Zain has accepted Bharti offer for African assets, say sources

The Zain Telecom board met in Kuwait today and is said to have unanimously accepted a $10.7-11 billion (around Rs 51,000 crore) offer from Bharti Airtel [ Get Quote ] to buy its African assets, according to television and agency reports.

The deal, which fits into Bharti’s global ambition after two failed attempts to strike an arrangement with South African telecom major MTN, will add 41.9 million customers to Bharti Airtel’s 125 million subscribers to put among the world’s top five or six telecom operators in the world.

Sources say that Bharti and Zain might go for exclusive talks to work out the details of the deal through February and March.

Though Zain Telecom has not responded to the development, the company has acknowledged that a sale purchase deal is under way. “Zain has received an offer in relation to its operations in Africa excluding Morocco and Sudan. The board of directors of Zain will be discussing this proposal on Sunday, 14 February 2010. Further announcements will be made as appropriate,” the company said in a statement.

A spokesperson from Bharti Airtel, India’s [ Images ] largest telco, declined to comment.

Zain Telecom has over 70 million customers overall across 23 countries in West Asia and Africa. It has revenues of over $7 billion (Rs 32,000 crore) and market capitalisation of $16 billion (Rs 74,000 crore).

The offer made by Bharti includes assets in countries like Burkina Faso, Chad, Democratic Republic of the Congo, Republic of the Congo, Gabon, Ghana, Kenya, Madagascar, Malawi, Niger, Nigeria, Sierra Leone, Tanzania, Uganda and Zambia.

Zain’s Sudan business falls under its Middle East management umbrella. It is also present in Morocco through a 31 per cent stake in Wana, the country’s third largest mobile operator.

Bharti already has mobile operations in Seychelles, Sri Lanka [ Images ] has recently bought the assets of Warid Telecom in Bangladesh.

Africa is one of the world’s fastest- growing telecommunications markets and several Indian telecom companies have been eyeing it as competition intensifies on home turf.

“The Indian market is moving towards saturation and it’s important for mobile phone companies to look at emerging markets such as Africa for growth,” said R.K. Gupta, portfolio manager and managing director at Taurus Asset Management in New Delhi [ Images ]. “My only worry is that there is this dangerous trend of Indian companies trying to buy overseas assets at any cost. If you get a company at cheap valuation or fair cost it’s O.K., but if you pay aggressively it’s going to affect profitability for years.”

Zain has also been looking for a buyer for its African assets for a while now. It also had other suitors like French company Vivendi, Egyptian company Etisalat and even MTN.

One of shareholders of the Kharafi family, which has an 11 per cent stake in Zain, had an arrangement last year with a consortium of other shareholders to sell 46 per cent in Zain for $ 13.7 billion to a group of investors led by Delhi-based realtors Vavasi Group and Malaysian billionaire Syed Mokhtar Al-Bukhary.

The buyers’ consortium included state-owned Bharat Sanchar Nigam Ltd and Mahanagar Telephone Nigam Ltd [ Get Quote ]. However, the two companies withdrew from the consortium because they found the price of the shares too high. They were unwilling to pay more than $10 billion for the stake.

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