Essar eyes merger with Warid in Uganda

Mergers, Acquisitions and Financial Results

The Ruias-owned Essar Group is looking at merging its telecom licence for Uganda with the Dhabi Group’s operations in that country. The Essar Group will hold a majority stake in the merged entity, valued at $310 million, a person familiar with the development told ET. The UAE-based Dhabi Group is an investment firm led by the Abu Dhabi royal family.

In Congo too, the Ruias are negotiating for a majority stake in the Dhabi Group’s telecom arm, Warid Telecom Congo, valued at around $70 million, said another person tracking the discussions. With investment in these two businesses of the Dhabi Group, Essar’s telecom footprint in South Africa will expand to three countries — Kenya, Uganda and Congo. Essar already offers telecom services in Kenya under the ‘Yu’ brand. The Essar Group, last month, said it was in exclusive talks to invest in the Dhabi Group’s telecom operations in Africa.

While the Essar Group bagged the licence for Uganda earlier this year, Dhabi Group company Warid Telecom Uganda has been operational in that country since February 2008 with a subscriber base of 1.6 million. “Warid Uganda’s enterprise valuation is $310 million and a 51% stake will come for nearly $190 million, including a control premium,” said the source.

Essar Group had outlined a $200-million investment when it bagged the licence for Uganda. “A large part of that will now be used for buying into Warid Uganda. It will give Essar immediate access to over 1.5 million users and a share in one of the fastest growing operators in the region,” said the source.

An Essar Group spokesperson declined to comment. Teledensity in Uganda is around 30%, indicating a market with potential. It has five telecom operators — MTN Uganda, Zain Uganda, Uganda Telecom, Orange Uganda and Warid Telecom. Reliance Communications (RCOM) also has licences in Uganda through Anupam Global Soft, a firm it acquired in February last year. Anupam Global Soft has the licence to offer mobile, fixedline, internet, Wi-Max and Wi-Fi services in Uganda.

In Congo, Warid has invested around $90 million and has 250,000 subscribers. Essar has also applied for a licence in Congo, where teledensity is less than 20%. Africa has around 15% of the world’s population, with extremely low telecom penetration. Economic Times