Airtel-yumobile

Bharti Airtel’s Kenyan unit Airtel Networks Kenya Limited has sought an approval from Kenya’s telecom regulator Communications Authority of Kenya to acquire the telecom license and subscribers of Essar Telecom Kenya Limited which operates under the brand ‘yuMobile‘, the company has informed BSE.

As per the proposed arrangement, over 2.7 million customers of yuMobile are expected to become a part of Airtel Kenya’s network. Although, note that this agreement is subject to requisite regulatory and statutory approvals and Airtel mentions the integration is expected to happen once the definitive agreements are signed.

Following this deal, Airtel is expected to become the second largest telco in Kenya with a combined user base of 8.2 million subscriptions – 5.5 million with Airtel and 2.7 million with yuMobile. This will account for around 26.2% market share in the country, behind the market leader Safaricom which has a market share of 66.5% with 20.8 million subscriptions.

What’s not included in the deal though is yuMobile’s infrastructure and its 130 employees which is being acquired by Safaricom. The combined deal is being pegged at $100 million.

This development follows a source-based ET Now report in December 2013, which had suggested that Airtel was looking to acquire yuMobile and the deal is expected to be closed in 2-3 months. Interestingly though, Essar had then told ET Now that it was in talks with investors to expand operations of yuMobile and was not looking for any sale at the moment.

Airtel’s Africa Strategy

This acquisition seems to be line with Airtel’s Africa strategy of being among the top two telcos in countries where it is operational. Last month, Manoj Kohli, the managing director and CEO (International) of Bharti Airtel had mentioned during the company’s earnings conference call that it was in the number one or two position in 14 of the 17 operational African countries.

He had also mentioned that a third placed player or even a weak second placed player may not earn profits in the long run in Africa, due to which they are currently testing out each market to grow organically or inorganically to become a strong number two player in those markets. (More on that here).

If the deal goes through, this will be Airtel’s third acquisition in Africa after acquiring Warid’s Congo Brazzaville business in November 2013 and Warid’s Uganda business in April 2013. Last month, the telco had also announced a new structure in Africa with operations now clustered into Strategic Business Units (SBU’s), whose heads will report to the Christian de Faria, the MD & CEO of Airtel Africa, starting April 1, 2014.

Also readAirtel Q3-FY14 Concall: On Discounted Tariffs & Africa Operations