Bharti Airtel joins the club of global telecom majors.

It’s only a matter of time Bharti Airtel will join an elite club of global telecom majors — a deal with Kuwaiti telecom firm Zain to buy its African assets is just round the corner. Once this $10.7 billion deal is sealed, India’s largest telecom firm by revenue and number of customers, will become the seventh largest telecom company in the world, and fifth in the cellular mobile segment.

Once the deal is done, Bharti Airtel will have a pan-African footprint, thanks to the Zain’s operations in 15 countries, and will remain be-hind only to a select telecom companies that includes China Mobile and Vodafone. It will also gallop ahead of other giants such as China Unicom, Sweden’s TeliaSonera, and Germany’s Tmobile.

Media reports on Saturday however said that the closing of the deal could take weeks or months, Zain’s chairman Asaad al-Banwan was quoted as saying. In fact, Mr Banwan who spoke about a possible delay in a television interview did not however mention any issues that may derail the talks. Not too long ago, Bharti made two separate bids to merge with South Africa’s MTN, but the deal fell through because of nationalism issues in the African country.

Bharti Airtel which is also bidding for 3G auction costing billions in license fees, has put in place a $8.5 billion warchest exclusively for its African sojourn. The company in an official statement said that banks like Standard Chartered and Barclays would lend it $7.5 billion, or the State Bank of India would offer a rupee loan equivalent to $1 billion, which will be used for transaction costs. No wonder, the financing was oversubscribed as international banks were committing to underwrite the total amount.

Also, Bharti has $1.5 billion of cash on its balance sheet, but that’s not sufficient in the backdrop of the company’s foray into the African market and its plan to consolidate its position in the home market through third generation mobile technology 3G. Already, there are speculations whether the Indian telecom major would be able to replicate its Indian success story of low-cost “minutes factory” model to 15 new markets in Africa.

As analysts have said, one of the main challenges for the Bharti Airtel in Africa after the deal is to evolve a new strategy to become a dominant player there. After all, Zain has been on the back-foot in key markets like Nigeria and Kenya, and the company needs to tackle its foreign exchange exposure efficiently as it has to buy equipment in dollars whereas revenue will come from local currencies.

Yes, there are challenges but for Bharti Airtel and its promoters including chairman Sunil Bharti Mittal, it’s more like chasing a global dream. A few years ago, Mr Mittal wanted to make a foray into infrastructure business, and then Bharti Enterprises and Singapore’s Changi Airport formed a consortium to bid for the development and management of airports in Delhi and Mumbai. But that was before two relatively low-profile companies from South, GMR and GVK, put an extra effort to make a mark in India’s political and financial capitals respectively. In this round, Mr Mittal may not like any dropped call.

Source: Economictimes.

Thanks,
Nimesh.