In a move that marks the exit of Essar Group from all telecom ventures, Essar Telecom Kenya Ltd (ETKL) has sold its telecom business to Safaricom and Airtel for about $120 million. ETKL, which provides telecom services under yuMobile, is the third largest mobile cellular network operator in Kenya with a base of 2.55 million subscribers.
Safaricom will buy ETKL’s network, IT and office infrastructure, while Airtel will acquire the subscribers. As part of the transaction, close to 90 per cent of the yuMobile’s employees will be absorbed by Safaricom and Airtel, according to a statement issued by Essar Capital.
Essar Capital, which controls ETKL through Essar Global Fund Ltd, expects the transaction to conclude during the fourth quarter of 2014. yuMobile, which launched operations in December 2008, will continue its services “uninterrupted”, it added.
The transaction was completed after Essar received approvals from Kenya’s Communication Authority. The transaction will now be filed with Competition Authority of Kenya for approval, it added.
“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.
“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.
The sale of yuMobile marks the exit of Essar from telecom businesses. This comes on the heels of Essar selling US-based outsourcing firm Aegis’ US, Philippines and Costa Rican assets to Teleperformance for $610 million.
The Essar Group, headquartered in Mumbai, had earlier sold its telecom tower business to ATC. In 2007, Essar had set up Essar Telecom Infrastructure Ltd, which expanded to 4,500 towers across 12 states, before it was sold to American Tower Co. for $415 million in 2010.
In 2011, Essar exercised its put option and sold its 33 per cent stake in Vodafone Esssar (Now Vodafone India) for $5.2 billion.
According to earlier reports, Essar investments in telecom had earned it nearly five times the return on investments.