Monday, October 5, 2009

Bharti & MTN Could Each Target Zain Africa After Failed Deal

After the failure of $23 billion cash-and-share swap deal with South African telecom major MTN, Bharti Airtel may be all set to take on its former partner in a battle to acquire control in Kuwait-based Zain Telecom that may also involve the shipping-to-telecom group Essar.
Banking sources confirmed that merchant bankers and some consortium partners who are talking to the telco have sounded out Bharti on Zain, and preliminary talks have been held through intermediaries. Asked about the talks, a Bharti spokesperson said, "We would not like to comment on market speculation."
Last month, MTN CEO Phutuma Nhleko told journalists that it would consider buying the African assets of Zain Telecom if the deal with Bharti did not go through.
Essar group, which is buying out the Uganda and Congo assets of Warid Telecom -- a joint venture between the Abu Dhabi Group and Singtel and is present in Kenya, has also reportedly been sounded out by Zain shareholders. A company spokesperson, however, declined to comment on the issue.
Asked about the buyer interest, Zain Telecom group media manager Antoine Aboukhalil said: "Unfortunately, we as management have no comments on such matters. These are a shareholder issue and only they can make comments."
The wealthy Kharafi family from Kuwait owns 11 per cent in Zain and wants to sell its stake. The government of Kuwait controls another 25 per cent through Kuwait Investment Authority, but has been silent on the issue. KIA officials were not available for comments, as it was a holiday in Kuwait.
Last month, the Kharafi family had announced it was signing a preliminary agreement with a consortium led by Vavasi Group -- a Delhi-based company which is into real estate, telecom and semi conductors -- and Malaysian billionaire Syed Mokhtar Al-Bukhary to sell a substantial stake in Zain valued at $13.7 billion.
It had said that Zain shareholders were committed to selling 46 per cent to the consortium, which would include Indian government-owned telecom operators Bharat Sanchar Nigam Ltd and Mahanagar Telephone Nigam Ltd [ Get Quote ].
The deal came under scrutiny after both BSNL and MTNL said they had not made up their minds whether to be part of the consortium or not. Sources close to Vavasi group, however, said both Bharti and the Essar group have approached them through intermediaries to discuss partnership possibilities. The source said: "A decision on eventually on getting in new partners would be taken in four to five days."
Banking sources say the other large shareholders like KIA have not stated their position on selling their stakes in the company and despite the preliminary agreement, the battle for control of Zain is still open.
For telecom companies in developing countries and especially for Bharti, a toehold in the African market is essential because it is growing at 25 per cent, roughly the same speed as India.
Zain Telecom is considered a valuable buy, with over 69 million customers and operations in 24 countries across West Asia and Africa, and a market capitalisation of $19.5 billion. In Africa alone, it has 41 million customers and is the number one mobile operator in 12 of the 16 countries it operates in. That compares favourably with MTN, which has over 103 million customers and operates in 21 countries.


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