M&A Decision Paralysis in African Telco’s

Recently we have received the news that Telkom Kenya and Airtel Kenya will not be merging. This comes after an exploration process that took a couple of years. During that time there was a decision paralysis within the management of both companies on projects that would have advanced their technology and innovation stacks. Buyashara was working on projects in both companies and we observed a marked slowdown as both sides delayed key projects until ‘post-merger’. Of course, history now shows us that the merger never happened. And windows of opportunities in delayed and cancelled internal projects for both entities were lost forever.

This is not something that is unique to Telkom Kenya and Airtel Kenya. Currently we are observing this trend at Zantel and Tigo Tanzania as discussions are unfolding. Neither management team seems overly keen to make any decisions which may impact a timeline of more than three months. This may have dire consequences for both entities, but especially the smaller relation in the deal. As a smaller and more agile company, by definition, you need to keep moving forward in order to maximize competitive edges. If this forward momentum stops for any reason, even good reasons, that organization will suffer organizationally, technologically and financially.

Perhaps the best example of this decision paralysis occurred a few years ago when Vodacom South Africa was in the market to buy Neotel. The transaction was held up for a good number of years before the South African regulator , ICASA, eventually blocked it. Throughout this time, especially on the Neotel side, there was a great reticence to make any decisions. Prior to the proposed acquisition, Buyashara management was involved in an IT transformation tender at Neotel valued at over R1 billion. Needless to say, it stopped in its tracks and Neotel never overhauled their somewhat outdated IT core.

Technology never stops and nor should business 

It is understandable that management sometimes does not want to commit to projects which may be short-term, after all they may not be a part of a new structure. The history of these failed mergers does go to show that transformative business and technology procurement cannot stop whilst the merger or acquisition process is ongoing. Mergers and acquisitions may represent growth for both companies involved in the transaction. Moreover, it may mean more financial power as the revenue generated by pooling the incomes of both businesses. But failed mergers contribute to a general slowdown in the growth cycle of an organization. As witnessed in the Vodacom/ Neotel acquisition, this slowdown can sometimes be fatal, since Liquid Telecoms was able to pick up the pieces of a non-transformed Neotel after this cancelled acquisition.

So, what can we do to avoid this? Management must accept that in a risk environment, any project has a downside risk and they must mitigate that risk. If management takes a mature approach to risk, it can be factored into all their decision. This way they can ensure continued operational excellence. The main thing is that they must follow their core values and execute their business plan. Stopping both of these in their tracks , we have seen, creates an operationally moribund entity.

The management of African Telco’s should factor this into their calculations and be a bit bolder with their operational decision making, in order to protect of the entities against any downside risk of the merger not going ahead. Technology never stops and nor should business.