Zain Africa goes to Bharti Airtel for $10.7b
By IT Edge Intelligence Unit (ITE-IU)
Zain
has unloaded its Africa operations to India’s telecom giant Bharti
Airtel for $10.7 billion
Zain in a deal expected to further excite competition in Africa’s
already fiery telecom sector and expanded portfolio of existing
services. The new deal transfers 100% of Zain Africa BV, its African
business excluding its operations in Morocco and Sudan , to Bharti
Airtel Limited to begin an official entry of the India’s giant into
Africa’s telecom turf.
“According to Cellular News, “the transaction implies an equity
value of US$9 billion and consideration will be fully satisfied in
cash, of which US$8.3 billion will be paid upon closing and US$0.7
billion will be paid one year from closing. Bharti Airtel will
assume US$1.7 billion of consolidated debt obligations.
“Subject to shareholder approval, the size of available
distributable reserves and the repayment of the US$4 billion
Revolving Credit Facility, Zain intends to distribute a large
proportion of the upfront net proceeds to shareholders in the form
of dividends.
“Commenting on the transaction, Asaad Al Banwan, Chairman, Zain
Group, said: “Since we acquired Celtel in 2005, we have grown
substantially to become one of Africa’s leading mobile operators,
and we are proud of the contribution Zain Africa has made to the
development of communications across the continent. This transaction
crystallises the significant value we have created for our
shareholders over the last 5 years.”
“Al Banwan added: “Bharti Airtel has a fantastic track record in
running successful operations in the emerging markets and we are
delighted that the African telecom operations that we so assiduously
built are becoming part of such a committed and reputable telecom
powerhouse. We wish Bharti Airtel all the very best for their future
success in Africa.”
“Nabeel Bin Salamah, CEO, Zain Group, said: “The transaction allows
Zain to focus on its highly cash generative operations in the Middle
East and to substantially improve its balance sheet. We are excited
about the growth prospects of the Middle East and we believe Zain is
well positioned to capture this opportunity.”
“With this acquisition Bharti’s total customer base will increase to
around 179 million in 18 countries. Bharti launched mobile services
in India in 1995, Sri Lanka in 2009 and acquired Warid in Bangladesh
in January 2010.
“Sunil Bharti Mittal, Chairman and Managing Director, Bharti Airtel
commented: “This agreement is a landmark for global telecom industry
and game changer for Bharti Airtel. More importantly, this
transaction is a pioneering step towards South-South cooperation and
strengthening of ties between India and Africa. With this
acquisition, Bharti Airtel will be transformed into a truly global
telecom company with operations across 18 countries fulfilling our
vision of building a world-class multinational.”
“Mittal also noted: “We are excited at the growth opportunities in
Africa, the continent of hope and opportunity. We believe that the
strength of our brand and the historical Indian connect with Africa
coupled with our unique business model will allow us to unlock the
potential of these emerging markets. We are committed to partnering
with the governments in these countries in taking affordable telecom
services to the remotest geographies and bridging the digital
divide. I would also like to compliment the Zain group for building
world-class operations in Africa and we have enjoyed working with
them on this transaction.”
“Mittal further added, “The extremely tight time lines and the
enormity of the task posed a real challenge. Bharti was able to
achieve this important milestone through much hardwork and support
from SingTel and the external advisors. Appreciation is in order for
all the team members involved in this transaction.” UBS Investment
Bank acted as lead financial advisor to Zain on this transaction.
BNP Paribas acted as co-advisor to Zain in relation to this
transaction.
What next in Nigeria for Zain?
By the time it rebrands as Bharti Airtel Nigeria, Zain would have
undergone its fifth evolution in a market it pioneered GSM services.
It opened services as Econet Wireless Nigeria and then became
VMobile and then Celtel before it turned Zain.
Zain’s metamorphoses have not been without controversies, internal
wrangling and court cases. It still has inconclusive court cases
with its first owners: Econet Wireless International. It has the
infamous sobriquet of being “Nigeria’s most controversial network,’
a tag that has impacted on its image and undermined its ability to
fund its operations.
Zain is not Nigeria’s No.1 mobile network neither is it the No.2. It
trails behind MTN and late entrant Globacom to occupy the third
position. Cash and boardroom tussle have connived to slow down
Zain’s buildout and undermine its ability to tame the competition.
In Africa, Bharti Airtel would be staking its money and experience
gained in India and other Asia countries to expand the reach of a
network that has demonstrated some level of market creativity
against arch rivals. Zain first introduced the One Network scheme
giving subscribers travelling across international borders the power
to roam at no additional cost. One Network gave Zainsome notch
against the competition but it still did not give it the No.1 spot.
Competitors reacted and launched a similar scheme.
In Nigeria, Bharti Airtel would have more arrogant, ambitious and ravenous competitors to contend with. Apart from the GSM operators aggressively adding blocks of services and rollouts that require a greater depth of marketplace creativity to tame, Zain has the army of CDMA operators – all operating under the unified licence scheme- to contend with. With more money coming into chest, CDMA operators portend the greatest threat to enhanced subscribers’ base to GSM networks. Zain appears weakest to fend off the competition.
One area it has performed unimpressively is the fast growing mobile Internet sub-sector. While MTN and Glo have been able to offer highly competitive packages that equal that of CDMA operators, Zain’s offering is still a fly-by-night scheme. Does not count much on reliability! Mobile Internet is a carrot operators have leveraged on to increase subscribers base. Zain has not been able to leverage on this.
In all, cash, personnel, experience, creativity will count. They
will decide the future of Zain as Bharti Airtel. The plus is that
Bharti Airtel comes from a country that present similar challenges
in terms of infrastructural development, demography and economic
wellbeing of potential subscribers. It is coming more prepared than
Zain was.
