Bharti closes $9bn Zain Africa deal
New Delhi, June 8, 2010
India's Bharti Airtel has completed its $9 billion acquisition of African operations from Kuwait's Zain, in a deal that would make the Indian firm the world's No 5 wireless carrier by subscribers.
In March, Bharti struck a deal to buy the Kuwait firm's mobile operations in 15 African countries, in India's second biggest overseas acquisition after Tata Steel's $13 billion buy of Corus in 2007.
The Indian telecom market leader is facing ferocious competition at home and betting on opportunities in Africa are worth the risks of operating there even as some regard the total deal value of $10.7 billion -- including assumption of $1.7 billion debt -- as a full price Bharti is paying.
The deal, which would lift the company's subscriber base to 180 million from 18 countries, brings tough financial and management challenges for a company scrambling to defend its lead in a fiercely competitive home market.
Bharti will aim for $5 billion in annual revenue from Africa by 2012/13, Manoj Kohli, the chief executive of its international unit, said.
Analysts have said a big challenge for Bharti was to streamline operations across 15 different countries in Africa, raising revenue and turning around the loss-making assets.
Bharti, which is 32 percent owned by Singapore Telecommunications Ltd, selected Zain as its second choice for building a major presence in Africa after it twice failed to finalise tie-ups with South Africa's MTN Group, the continent's biggest operator.
The deal had run into hurdles after the government of the small central African nation of Gabon had come out against the deal, but later approved the sale. The government of Congo Republic had also said Bharti-Zain deal broke law.
There was also a dispute about minority ownership of Zain's operations in Nigeria, the biggest market in the deal. Minority shareholder Econet was seeking to overturn a 2006 deal by Zain -- then called Celtel -- in which it bought a majority stake in Nigerian mobile operator Vee Networks Ltd, now Zain Nigeria.
On Tuesday, Bharti said the Nigeria ownership dispute had been settled.
Under the terms of the deal, Bharti had to pay $8.3 billion to Zain in the first tranche, and the remainder after one year from the closing.
Bharti had secured debt of up to $8.5 billion from a clutch of lenders to fund the deal, and may have to spend more to expand networks that analysts say have been under-invested for years.
The company also recently paid about $2.6 billion for acquiring 3G licences in India and will have to pay more after an ongoing auction for wireless broadband radio spectrum is completed. - Reuters
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