NAIROBI – Bharti Airtel is in talks to buy Telkom Kenya, which will help the Sunil Mittal-led telco emerge stronger in the east African market and improve overall valuation of Airtel Africa in the run-up to its initial public offer (IPO), likely in May-June, people aware of the development said.
Telkom Kenya is the third-largest telco in Kenya with over 5 million users, behind market leader Safaricom with over 30 million and Airtel Kenya, with 10 million-plus customers. It is 60% owned by UK private equity firm Helios Investment Partners and the rest by Kenya’s government.
Airtel is learnt to be in preliminary talks with Helios, though it will probably inform the Kenyan telecom regulator only if discussions lead towards a potential deal, said an insider.
A Bharti Airtel spokesman declined to comment on matter according to reports.
The latest deal overtures come in the aftermath of Airtel Africa recently raising $1.25 billion by placement of shares to six global investors, which will be followed by an Airtel Africa IPO, through which the telco plans to garner an additional $1.5-1.6 billion.
Sector experts though said the actual impact on Airtel Africa’s valuation will hinge on the premium Airtel pays to buy a controlling stake in Telkom Kenya.
Rohan Dhamija, head of India and Middle East, Analysys Mason, said any potential Airtel takeover of Telkom Kenya “will increase Airtel Africa’s overall valuation” as it would “be value-accretive, given the scale driven synergies, which are so important in the Africa market.”
Former Airtel chief executive Sanjay Kapoor said the degree of improvement in Airtel Africa’s overall valuation would hinge on a host of factors, “including the quantum of premium Airtel actually pays to buy Telkom Kenya, synergies that get drawn by virtue of such a consolidation and the level of pricing power gained in the Kenyan telecom market.”
Insiders familiar with the matter said growth for Airtel Kenya had been driven by a combination of higher voice, mobile data and money transfer transactions in the eastern African country.
Airtel Africa is the UK-based holding company of Bharti Airtel’s operations in 14 countries in the continent. Airtel is the second-largest telco in the continent with a customer base of some 94 million and ranking among the top two in most markets.
Airtel Africa has seen a turnaround in recent years, in a clear departure from before, when losses mounted every quarter, dragging down consolidated numbers and casting doubt on Bharti’s strategy of expanding into the continent in 2010. Africa earnings have been supporting Airtel’s consolidated financials.