ICT Africa Headline News

Safaricom Expects to Finally Seal Yu Mobile Buyout in Months

06 August, 2014

Source: CIO East Africa

By Stella Kaibung'a:

In an interview yesterday, during the US Africa Leaders' Summit in Washington, Bob Collymore, CEO Safaricom Ltd. said that the telecommunications giant was expected to submit the transaction for the buyout of Essar's yuMobile for approval to the Communications Authority of Kenya (CA), following the withdrawal of objections earlier raised by the communications industry regulator.

"I am hoping we can close this in a couple of months." Collymore said.

The details of the deal, which was announced in March this year, are such that Safaricom will acquire Essar's 453 network sites and associated agreements, sites leases, data centre, existing office, spectrum, employees in the technical department and residual assets including IT infrastructure.

Airtel will in turn take over yuMobile subscriber base of about 2.7 million, GSM licenses and subscriber related contracts. To ensure smooth transition, Airtel will also take over the yuMobile number prefix so that subscribers would not be inconvenienced by the change.

In April year, Safaricom had backed out of the deal citing tough conditions imposed by CA. Some of these conditions imposed, were that Safaricom open up its M-Pesa agency network to rival operators, a provision the company had strongly opposed. The company had also cited withdrawal due to delays by CA in approving of the acquisition.

Currently, Safaricom dominates the market with over 66 per cent of the subscriber share, followed by Airtel with 17.6 per cent. YuMobile comes in third, with 8.8 percent and Orange holds 7.1 percent of the market share.

Once the deal is sealed, Airtel will move up to 25 per cent of the market share.

The withdrawal of objections by CA comes less than three weeks after the communications authority body ordered Safaricom to open up its M-Pesa platform after Airtel filed a petition accusing Safaricom of unfair competition. CA also prohibited Safaricom from imposing any extra charges on competitors using its network.

A letter signed by CA, and sent to Safaricom and Airtel on Friday July 25, CA stated, "All restrictive clauses in the agreements between Safaricom and mobile money transfer (M-Pesa agents) be immediately expunged but in any event not later than July 18, 2014."

The joint acquisition deal will cost about $120 million, Chief Executive Officer Bob Collymore said.

In March, Safaricom's company secretary had warned shareholders on the possible effect of the deal on the value of the shares. The effects of these recent developments on the Kenyan mobile telecommunications industry are expected to be massive.

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