Zain Reported to Be in Talks for $12 Billion Sale of African Networks with Vivendi

Telecoms

Dow Jones (citing Al Qabas newspaper) reported that Zain is in discussions with a French company to sell off its African operations. These same reports say that a sum of US$12 billion is being discussed with an un-named prospective French buyer.

The company has been sacking staff across its operations and last week outsourced major parts of its network services to Ericsson. Reports have also reached us that it has been trying to raise capital in local markets to fund expansion.

Zain Nigeria spokesperson, Emeka Oparah, told Nigerian e-news service Next: “I am not aware of the development. I only saw it as an alert from Google today, so I cannot say anything on it right now. Hopefully by tomorrow morning more information will start flowing on it.”

There are only two obvious candidates if the potential buyer is a French company: France Telecom (branded Orange) and Vivendi. Of these two, Orange has the greater financial muscle to raise the kind of sale price mentioned and might benefit most. It has staked future growth on getting bigger in Africa and most recently bought Hits Telecom, a speculative operation put together by Arab investors.

Both its most recent operations - in Kenya and Uganda - have been struggling. In Kenya it claims a million subscribers but these have been bought at the cost of a fierce price war that has seen ARPUs plummet to unsustainable levels. And in Uganda where it has just launched, it is not making speedy progress: informed sources say that its actual subscriber levels may be as low as 100,000-200,000.

However, Vivendi has previous form. In 2001 when Zain’s operation was called Celtel, it made a serious offer to buy the company but financial pressures following the dotcom collapse forced it to pull out. Subsequently Celtel claimed damages in the matter and won 500,000 euros. For the moment it seems to be committed to making African acquisitions but none of them have been made outside of francophone Africa.

Stop press: Reports as we went to press suggest that Vivendi is indeed the potential buyer and that if a deal cannot be reached Zain will turn to potential Indian and Chinese buyers.

(Sources: Various)