India Bharti Bids $US 10.7 Billion for Zain Africa
Five months after the collapse of a proposed tie-up between MTN and India's Bharti Airtel, the two are set to go head-to-head in Africa's cellphone industry, after Bharti launched a US$10.7bn bid for most of the African operations of Kuwaiti telecommunications company Zain.Under the terms of the deal, India's largest cellphone operator will take over Zain's units in 15 African countries.
Through this deal Bharti gets a ready-made pan-continental operation rather than having to acquire licences and enter markets on a “one-by-one” basis. However, most of Zain’s markets are in the second or third leagues by size and the exceptions – Nigeria and Kenya – have not performed well recently. Zain’s last annual report noted that the Kenya operation made the lowest financial contribution of all its operations on the continent.
Zain's board issued a statement last Sunday saying that it had agreed "to enter into exclusive discussions until March 25" with a view to completing the deal.
Bharti is looking to boost its margins by expanding beyond its core operation in India, where fierce competition by numerous international players has forced cellphone tariffs to levels that are among the world's lowest.
Bharti's US$10.7bn offer is higher than many analysts had expected when speculation about Zain's African operations grew last year.Despite accumulating about 42-million customers in Africa since its US$3.4bn acquisition of Celtel International in 2005, the Kuwaiti company is making a net loss on the continent.