[itweb] MTN could face its first real competitor on the African continent if exclusive talks between Bharti Airtel and Kuwaiti-based provider Zain produce a sale.
Zain and Bharti this morning confirmed they had entered into exclusive talks over the sale of Zain's African presence. The deal will not include Zain's Sudan operation, which currently boasts seven million customers, nor the newly created Moroccan operation, of which it owns 30%.
Yesterday, it was revealed that Bharti Airtel hopes to snatch up Zain's substantial African operations for $10.7 billion. According to Frost & Sullivan ICT consultant Lindsey Mc Donald, the move has taken many in the industry by surprise.
“This move would indicate a period in which Zain is set to reconsider its strategy. An additional dimension to this situation is the recent resignation of the CEO, someone widely credited with turning Zain into the success story it has become. The operator also announced yesterday that Nabil bin Salama will now be assuming the role,” she says.
Mc Donald says Zain may well be looking to its core assets, possibly pushed home by the global economic downturn. “While there is a lot of potential in the African market, it is an expensive region in which to deploy assets.”
She says Bharti would make a perfect partner, especially since it has courted access to Africa through MTN in the past. “This move will pitch them as highly competitive rivals.”
Despite the opportunity in customer growth the acquisition gives Bharti, Dobek Pater, analyst at Africa Analysis, says MTN will have time to monitor Bharti's plans. “Zain has had a centralised model, with the head office essentially telling the sub-operations what to do. It will take some time before the operations will have the expertise to take matters into their own hands, since Bharti will not be as domineering to the individual operations.”
He says where MTN will need to be concerned is with Bharti's experience in low average revenue per user markets and its ability to turn around small margins with innovative ideas. “For the time being, MTN has nothing to fear, but it all depends on how Bharti uses the operations it gets.”
According to Pater, MTN will now invoke all its past confidentiality agreements with Bharti, since due diligence will have given the Indian company access to information about MTN it would not have had before. “It could prove potentially compromising if Bharti uses that intelligence to its advantage in Africa,” he notes.
Talks between Bharti and Zain are expected to come to an end on 25 March.
Clash of the Titans