Bharti, Zain 'may clinch deal next week'
New Delhi, March 20, 2010
Bharti Airtel's board will on Saturday discuss its $9 billion bid for Kuwaiti telecom group Zain's African units, a source said, and the two sides may clinch a deal next week.
The exclusive talks between billionaire Sunil Mittal's telecom group and Zain expire on March 25, marking the third time it has tried to get its hands on a meaningful African business after two failed bids for South-Africa's MTN.
'Currently Bharti is aiming to meet the March 25 deadline, but there could be a slippage of a day or two. Tomorrow's board meet is crucial,' said a source with direct knowledge of the matter.
Financing details were likely to be finalised in the next two days, the source said.
Bharti has been hunting for emerging market assets as its home turf becomes fiercely competitive and call charges plummet in the world's fastest growing mobile market.
The two sides also look to have cleared a potential stumbling block over ownership of Zain's assets in Nigeria, of which it holds 65 percent.
Bharti might put part of the purchase price in an escrow account to protect it from potential problems, the source said, such as that in Nigeria. The unit is a crown jewel, without which Bharti would not close the deal.
Bharti and Zain have said $700 million of the purchase price would be paid a year after the completion of the deal, and the source said part of it would be put in the escrow account.
'The due diligence has been conducted quite speedily. So if something works out negatively, the money can be adjusted against that,' the source said, referring to the money likely to be put in the escrow account.
'No major issues have emerged in the due diligence apart from Nigeria,' he said.
A spokesman for Bharti, which is conducting a due diligence assessment of the Zain assets, declined to comment on the board meeting and the possible setting up of an escrow account.
Banking sources said Bharti is aiming to raise up to $8.5 billion in offshore loans to fund the deal and has issued a term sheet to banks.
A team of bankers from UBS -- which is advising Zain -- visited Nigeria with Mittal last week, sources have told Reuters, indicating the parties had worked around the Nigerian problem.
Bharti, 32-per cent owned by Singapore Telecommunications, had earlier played down any concerns over the conflict in Nigeria, but the sources could not specify what solution the two parties had reached after last week's visit.
The escrow account, and the setting aside of part of the payments, now indicate the likely direction of the talks.
Econet, which owns 5 per cent of Zain's Nigerian assets, is seeking to overturn a 2006 deal by Zain -- then called Celtel -- in which it bought a majority stake in Nigerian mobile operator Vee Networks, now Zain Nigeria.
The South African group was a founding shareholder of Vee Networks and said that its right of first refusal was breached when its Nigerian partners sold the shares to Zain.
Zain is selling the 65 per cent it owns in the Nigerian operations to Bharti, and the Indian group will leave existing minorities in tact.
Other minorities include Broad Communications, which has welcomed the divestment because it thinks Zain has done a poor job in running the company.
Talks between Bharti and MTN Group, which would have created the world's third-largest mobile operator, collapsed for the second time in September over South Africa's reluctance to allow a flagship corporate to lose its national character. – Reuters