ZAIN SELLS OFF AFRICAN OPERATION TO BHARTI

By Oluwaseyi Bangudu
with agency reports
March 26, 2010 01:38AM
It's only a matter of time before India's Bharti takes over Kuwaiti Zain

Zain has confirmed that its board of directors met in Kuwait on Wednesday, 24 March 2010 to review the latest developments and negotiations regarding the sale of its African Unit to Bharti Airtel Limited. 'The Board is pleased to report that the due diligence process has been completed and that the parties are finalizing definitive agreements, which are expected to be signed in the coming days,' a statement issued by Zain Group Corporate Communications department said yesterday. Zain's management stated that the development is 'further to the announcement made by Mobile Telecommunications Company KSC, 'Zain', on February 16, 2010, regarding the sale of its African unit, 'Zain Africa BV' to Bharti Airtel Limited'. After the signings, the parties will move towards getting any required approvals. It has been reported that Bharti has already secured the entire financing requirement of USD 8.3 billion for this transaction. Bharti Airtel, India's top mobile firm was set on Thursday to seal a 10.7-billion-dollar deal to buy the African assets of Zain, giving it a presence in one of the world's phone markets. Bharti, which has twice failed to forge a deal with South Africa's MTN Group, has been racing to expand abroad amid savage price wars in India's congested mobile market that have slowed revenues. Analysts sceptical But analysts, according to the AFP report, said the takeover would 'require all of Mittal's legendary Midas touch to turn around Zain's struggling African operations, particularly in Nigeria, the Kuwaiti company's key market, where it has been losing clients. It stated that Rahul Jain, an Angel Broking analyst said the acquisition would give Bharti 'a strong business opportunity,' but added the company would face big challenges in the short term. 'It faces the challenge of integrating this acquisition, it has to deal with multiple geographies — there will be 15 new markets, not just one market,' Jain said. 'But we have faith in Bharti's ability to deliver.' Analysts say Bharti will seek to duplicate its low-cost, outsourced model of operations in Africa in a bid to return the Kuwaiti company's networks to profitability. Details of takeover The report also stated that under the agreement, Bharti, which already has 125 million Indian subscribers, would get 42 million new clients in Africa, making it the world's seventh-largest telecom company measured by subscribers. 'The proposed takeover, dubbed Bharti's 'African safari' by Indian media, values Zain's African assets at nine billion dollars. Bharti will also assume Zain's 1.7-billion-dollar debt, putting the deal value at 10.7 billion dollars' the report added. Last weekend, Bharti said it had raised 8.3 billion dollars to finance the takeover, adding the 'financing was oversubscribed, with major international banks committing to underwrite the total amount'. It also added that the deal would give Bharti combined sales of 13 billion dollars and clients in 15 African countries from Burkina Faso to Zambia and transform the group into an emerging market multinational as shares of Bharti closed up 2.27 percent or 6.95 rupees at 313.75 on news that Zain's board on Wednesday had cleared the sale to the Indian company. This deal is expected to mark the fulfilment of Indian billionaire tycoon Sunil Bharti Mittal's dream of gaining a major footprint in Africa and may be the second largest foreign takeover in Indian corporate history. Its former takeover target MTN would be one of its biggest rivals in Africa. The sale of 'Zain Africa BV' does not include Zain's operation in Sudan or its investment in Morocco.

Source http://234next.com/