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By George Obulutsa
NAIROBI, March 28 (Reuters) - Kenya's telecoms regulator granted conditional approval to the country's biggest telecom companies, Safaricom and the local unit of Bharti Airtel, to buy No. 3 network Yu.
Safaricom, which is 40 percent owned by Vodafone, wants to acquire Yu's infrastructure such as base stations to help improve the quality of its network. Airtel aims to acquire the subscriber base that Yu has built up since entering the Kenyan market in 2008.
Yu is operated by India's Essar Telecoms. The deal would leave Kenya with three mobile phone service providers, including smaller player Telkom Kenya, owned by France's Orange.
The regulator said on Friday it would approve the Yu deal, subject to Safaricom and Airtel each paying a $5.4 million fee for Yu's licence and meeting several conditions.
The conditions cover areas such as infrastructure sharing and cooperation between the companies on customer money transfer services and SIM registrations.
The director general of Kenya's Communications Commission, Francis Wangusi, told reporters that final approval would be given if the two firms meet those conditions and the deal is cleared by the competition authority.
Safaricom announced the asset purchase talks with Essar in early March and Airtel then confirmed it was interested in buying the licences and taking over Essar's subscribers. (Writing by James Macharia; editing by Tom Pfeiffer)