Mobile Network Consolidation Finally Happens In Kenya As YU Is Carved Up By Safaricom & Airtel
It was inevitable. The YU mobile network had been bleeding red ink for far too long. However, what is somewhat surprising is the manner in which they will cease to operate in Kenya’s super competitive mobile network space. There had been rumours and talk of some big global players planning to buy up the YU mobile network over the past year or so when it became evident that it quite simply was not working out. Then, just last week, a newspaper article suggested that Equity Bank had planned to secure a mobile virtual network operator (MVNO) license so that it too could become a mobile network by piggybacking on the YU mobile network – leveraging their massive client base of 8 million bank account holders. It then also came to light last week that Nakumatt, Tangaza and Mobile Decisioning (MoDe) also had applied to acquire MVNO licenses and were most likely planning to use the YU mobile network as their platform for the same. Clearly, the sharks could smell blood in the water. However, Safaricom and Airtel had other ideas.
In what now seems like stroke of genius, Safaricom and Airtel will gain immensely from carving up what is left of YU mobile. In a deal valued at approximately Kes. 8.5 Billion or US$ 100 Million, give or take a few digits, YU mobile will cease to exist as we know it in Kenya. In the process, Safaricom gets to inherit YU’s highly rated mobile network infrastructure whilst Airtel stands to gain close to 3 million mobile subscribers (and in the process rises to 25% marketshare). It indeed does sound like sweetheart deal for the two largest mobile networks in Kenya who will have a consolidated marketshare of over 90% post-deal. Safaricom’s network is and has been notorious for dropped calls so now they have the extra capacity they have always needed. Airtel has been struggling to gain market share in Kenya and essentially overnight gain millions of subscribers. What remains to be seen is if the Competition Authority of Kenya will see it fit to approve this plan. In addition, there is every possibility that Orange (i.e. Telkom Kenya) may try to block the deal since they stand to lose big time when the consolidation takes place. Lastly, there is the matter of the companies that had wanted to launch MVNOs in Kenya who will most likely not be able to do so now given that none of the remaining three mobile networks will want to create further competition for customers.
The fact of the matter is with Safaricom owning most of the mobile market and Airtel a distant second place, Kenya can realistically only handle 2 or 3 mobile networks at most which would actually operate profitably. The YU mobile network was also struggling given that they did not yet have 3G data services and ultimately their value proposition was quite limited. Safaricom on the other hand has more or less cornered all segments of mobile ranging from voice, to data and mobile money. However, with an additional 3 million mobile subscribers could Airtel finally(?) mount a credible challenge to Safaricom? It seems plausible. However, they should not assume that the former YU subscribers will simply stay with them and could very well opt to join Safaricom after all. The long and short of it is that consolidation is happening in Kenya’s mobile network space and the next few months should be very interesting.