Bharti Airtel exploring acquisition of Telkom Kenya – report

Indian telco Bharti Airtel is reportedly in discussions to expand its presence in the Kenyan market through the acquisition of Telkom Kenya.

According to Reuters, the under-pressure Indian telco is meeting with Telkom Kenya executives to acquire the business, merging the number two (its own brand Airtel) and three players in the country. This is not the first time such a transaction has been discussed, though it is claimed London-based Helios Investment, which owns 60% of the business, is attempting to cash-out of the market.

While agriculture still remains the leading sector across the country, Kenya’s growth has been steady and diversifying in recent years. The country is the economic, financial, and transport hub of East Africa, and real GDP growth has averaged over 5% for the last decade, according to statistics from the CIA World Factbook. Mobile growth in the country is growing quickly, while the economy is increasingly looking mobile-first. This could be a very useful acquisition for Bharti Airtel.

In terms of market share, this is a country which is heading the right direction for Bharti Airtel. Safaricom is the market leader with a 67% share but declining, according to Ovum’s WCIS, Airtel has 23% market share and increasing while Telkom Kenya currently has 9% but is also increasing, albeit at a slower rate than Airtel. Supplementing the gathering Airtel momentum in Kenya with the Telkom Kenya footprint would certainly be a sensible business strategy to tackle the dominant Safaricom.

Another interesting factor to this deal would be the fixed line business. As it stands, Airtel does not have a fixed line offering in Kenya while Telkom Kenya does, and this is a segment which has been targeted for growth by the government. The National Broadband Strategy intends to deliver reliable fixed line broadband to as many as 30% of the Kenyan population, though you should always remember this is a mobile-first country. Fixed line might be a useful addition, but with mobile money dominating the economy (48% of Kenya’s GDP was processed over M-PESA between July 2016 and July 2017), this is very much a mobile-first society.

For Bharti Airtel, the team needs a win to report back to investors before too long. The emergence, and continued success, of Reliance Jio has been a nightmare for the former market leader, while an end to the misery seems unforeseeable right now. Profits at the firm have been impacted, subscriptions are going south, and the newly-merged Vodafone Idea business might cause more upset as it readies its own attempt at market disruption. Bharti doesn’t seem to have done much to combat the threat at home, though it does have a successful African business to bolster the numbers.

Looking at the most recent financial results, revenues across the group grew by a miserly 0.5%, though the revenue decline in India (which accounts for roughly 66% of the group total) was 3.6%. Africa on the other hand contributed 10.8% revenue growth and almost three million net additions in subscribers. The consolidated East Africa region brought in an additional 1.2 million customers over the period, while revenues in both voice and data have been steadily increasing over the last year. This is a stark contrast to the failures at home.

Bharti Airtel has lost the number one spot in India thanks to the Vodafone Idea merger, and should trends continue, it won’t hold onto number two for very long either. Catalysing the promising African market is certainly a sensible way forward, but onlookers should not be distracted from the chaos in Bharti’s domestic market.

Alphabet’s blue sky thinkers pen first Loon deal in Kenya

The Loon team have signed its first commercial deal with Telkom Kenya to deploy a pilot 4G network in suburban and rural areas of the country.

Having dropped the ‘Project’ part of the name, the Loon team now operates as an independent company within the Alphabet business, and does not look that ridiculous any more. Why didn’t anyone else figure out balloons would be an efficient means to deliver connectivity to some of the world’s more difficult not spots.

“As Loon, our mission is to connect people everywhere by inventing and integrating audacious technologies,” said Alastair Westgarth, CEO of Loon. “We couldn’t be more excited to start our journey in Kenya, and we look forward to working with mobile network partners worldwide to deliver on the promise of Loon.”

The deal with Telkom Kenya will kick off in 2019, and is being touted by the team as an alternative to the expensive job of building ground-based infrastructure. The balloons will be 60,000 feet in the air, on the edge of space, focusing on the central regions of Kenya which have been previously difficult to service, due to mountainous and inaccessible terrain. The exact coverage areas will be determined in the coming months, and subject to the requisite regulatory approvals.

