Airtel Kenya and Telkom Kenya recently called off the proposed merger of the two companies which began in February 2019. Their union would have provided cost efficiencies and grown the firms’ market share in Kenya. Additionally, Airtel was set to gain from improved network and spectrum capacity.
However, even with the merger plans cancelled, analysts expect Airtel Kenya to maintain its current growth momentum in terms of market share and value. Citi analysts note that Airtel Kenya’s operations are growing in double digits as its market share expands. The company maintains a price leadership strategy in Kenya.
Airtel, which is Kenya’s second-largest mobile operator, has a decent quality of data service in the major urban centres in Kenya, even though it has less capacity than Safaricom.
Impact of the cancelled merger on Safaricom
Citi Research team expects Safaricom to continue experiencing “pressure on telecom services from Airtel”. The analysts predict that smaller telecom players will continue demanding for favourable terms from the Communication Authority of Kenya.
Safaricom’s board has successfully managed regulatory risk in the past. The trend is expected to continue under the new leadership with the help of the board chairman Michael Joseph who has been with the company since 2000.
Citi researchers are still optimistic about Safaricom shares. The team has set a target price of KSh 33 on the stock. The giant telecommunication company faces certain risks like; stiff competition, pressure on voice revenue as data usage goes up, regulatory risk, entry of international money transfer companies in Kenya, and macro-economic factors such as inflation and fiscal deficit.
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