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Essar pulls out of telecom business in Kenya

August 30, 2014 08:00 pm | Updated 10:56 pm IST - MUMBAI:

Signs binding agreements with Safaricom and Airtel in Rs.720 crore deal

Essar Global Fund Ltd. (EGFL), part of the $39 billion Essar Group, has exited its investment in Essar Telecom Kenya Ltd. (ETKL) by signing binding agreements with Safaricom and Airtel to sell its telecom business in Kenya for $120 million (Rs.720 crore). With this the Essar Group has completely exited the telecom business.

The telecom business in Kenya is operated under the brand name yuMobile. As per the agreements, Safaricom will take over ETKL’s Network, IT and Office infrastructure while Airtel will acquire the company’s subscribers.

The transaction has received approval from the Communication Authority in Kenya, subject to all parties involved in the transaction meeting certain pre-conditions. The transaction will now be filed with the Competition Authority of Kenya for approval. The transaction is expected to conclude during the fourth quarter of 2014.

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“As part of the transaction, close to 90 per cent of the yuMobile’s employees will be absorbed by Safaricom and Airtel,” said yuMobile’s Chief Executive Officer, Madhur Taneja.

Essar Global, together with its partners, invested $200 million in ETKL in 2007-08.

“The ETKL transaction is another step towards achieving Essar Capital’s strategy of divesting EGFL’s investments in the global telecommunications sector,” Firdhose Coovadia, board member of Essar Capital said.

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

Essar Group which had invested about $1.2 billion in the telecom businesses over the years has exited the business at about $6.5 billion, over five-fold return.

Having started the monetisation process in 2010 with the sale of its telecom tower business to ATC for $415 million, Essar’s owners, the Ruias, followed it up by the sale of its 33 per cent stake in Vodafone Essar for $5.2 billion in 2011. Now Kenya telecom business has been sold out.

Essar continues to own Aegis’ non-U.S. business, worth several hundred million dollars, which is still growing across multiple geographies.

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