Kenya's competition regulator approves Airtel Kenya, Telkom Kenya merger

NAIROBI (Reuters) - Kenya's competition authority has approved the planned merger between Airtel Kenya and Telkom Kenya, the regulator said on Friday, in a deal that could challenge market leader Safaricom's dominance of the East African country's telecoms industry.

India's Bharti Airtel said in February its Airtel Networks Kenya unit had agreed to buy Telkom Kenya, the East African nation's smallest operator in which the state still has a 40% shareholding after a majority stake was sold in 2007.

The combined entity would create stronger competition for Safaricom, which now controls about two thirds of the market in terms of subscribers.

The Competition Authority of Kenya said in a legal notice that the merged entity was not allowed to sell itself for the next five years, and must honour any existing contracts with government bodies.

One last hurdle to the merger is the anti-corruption commission lifting a suspension it ordered in August while it investigated allegations about the misappropriation of public funds at Telkom.

France's Orange bought a majority share in Telkom Kenya when it was privatised in 2007 but then sold its stake to London-based Helios Investment in 2015.

Airtel Kenya has previously said the merger would not involve Telkom Kenya's extensive real estate holdings and some government contracts for unspecified services.

(Reporting by Omar Mohammed; Editing by George Obulutsa and Mark Potter)