Bharti finally takes over Zain’s Africa operations

By Patrick Kagenda

Sunil Mittal, the Bharti Airtel’s chairman, who started business as a bicycle spare parts dealer, last week put pen to paper to pay $10.7 billion for Zain’s mobile operations in 15 African countries. The deal gives Bharti Airtel 42 million subscribers in the 15 African countries, which have a combined estimated annual revenue of $3.6 billion. The acquisition will make Bharti the world’s fifth largest wireless firm by subscriber base with a presence in 18 countries and a subscriber base of 163.6 million with annual revenue of $92 billion. World leading telecom companies include China Mobile with 532.9 million subscribers and a revenue of $66.2 billion, Vodafone Group with 333 million subscribers and a revenue of $65.7 billion, China Unicorn with 284 million subscribers and a revenue of $22.6 billion , Telefonica with 264 million subscribers and $79.1 billion.

Bharti’s major challenge will be how to bring on board more subscribers as Zain has been losing them to its competitors following the entrance of more players into the market  In spite of the acquisition, Bharti will have to overcome huddles like that of the government of Gabon which has opposed the deal, saying Zain Gabon had not complied with regulations. The government said it reserves the right to take all necessary measures against the deal. Also in Nigeria, Econet is seeking to overturn a 2006 deal by Zain (then called Celtel) in which the latter bought a majority stake in the Nigerian mobile operator Vee Networks Ltd, now Zain Nigeria.

At Zain Uganda, Fred Massade, the External affairs manager said: “The deal was signed, so we are waiting for what comes next. The takeover comes after Kuwait’s Zain Telecom announced a 39.4 % slump in net profits for 2009 due to the global economic meltdown.

A statement from the Zain headquarters in Kuwait said the company posted a small loss in the fourth quarter of last year despite posting $ 677 million in net income in 2009 compared to $1.11 billion the previous year. The company made a $2.4 million loss in the fourth quarter of last year compared to the fourth quarter of 2008 when Zain posted a profit of $300 million. “Last year was the most difficult year. Companies of the group operated under pressure from the global financial meltdown and most markets were severely impacted by its fallouts, especially the African markets,” Zain Chairman Asaad al-Banwaan said in the statement.

The Group provided no details about the performance of its operations, but is believed to have posted a decline in Africa. In spite of the bad performance, the board of directors recommended the distribution of around $2.4 billion in cash dividends to shareholders. The company last week said it will post a net profit of $3.3 billion from the sale of its African operations to Bharti Airtel, which will be reflected in the second quarter of this year. Zain said its total consolidated revenues in 2009 reached$ 8.05 billion compared to $6.94 billion in the previous year which is a 15.7% rise. Zain also said its capitalisation increased to around $20 billion at present from 9.5 billion dollars a year ago.