Airtel's Kenyan unit abandons plan to merge with Telkom: sources

NAIROBI (Reuters) - The Kenyan unit of Bharti Airtel has abandoned plans to merge with Telkom Kenya to take on the market leading operator Safaricom, industry and government sources said on Monday.

Sources said in April that Airtel and Telkom Kenya were planning to merge to create a stronger challenger to Safaricom, which has 72 percent of subscribers, or around 30 million subscriptions.

"Airtel developed cold feet," said an industry source who declined to be named.

Airtel, owned by India's Bharti Airtel, did not respond to a request for comment.

Joe Mucheru, the minister for information and communication, said he was aware of the walkout by Airtel.

The proposed merger broke down over a number of issues, particularly Airtel resisting making a commitment to significant future investments in the company, the industry source said.

The sector regulator, Communications Authority of Kenya, said neither Telkom nor Airtel had formally communicated with it about the deal.

Telkom Kenya, which is controlled by Africa-focused, London-based Helios Investment declined to comment.

Telkom and Airtel have a combined 23 percent of Kenya's 41 million mobile subscribers.

Data from the regulator showed Airtel had increased its users by more than a million in the last quarter of last year, benefiting from a call by the opposition for its supporters to boycott Safaricom.

(Reporting by Duncan Miriri; Editing by Maggie Fick and Adrian Croft)