Indians buying Zain this month?

By Patrick Kagenda

Kuwaiti-based Zain, which was last year a headlines maker after its July announcement that it was looking at its options in Africa including a possible sale of its networks, is back in the news.

This time newswires report that it is in talks with Bharti Airtel the leading telecoms giant in India. Officials of Bharti, which saw its own deal with MTN fall through last year, have confirmed talks with Zain.

Bharti officials told the media last week that the company was still doing due diligence but was hopeful of clinching a deal by March 25, when a period of exclusive talks end.

“Bharti should be able to integrate Zain’s operations within six months of closing the deal and that no extraordinary regulatory issues would threaten the deal,” said a Bharti Airtel official.

At Zain Uganda, the head of corporate affairs Fred Massade confirmed there were negotiations ongoing on the impending merger. As to what implications the merger would have on Zain Uganda Massade said it was still early to make a comment.

In detailed comments to analysts since confirming the talks with Zain, Bharti Airtel said $9 billion was not a high price for Kuwaiti telecom Zain’s Africa assets given the growth opportunities, though it could dilute earnings in the short-to-medium term for India’s leading telecom.

They said Africa had good growth opportunities among emerging markets, given its high population, lower mobile penetration and relatively less competition. According to estimates, the total population of the 15 African countries Zain operates in is just under 500 million, and about 35 people in every 100 use mobile phones.

Bharti is yet to detail its financing plans but bankers have said the company is looking to raise debt from offshore as well as the local market in India to fund the deal.

When former Zain chief executive, Saad al-Barrak, quit three weeks ago he re-igniting rumours of the possible sale of Zain Africa operations in his exit interview.

Al-Barrak had been with Zain since 2002 and was the main driving force behind the firm’s massive expansions and acquisitions. Over the past few years, Zain expanded rapidly by paying billions of dollars for huge acquisitions and has operations in 23 countries in Africa and the Middle East. During Al-barracks tenure of office, Zain`s customer base rose from around one million subscribers to about 72 million as of today in all its areas of operation.

In spite of Zain`s strong growth, the global financial meltdown forced some of Zain`s main shareholders, notably the biggest private investor, Al-Khorafi Group, to offer to sell a majority stake in the firm. Last year France’s Vivendi and Orange owner France Telecom stopped short of a merger with Zain. Zain`s Africa assets are currently valued at $12 billion.

The MTN /Bharti Airtel deal hit the rocks after the south African government expressed concern over exchange control issues.