Zain - India's Bharti offers US$10.7 bn for its African business

[business standard] Move comes after bid for MTN came to naught.

Bharti Airtel, the most valuable telecom services company in India, has made an offer to buy the African assets of Kuwait-based Zain Telecom for up to $10.7 billion, according to reports in Kuwaiti newspapers. The Zain board, according to these reports, is expected to meet soon to discuss the offer.

Zain has over 70 million customers in 24 countries across West Asia and Africa, and its market capitalisation is over $16 billion. It has 41.9 million customers in Africa, and is the number one mobile operator in 12 countries. Bharti has been eyeing the African market for some time now. It had last year tried hard to strike a deal with MTN of South Africa but it failed. MTN has 103 million customers in 21 countries. Bharti, controlled by the Mittal family, is India’s largest provider of telecom services with over 110 million customers. The company, which also has operations in Seychelles and Sri Lanka, has often talked of acquisitions in emerging markets.

The promoters of Zain, led by the Kharafi family (its stake is over 11 per cent), have been looking for a buyer for a while. They had announced a preliminary agreement last year with a consortium led by Vavasi Group — a Delhi-based company which is into real estate, telecom and semiconductors — and Malaysian billionaire Syed Mokhtar Al-Bukhary to sell 46 per cent stake valued at $13.7 billion. The consortium also included state-owned Bharat Sanchar Nigam Ltd and Mahanagar Telephone Nigam Ltd. 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.

The Bharti spokesperson declined to comment. Bharti Group Deputy CEO Akhil Gupta had last year said that Bharti can look at Zain if the opportunity arises. However, sources in Vavasi Group said that Bharti has had talks with Zain to buy its African assets and the deal could also include it. The sources also said that Vavasi Group had approached Bharti to join its consortium last year, but it didn’t work out.

Zain has been on the radar of many suitors including include Vivendi, Europe’s largest entertainment group, and Etilasat of Egypt. Even MTN had shown interest in buying some of its assets.

Zain has annual revenues of over $7 billion. Africa is a booming market growing at around 25 per cent per annum. Zain has invested over $12 billion to expand its operations in Africa which includes countries like Tanzania (39 per cent share in mobile space), Zambia (70 per cent), Nigeria (25 per cent), Congo (45 per cent) and Chad (70 per cent).

Bharti offers $10.7 bn for Zain's Africa business