul Richardson at pmrichardson@bloomberg.net Sarah McGregor

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