Essar exits Kenya telecom venture in Kenya to Bharati, Safaricom

In its final exit from all telecom ventures,Essar Group has sold its telecom business in Kenya - Essar Telecom Kenya Ltd (ETKL) - to Safaricom and Bharti Airtel for about $20 million.

ETKL, which provides telecom services under yuMobile, is the third-largest mobile cellular network operator in Kenya with a base of 2.5 million subscribers.

The group has signed definite agreements with Safaricom to sell its network, IT and office infrastructure to Safaricom and with Bharti Airtel to sell its 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 will continue to operate and serve customers offering uninterrupted services.

The transaction has received Kenya's Communication Authority approval, while the companies will now file for Competition Authority of Kenya for approval.

''We would like to reassure our customers that they will continue enjoying our products and services uninterrupted. 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's chief executive officer Madhur Taneja.

EGFL, together with its partners, invested in ETKL in 2007-2008. The company launched operations in December 2008.

''The ETKL transaction is another step towards achieving Essar Capital's strategy of divesting EGFL's 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 at board member of Essar Capital.

The divestment of ETKL represents EGFL's second significant portfolio exit in the last few months, following the sale in July of its US-based outsourcing company, Aegis US, to Teleperformance for $610 million.

The sales of ETKL comes close on the heels of Essar closing the sale of Aegis' US, Philippines and Costa Rican assets to Teleperformance for $610 million (See: Essar to sell Aegis its US, Philippines and Costa Rica operations). The company has started exiting its telecom business in 2010 with the sale of its telecom tower business to American Tower Corporation for an enterprise value of $415 million.

The divestment follows the offloading the Group's 33-per cent stake in GSM operator Vodafone Essar for $5.2 billion (Essar agrees to sell stake in Vodafone Essar).