Kenya: Celtel to buy Vivendi’s Kencell stake

25 May 2004 – According to a Reuters report, African mobile group Celtel has won control of Kenya's second mobile operator Kencell. Celtel agreed to pay Vivendi Universal US$ 230 million for its 60% stake. Dutch-based Celtel beat out South Africa's MTN sources said.

The purchase, to be formally announced on May 26, will increase Celtel's subscribers by over 30% to approximately 3.7 million. Vivendi has been trying to sell its Kencell stake for over a year as part of its debt reduction strategy, but competition between MTN and Celtel, formerly known as MSI Cellular, delayed the sale. Both firms saw Kencell ownership as the best way to get into the Kenyan telecoms market, where penetration is expected to double in the near term.

In April, Vivendi agreed to sell its Kencell holding to MTN, but Vivendi's local partner in Kenya, the Sameer Group, which holds the remaining 40 percent, did not agree to the deal. Sameer, a conglomerate with holdings ranging from tea growing to finance, had the rights to buy the Vivendi stake, putting it in control of selecting the winning bidder.

Kencell, with about 1.2 million subscribers, has recently lost market share to rival Safaricom, a joint venture of Kenya's state-owned Telkom Kenya and Britain's Vodafone. Safaricom's subscribers have grown to 1.8 million, increasing its share to 60% from about 50%.

Kenya is a good fit with Celtel’s existing portfolio, which includes operations in twelve African countries, including Tanzania and Uganda. The addition of Kenya will create a swathe of coverage across the continent through the Democratic Republic of Congo to Gabon.

Vodacom and MTN are by far the two largest mobile operators in Africa, with 10.2 million and 8.9 million subscribers respectively at the end of 2003. The bulk of their subscribers, however, are in their home market and both are looking for growth elsewhere in Africa. MTN has done well in Nigeria, where Vodacom has also recently entered the market. The Kenyan deal would put Celtel International close to the top as the largest African operator outside of South Africa, based on MTN's 2.88 million and Vodacom's 1.3 million non-South African subscribers.

Intelecon Research & Consultancy Ltd. 25/05/2004

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