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

Bharti Airtel’s arrival in the African market marks an emerging trend in which Asians operators are fighting for a piece of the cake that has long been dominated by European players.

If successful, Bharti Airtel’s takeover of Zain Africa will make it the second Indian operator to own a majority stake in a Kenyan mobile operation, joining Essar which controls 80 per cent of Essar Telecom Kenya which trades as Yu.

Bharti will take over the 95 per cent stake in Zain Kenya previously owned by Zain Group.

The entry of a second Indian player into the local telecommunications market is likely to intensify the fight for rural, low spending clients, industry analysts said.

“Africa works just like India, because of a mix of factors including the lower spending power and the lack of formal infrastructure. We can count on the strategies that worked in India to work here,” said Srinivasa Iyengar, the former CEO Essar Kenya in a previous interview.

Bharti has used Essar’s pursuit of a low tariff, rapid subscriber acquisition model in other markets, setting the stage for intense competition on the local front.

Still, analysts insist that the operation currently known as Zain Kenya is likely to benefit from a renewed flow of investment from the deal.

“In terms of performance on the technical side Zain has a wider footprint, less congestion and has proved to have the all important innovation mantle. What has been lacking is a clear market segment, focus and a consistent marketing strategy,” said Mr Kadzutu.

The local unit has managed to maintain its number two position in the highly competitive market due to a focus on its tariff table and value added services such as its international roaming program and the mobile money transfer product Zap that trades across borders.

Zain Kenya has 280 employees down from 550 last May, a number that has progressively declined in the last eight months.

Between May and November 2009, the firm retrenched 170 employees in a staff rationalisation program, and thereafter enjoined 100 of its workers to Nokia-Siemens in a knowledge transfer deal.

For Bharti, the deal represents a second attempt to enter the Kenyan market after its bid to become the country’s second national operator failed in October of 2006.

At the time, Bharti refused to give a reason for its pullout from bidding for the licence of a second national telecommunications operator to rival Telkom Kenya.