Zain board approves Bharti's bid for Africa

Bharti eyes high-growth markets to beat competition at home

Bhaskar Hazarika & Sanjeev Sharma

New Delhi, February 14: Kuwait-based Zain telecom could be the second major overseas expansion plan for the largest Indian telco, Bharti Airtel after it failed to ink the deal with South African telecom operator MTN. Zain board on Sunday unanimously accepted the bid from Bharti Airtel to buy Zain's African assets.

Kuwait Investment Authority (KIA), which has a 24.6 percent stake in Zain has put its stake on the block. Bharti has offered a bid of $10.7 billion to buy a stake in the company for its African assets excluding except for Sudan and Morocco.

When contacted Bharti Airtel spokesperson declined to comment. An email sent across to Zain failed to elicit any response.

Director telecom, KPMG, Romal Shetty said that Africa is one of the lucrative markets for operators. "In the next 3 to 4 years India will continue to be the most difficult market with 12 to 13 operators. For Bharti getting in Africa market, it could be the right time. As the company has pioneered the low cost concept, it can replicate the India success in Africa," Shetty said. He said that the compared to India the ARPUs in African market is around Rs 480 to Rs 500 ($8-10) compared to India, where ARPUs stand at sub- Rs 200.

According to Citigroup report, net debt for Bharti reduced by Rs 23 billion to Rs19 billion during the third quarter. "Overall net debt is down Rs 50 billion this fiscal, indicating strong free cash flow generation with lowering capital expenditure intensity. In the third quarter capital expenditure stood at Rs 17 billion," the report stated.

Managing director, Taurus mutual fund, RK Gupta said, "Costumer growth in India will be become stagnant in 3-4 years and Bharti has to look out for growth beyond Indian geography. African is an unexplored territory where growth can happen, compared to other geographies such as South East Asia, Europe where growth has declined. In case of Bharti, picking up a stake in Zain will add to the subscriber numbers and will boost the revenue. Only major area of growth in India is adoption of 3G."

An investment banker close to the development in condition of anonymity told Financial Chronicle, "Bharti had earlier said that it would continue to pursue international expansion. The company had clearly mentioned that Africa remains to be an important geography for expansion. Zain will offer Bharti access to one of the growth markets globally, with only three operators. This would also help Bharti to beat the pressure on their margins, which has witnessed a decline."

In December Bharti has picked up 70 per cent stake in Bangladesh telecom operator, Warid Telecom with an initial investment of $ 300 million.

Zain is the third-largest telecom operator in the Arab world. Last year a consortium n October halted talks to sell the African assets to appease potential buyers of a 46-percent stake in the parent company, Zain Group.

In October 2009, Indian telecom PSUs BSNL and MTNL joined the consortium with an Indian firm, Vavasi expressing their keenness to take a majority stake in a joint special purpose vehicle (SPV) to buy 46 per cent in Zain, along with Malaysian billionaire Al Bukhary.

Bard al-Khorafi, whose Khorafi Group holds 20 per cent in Zain, announced in September that they, along with other shareholders, were selling 46 per cent of Zain to a consortium made of Malaysia’s al-Bukhari Group, BSNL, MTNL and the Indian group called Vavasi.


© Time

Bangla Regulator sees no issues with Bharti bid

New Delhi, Dec 18 2009

Bhaskar Hazarika

The Bangladesh Telecommunication Regulatory Commission sees no legal barrier to Bharti Airtel picking up 70 per cent in Warid Telecom.

The commission secretary, Mahboob Ahmed, in an email communication to Financial Chronicle said, “According to the provisions of the Bangladesh Telecommunication Act, there is no legal bar on transferring shares of the company with the prior permission from the commission.”

Bharti has reportedly made a $300 million bid for a 70 per cent stake in Bangladesh’s Warid Telecom. This is the Indian company’s second bid to buy up a foreign telecom operator, after a failed attempt for a merger deal with South Africa’s MTN. Over four months of ‘exclusive talks’ and two extensions, the proposed $24 billion Bharti-MTN deal foundered on regulatory hurdles.

The Bangladesh regulator has sought details from Warid on the proposed stake sale to Bharti. The regulator is also likely to meet Bharti and Warid officials.

“We have asked for some information and documents relating to the sale. The commission will examine these will take a decision. The commission is expecting a meeting with Warid and Bharti officials as early as possible,” Ahmed said.

The commission’s move comes after the Dhabi group, which fully owns Warid, sought approval for going ahead with the deal.

A Bharti spokesperson said on Wednesday, “We have nothing more to comment on it.”

In 2008 Japan’s NTT DoCoMo paid $350 million to pick up 30 per cent in another Bangladesh operator, AKTEL, majority owned by Axiata of Malaysia.

Warid is the fourth largest among Bangladesh’s six telecom operators with 2.79 million subscribers at the end of October, when the total mobile subscriber base in the country was 51.4 million. The largest operator is the Grameen Phone with 22.30 million subscribers, followed by Orascom Telecom (12.27 million) and Axiata (10.99 million). The other two operators are PBTL and Teletalk.

© Financial Chronicle