Zain Seeks More African Markets
Cellular operator Zain is planning to raise $5bn through listing on a European stock market to help fund its entry into three more African countries within a year.
Zain, one of the main African rivals to MTN, operates in 22 countries and is already the world's fourth-largest operator measured by geographic spread. Now its CEO for Africa, Chris Gabriel, says his ambition is to turn Zain into one of the world's 10 largest operators by revenue and profit by 2011.
Its growth plans are based on acquisitions in the coming months. Its parent company is Kuwait-listed Mobile Telecommunications Company (MTC), a network operator in the Middle East, which gained its operations in Africa through the $3,4bn acquisition of Celtel in 2005. Celtel's networks now trade under the name of Zain.
MTN had tried to take over Celtel for itself, but its bid was trumped by the cash-rich Kuwaitis.
Zain's ability to borrow from its parent company would be augmented by a listing next year, Gabriel said on Friday. "We are looking at expanding in Africa and in the next six to 12 months we will definitely take on three African operations."
The company was assessing opportunities in about seven countries .
"We are looking across Africa at opportunities that arise and if we see any value we will be making acquisitions. We are looking at all options."
Paying for an acquisition would not be a problem as its parent company had access to plenty of cash, Gabriel said. "The listing on a European stock exchange will provide currency for the organisation but there is no shortage of funds if we find the right acquisition," he said.
There were no specific countries that Zain wanted to enter, and each opportunity would be assessed on its merits.
Zain competes against MTN and Vodacom in several countries, but has never entered South Africa. Gabriel said Zain would like to operate in South Africa and was keeping an eye on the market.
He would not comment on whether Zain may make a bid for South Africa's lagging third cellular operator, Cell C. Cell C is 60% owned by the industrial conglomerate Saudi Oger and 15% by another Saudi company, Lanum Securities. That Middle East connection could smooth the way to a potential takeover, but Gabriel said he would not comment on conjecture.
Nor would he comment on the potential deal MTN is negotiating with the Indian cellular operator Reliance Communications, except to say: "I actively encourage them to do it because it stimulates the market and expands networks into remote and rural areas. We have our own aspirations and are looking at acquisitions as we speak, and I encourage all our competitors to do the same thing."
Gabriel would not say whether Zain will bid for a third cellular licence in Iran, which should go up for sale next month. That would again bring Zain into competition with MTN, which is rapidly rolling out its network in that country.
The most attractive countries for Zain are those neighbouring its existing operations, so it can expand a scheme to let users make calls from adjacent countries without paying roaming fees.
"We want to expand our footprint into contiguous countries to grow our One Network scheme," said Gabriel.
The One Network initiative has proved popular in several countries where users regularly cross the borders as it makes the cost of calls far cheaper.