Indian conglomerate Essar will sell its Kenyan mobile operator, Yu Mobile, to its larger rivals Safaricom and Airtel for US$120m.
Under the agreement, Safaricom, which controls over 65% of Kenya’s mobile market, will take over Yu’s network, IT and…
Indian conglomerate Essar will sell its Kenyan mobile operator, Yu Mobile, to its larger rivals Safaricom and Airtel for US$120m.
Under the agreement, Safaricom, which controls over 65% of Kenya’s mobile market, will take over Yu’s network, IT and office infrastructure.
Airtel will acquire the company’s 2.55 million subscribers, Essar said in a statement at the weekend.
The transaction has already received approval from Kenya’s Communication Authority (CA) but also needs to be green-lit by the Competition Authority of Kenya (CAK). Essar expects the deal to close in the last quarter of 2014.
Essar, via its Essar Global Fund (EGFL) unit, first invested in Yu, also known as Essar Telecom Kenya, in 2007.
Commenting on the exit, Firdhose Coovadia, board member of Essar Capital which manages EGFL, said: “The [Essar Telecom Kenya] transaction is another step towards achieving Essar Capital’s strategy of divesting EGFL’s investments in the global telecommunications sector.
“We also 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.”
In July, EGFL sold US-based outsourcing company Aegis US to Teleperformance for US$610m.
The Yu Mobile deal was first announced earlier this year and, in late March, the watchdog granted conditional approval to split the operator’s assets between its larger wireless competitors.
At the time, Airtel was given the green light to buy the minnow’s subscribers and GSM licences, while Safaricom received permission to snap up its network infrastructure on the condition that it shares both the passive and active infrastructure with other licensed operators and service providers.
Safaricom, which is controlled by Vodafone, had reportedly been unhappy with the demand to open up its mobile phone-based money transfer and micro-financing service, known as M-Pesa, to rival MNOs and MVNOs. Meanwhile, Airtel was concerned about the timeline for the regulatory fee payment and whether it might need to sell one of its licences.
But a month ago, the CA reportedly removed several conditions linked to the sale of Yu Mobile, allowing the deal to go ahead.
With mounting losses and a market share of only 9%, as opposed to 66.5% for Vodafone’s Safaricom and 18% for Airtel, Yu Mobile has been struggling to survive.
Yu has been affected by an ongoing price war in Kenya since it entered the market in 2008.
The country’s fourth and smallest mobile player, Telkom Kenya, is also up for sale. Its parent, French incumbent Orange, launched a strategic review of the asset a few months back which could see it sell the operator or bring in a new partner.
The Kenyan market is expected to see further developments over the next few months as three MVNOs are set to make their debuts.
