India’s Bharti places $10b bid for Zain Africa

Kuwait-based mobile phone firm Zain’s acceptance of a $10.7 billion offer for its Africa operations promises a major realignment of the wireless telecoms landscape on the continent, analysts said, citing a possible renewal of market share wars in countries such as Kenya.

The Kuwaiti firm, which has been looking for a buyer of its Africa operations since early last year, said its board had accepted the Valentine’s Day bid from India’s Bharti Airtel but warned that the deal remains subject to completion of due diligence by the potential buyer and approvals from the relevant regulatory authorities.

“This potential transaction remains subject to due diligence, customary regulatory approvals and signing of final transaction documentation. There can be no assurance that a transaction will be consummated,” said a statement posted on Bharti’s website.

If successful, Bharti’s takeover of Zain’s Africa operations will place it in the league of the world’s top five biggest mobile firms and underscore Africa’s continued attractiveness to global operators looking for a presence in one of the remaining growth markets.

Bharti Airtel is one of Asia’s leading integrated telecom service providers and boasts the financial and technical muscle to turn around the fortunes of Zain Africa business that has been flagging since the Kuwaiti firm bought it from Sudanese billionaire Mo Ibrahim’s Celtel three years ago.

The division, with a footprint in 15 African countries accounts for 62 per cent of Zain’s 65 million subscriber base but contributes only 15 per cent to the group’s net profit pointing to the low average revenue per user (ARPU) from the region.

Telecoms market analysts say the business with a leadership position in nine markets remains an attractive proposition for global operators locked in saturated markets such as Europe and Asia.

Zain Africa has registered strong growth in markets such as Nigeria, Malawi and Madagascar besides delivering solid profits in Sudan and Morocco, which are not part of the proposed sale deal.

This skewed landscape of Zain’s operations has been the main driver of multiple valuations that have put a price tag of $10 billion or less on the Africa business.

Zain also reckoned that the offer from the French firm was too low.

In a research note released following revelation of Vivendi’s interest in Zain’s Africa operations, JP Morgan analyst Johan Snyman said the business was worth no more than $6.5 billion, making Bharti’s offer well a premium price for the Kuwaiti firm’s African interests.

On Monday, Shubham Majumder of Macquarie Group told Bloomberg that the Bharti offer was too expensive citing the low profit margins in the company’s Africa operations.

He described Zain Africa’s business outlook as “significantly inferior” compared to other operators in the region.