As Airtel and Safaricom prepare to take over the assets of Essar Telekom Kenya over the next few months, it's becoming clear that users' choice of mobile service providers in the country will be limited to only three operators for the foreseeable future.

Over the last three months, Airtel and Safaricom have been in intense discussions with the country's telecom regulatory body, the Kenyan Communications Authority, about dividing up Essar's Yu Mobile assets, and finally got approval for the takeover. The issue has been controversial. Industry insiders point to the fact that Safaricom's growth and domination of the market likely means that smaller players will not be able to enter the market and provide more choice and possibly innovation for users.

Essar Telekom Kenya is the last remaining telecom investment by Indian conglomerate Essar Group. The sale will finalized this quarter, with Safaricom paying $120 million for infrastructure and offices, and Airtel paying an undisclosed fee for the company's 2.5 million subscribers.

The deal ended a tough six year spell for Essar Telekom, marked by delayed market entry, slow service uptake, legal battles with service and equipment suppliers as well as late payments to the Communications Authority. Analysts have said that the Kenyan market has reached saturation, and can not sustain four mobile operators.

"Safaricom is a dominant player in some of the market segment in Kenya, which makes it very difficult for new or small players to establish sustainable operations in the market; if Safaricom's market share was smaller, the market could potentially sustain four operators," said Dobek Pater, senior telecom analyst at Africa Analysis.

Nigeria is the only sub-Saharan Africa market that has demonstrated the ability to sustain more than four mobile service providers, owing to its population of 150 million. The large players in Nigeria are MTN, Airtel, Glo, Etisalat and Vodafone, which is one of the few surviving CDMA operators.

"In South Africa, only Vodacom and MTN have profitable mobile operations at the net profit level, which at this time could be deemed as long-term sustainable," Pater said. "Cell C is struggling financially as is Telkom Mobile; among the MVNOs (mobile virtual network operators) Virgin Mobile is very small and struggling."

Safaricom has denied on several occasions that it is a dominant player in the market, insisting that its 67.9 percent market share, according to the regulator, is not high enough for it to be deemed dominant. With the spectrum acquisition, Safaricom is expected to gain more market share, by improving services and pushing the network to more remote areas.

"The spectrum which is in the 900Mhz and 1800 MHz range will allow to improve our quality of service for voice and data; specifically it will allow us to refarm the 900 MHz for 3G UMTS and increase the available bandwidth for customers in areas where the network is experiencing congestion and negatively impacting on connection quality and data speeds," said Nzioka Waita, Safaricom corporate affairs director.

Waita agreed with analysts that Kenya can not support more than three players, adding that innovation, value added services and network expansion are key in development of revenue streams beyond voice.

"Based on the market size, the optimum number of players for Kenya is three strong players (excluding MVNO's); some of the other jurisdictions have some factors such as huge population that allow for more players, however the key determinant is the available frequency spectrum for each player," added Waita.

For the regulator, focus has shifted from licensing mobile operators to encouraging infrastructure sharing. This has been done through licensing of MVNOs, which are expected to share infrastructure with existing players.