Batelco closes in on Africa buy, sees flat profit

Mergers, Acquisitions and Financial Results

Bahrain Telecommunications Co (Batelco) plans to make an acquisition in Africa within six months, its chief executive said, and could spend almost $2 billion. CEO Peter Kaliaropoulos also told Reuters in an interview that he expects 2009 profit to remain at last year's level, as higher profit in Bahrain is offset by investment costs for its new Indian operation.

"There are three opportunities we are working on in Africa, they are all existing operators, and ... we are giving ourselves a time frame of six months to make sure we are getting the right opportunity for Batelco," Kaliaropoulos said on Monday.

"Our preference is buying into existing companies, or buying into companies that have just started operating," he said without elaborating. Batelco, which operates in six Middle East markets, seeks to diversify by growing in India and South East Asia as well as Africa to offset rising competition at home.

In January, Batelco agreed to buy a 49 percent stake in Indian mobile telephone operator S Tel Ltd for $225 million, partnering with Millenium Private Equity, only days before Saudi Telecoms Co (STC) won Bahrain's third mobile license.

Kaliaropoulos reiterated that Batelco is prepared to raise $1.5 billion in debt to finance further acquisitions, and with some additional equity could seek targets with a price tag of up to just under $2 billion.

Batelco is open to several options to raise the funds, he said. "We are looking at bonds, we are looking at loans from banks, I think it is going to be a combination. It could be Islamic finance, it could be normal finance," he said.

Kaliaropoulos said Batelco is also seeking to compliment its new operations in India by organic growth in broadband Internet. "There is more to do in India, it is not just the mobile business" he said.

Kaliaropoulos said he expects Batelco's profit to be flat this year, due to the start-up costs in India. "We don't expect a huge growth in profits, we don't expect a huge decline in profits," he said.

"It is a start-up operation (in India), so we will obviously be carrying our share of the operating costs and losses over the first year, because the company is not going to turn positive for another three years," he added.