India’s Essar Telecom agreed to sell its yuMobile business – the third-largest mobile operator in Kenya – to larger rivals Safaricom and Airtel in a KSH10.5 billion ($120 million) deal.
Under the agreement, approved by Kenya’s Communication Authority (CA), Safaricom gets hold of yuMobile’s IT and network infrastructure. Airtel acquires the mobile operator’s GSM licences and subscribers.
The deal is expected to go through in the fourth quarter, once CA’s pre-conditions are met.
It’s another step in Essar’s strategy to divest its global telecommunications portfolio. Essar Global Fund Limited (EGFL), which includes yuMobile as part of its portfolio, sold its US-based outsourcing company Aegis to Teleperformance for $610 million in July.
One of the deal’s pre-conditions, according to previous local media reports, is the payment of yuMobile’s outstanding licence fees. That means both Safaricom and Airtel having to stump up $5.4 million.
Another CA clause, to which Safaricom CEO Bob Collymore originally objected, is the opening up of its hugely popular M-Pesa money transfer network to rivals. Safaricom, however, has subsequently relented under regulatory pressure.
Subscribers to rival money services from the likes of Airtel, Telkom Kenya Orange and MVNOs can now pay in and collect cash from M-Pesa agents.
“[We] believe that the transaction with Safaricom and Airtel will provide for much needed consolidation in the Kenyan mobile telecommunications market and provide customers with fewer mobile operators, better equipped to enhance service delivery and provide customers with greater product offerings,” commented Firdhose Coovadia, board member of Essar Capital (EGFL’s fund manager), on completion of the deal.
As part of the agreement, close to 90 per cent of yuMobile’s employees are expected to be absorbed by Safaricom and Airtel.
According to figures from GSMA Intelligence, Yu had 2.6 million connections by end-March 2014, well behind market-leader Safaricom (21.6 million).
Airtel had 5.3 million connections, while Orange (Telkom Kenya), in fourth place, had 2.5 million.