31 August 2014

Kenya: Essar Finally Sold for U.S. $120 Million

The Essar Group yesterday signed a binding agreement for the sale of its telecom business in Kenya. Essar's YuMobile is to be sold for $120million to Kenya's Safaricom Ltd. and Bharti Airtel Kenya. The signing came after approvals were given by the Communication Authority (CA) of Kenya.

According to livemint.com, Firdhose Coovadia, board member of Essar Capital said that the Essar Telcom Kenya transaction is another step towards achieving Essar Capital's strategy of divesting Essar Global Fund 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," said Firdhose Coovadia, Board Member of Essar Capital.

Before the approvals by the CA, the parties involved had to meet certain pre-conditions. Some of the conditions were such that Safaricom Ltd. would have to open up its M-Pesa network to rival operators. The two mobile operators Safaricom and Airtel would also have to pay $5.5million each, so as to allow synchronization of the assets to be acquired by the two operators. YuMobile on the other hand, was required to clear all its outstanding regulatory fees before approvals.

Finalization of the deal will see Safaricom take over Essar Telcom Kenya's network, IT and Office infrastructure while Bharti Airtel will acquire YuMobile's subscriber base.

"We have structured the transaction such that our customers will not need to change their mobile numbers or SIM cards, post this transaction. Moreover, we expect that the intended transaction will bring bigger benefits through an expanded product bouquet to the customers," said YuMobile Chief Executive Officer Madhur Taneja.

The Essar Group's exit from the telcom business started back in 2010, with the sale of its telcom tower business to ATP IP LLC, followed by the sale of its 33 per cent stake in Vodafone Essar Ltd. for $5.46 billion to Vodafone Group PLC in 2011.

The multi-million dollar transaction will soon be filed with the CA for approval and is expected to be concluded towards the end of the year.


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