East Africa's telecommunications industry set for M&A activity

McKinsey says regional mobile phone markets are ripe for consolidation to reduce costs.

East Africa's mobile telecommunications market is set for more mergers and acquisition as intensified competition puts the revenues of the existing operators under pressure.

Global consultancy firm McKinsey & Company says regional mobile phone markets are ripe for consolidation to reduce costs, lower investment requirements and allow weaker firms to survive.

"Consolidation and new types of partnerships are likely but the pace and nature will depend on regulatory conditions, industry structure and shareholder value," the firm said.

In Uganda, the mobile phone market is split among seven operators, with MTN-Uganda being the dominant player in both the voice and money transfer business.

Other players are Airtel Uganda Telecom, Africell, Smile Telecom, K2 Telecom and Vodafone.

In 2017, Vodafone Group sold its 35 percent stake in Kenya's Safaricom to South Africa's Vodacom Group, and last week the British telecoms giant sold its New Zealand subsidiary to an investment consortium – Canada's Brookfield Asset Management and Wellington-based infrastructure operator Infratil – at an estimated price of $2.2 billion.

It is argued that with increased competition in Uganda's telecoms industry coupled with a combination of the inability of the operators to raise prices, the stage is set for increased consolidations in the coming years.