“Telkom is focused on bringing innovative products and solutions to the Kenyan market,” said Telkom Kenya CEO Aldo Mareuse. “With this association with Loon, we will be partnering with a pioneer in the use of high altitude balloons to provide LTE coverage across larger areas in Kenya. We will work very hard with Loon, to deliver the first commercial mobile service, as quickly as possible, using Loon’s balloon-powered Internet in Africa.”

Alphabet is a company which certainly does specialise in absurd ideas, though this is one of the few moon-shots which looks to have genuine potential in the near future. Although it has been used to help provide connectivity in regions struck by natural disasters, this is one of the first signs of the long-term and sustainable presence of Loon. For telcos who are considering satellite as a means to tackle the rural not spots, Loon could certainly provide a more cost and time effective means to meet demand.

Back in October, Alphabet was given permission to use 30 experimental balloons to provide connectivity to Puerto Rico and the US Virgin Islands, which have been ravaged by Hurricanes Irma and Maria, leaving around 90% of the territories without coverage. While temporary coverage following natural disasters will be a continued use case for Loon, executives will certainly be comforted they don’t have to sit around and wait for a natural disaster to hit.

Alphabet is one of the internet giants which has been consistently searching for ways to diversify the business model, though this is not the first time connectivity was a major play. US telcos might have been relieved to see the end of the Google Fibre experiment, though this venture looks to be far more sustainable for Alphabet. Should the Telkom Kenya project be successful, Loon will start to attract interest around the world.

American Tower expands in Africa with acquisition of 723 towers

Telkom Kenya has announced it has reached a definitive agreement to sell up to 723 towers to American Tower, expanding the latter’s footprint to a fifth country in Africa.

The transaction, which will be completed in the second-half of 2018, will give the telco a bit of breathing room and cash to invest in its 4G network. Kenya Telkom has been performing adequately to date, though has struggled to get anywhere near market leader Safricom. It is hoped the funds will give the telco a boost to be more competitive.

“We are excited to announce the launch of operations in Kenya through our agreement to acquire TKL’s towers,” said William Hess, American Tower’s President of EMEA and Latin America. “This represents American Tower’s 17th market globally, and our fifth in Africa, and we look forward to helping expand the reach of mobile broadband throughout the country. Kenya is a very attractive market, and we have high expectations for its long-term growth potential.”

“Telkom will now focus on its core function – the provision of quality telecommunications services to our customers,” said Aldo Mareuse, CEO of Telkom Kenya. “In addition, the sale will release capital for further investment in our 4G network and a number of state of the art IT platforms, all of which will further enhance services for our customers as they demand higher quality and speed from our mobile data networks as well as a richer range of services.”

American Tower is one company which has been on the acquisition trail recently, seemingly capitalizing on strong financial performance. Aside from this deal, American Tower has also acquired the tower business units of both Idea and Vodafone in India, as the pair gear up to tackle the disruption caused by Reliance Jio in the market. Praying on struggling telcos’ assets seems to be a successful strategy here, as it spent $673 million to acquire nearly 10,600 sites over the first three months of 2018.

Looking at the financial side of the business, American Tower recently reported its figures with the first quarter demonstrating a 7.8% year-on-year increase to $1.742 billion, though it has lowered forecasts for the year, citing the troublesome Indian market and other factors.

The team will also be keeping an eye on developments with Sprint and T-Mobile, with the pair accounting for 4% and 3% (respectively) of American Tower’s consolidated property revenues. While there is still three to four years left on non-cancellable lease agreements, and the team anticipate aggressive spending to catch up to the top tier, consolidation of two major customers generally doesn’t bode well for the supplier.

Whether there is any acquisition left in American Tower remains to be seen, though the team has stated it is continuing to review and act on expansion opportunities in international markets. It does not seem to be shy about living by the ‘speculate to accumulate’ mantra.