Kenya anti-corruption body halts Telkom-Airtel merger

Government probe into 'misappropriation of public funds' stops Airtel's purchase of partly state-owned Telkom Kenya.

    Kenyan regulators are scrutinising Telkom Kenya, amidst a wider anti-corruption drive undertaken by Nairobi [Baz Ratner/Reuters]
    Kenyan regulators are scrutinising Telkom Kenya, amidst a wider anti-corruption drive undertaken by Nairobi [Baz Ratner/Reuters]

    The government's anti-graft commission in Kenya said on Wednesday that it had suspended a planned merger of Airtel Kenya with partly state-owned Telkom Kenya, pending a probe into allegations about the misappropriation of public funds at Telkom.

    Bharti Airtel, based in India, said in February that its Airtel Networks Kenya unit had agreed to buy Telkom Kenya, the East African nation's smallest telecommunications services provider, in which the state still has a 40 percent holding after a majority stake was sold in 2007.

    The combined entity would create a stronger challenger to Safaricom, which now controls nearly two-thirds of the market in terms of subscribers.

    The merger was halted because Kenya's Ethics and Anti-Corruption Commission (EACC) was "conducting investigations into allegations of misappropriation of public funds in the process of privatisation, recapitalisation and restructuring of balance sheets of Telkom Kenya Ltd", EACC spokesman Yassin Amaro said.

    Amaro did not say how long the investigation would take. However, he said the EACC was examining how Telkom was combining with Airtel Kenya and "how [Telkom] is safeguarding the interest of taxpayers". Amaro added that the investigation was restricted to Telkom.

    Telkom Kenya Chief Executive Mugo Kibati told KTN News television that his company would cooperate with the investigation. He also said - contradicting Amaro - that the probe was not linked to the merger deal.

    Airtel declined to comment.

    'The interest of taxpayers'

    Francis Wangusi, the outgoing director-general of the Communications Authority of Kenya, told the Reuters news agency that the authority had received a letter about the suspension from the EACC.

    "They want to investigate the recapitalisation of Telkom Kenya," he said, adding that he expected the two companies would "make sure the investigation is concluded very fast".

    Bharti shares dropped as much as 4.4 percent on Tuesday on reports that the deal had been suspended.

    France's Orange bought a majority stake in Telkom Kenya when it was privatised in 2007, but then sold its stake to London-based Helios Investment Partners in 2015.

    Airtel Kenya has previously said the pending deal would not involve Telkom Kenya's extensive real estate holdings or certain government service contracts.

    Both firms have been continuing to run normally as independent operators in the meantime.

    SOURCE: Reuters news agency