India's top telecom player Bharti Airtel on Tuesday has successfully concluded its $10.7 billion deal to acquire the African assets of Kuwait's Zain making it the world's fifth largest mobile phone services company.The transaction is the largest ever cross-border deal in an emerging market and will result in combined revenues of about $13 billion.Zain Africa will be renamed Bharti Airtel International BV and 15 top Zain executives will move to India. Debt for Zain and Bharti's 3G spectrum combined stands at $10 bn. Combined interest outgo for Bharti would be $200 mn annually. Will use Zain expertise in running 3G operations
This is also the largest overseas acquisition of assets in Africa by an Indian company, even though it does not cover the Kuwaiti company's operations in Sudan and Morocco. The total customer base of Bharti now stands at over 180 million in 18 countries.African operations will not be profitable immediately and will not go to middle east.The closure of the deal implies that Bharti has received all the approvals from the governments and regulators of each of these 15 nations.
a 40-member management team from Bharti Airtel headed by its CEO for international operations, Manoj Kohli will soon relocate to Kenyan capital Nairobi, the city chosen by the Telco to base its African headquarters. This management team will work with Zain's top executives in all 15 countries where it offers services in Africa and oversee its operations.
With Zain Africa's 42 million customers, Bharti Airtel will have over 180 million subscribers, making it the world's fifth-largest mobile phone operator. The deal will also give Bharti a firm foothold in the relatively untapped African market and the combine will have revenues of $13 billion and earnings before interest, taxes, depreciation and amortization of around $5 billion.
This was Bharti's third attempt to enter the largely untapped African market after the failure of merger pacts with South African telecom major MTN on two occasions. Africa accounts for a little over 60 percent of Zain's 71.8 million customers. The $10.7-billion deal, including $1.7 billion of Zain's debt, was signed in Amsterdam, the base of Zain's African unit on March 30.
The tariff war that has plagued India's telecoms space over the last one year has lowered profits and valuations of most mobile firms in India, forcing the likes of Bharti Airtel to look for attractive options outside the country. Looking for better deals than those being offered by its existing partners.
Bharti has invited bids for IT-related services as well as the management and maintenance of mobile and landline networks in fifteen nations as it looks to replicate the success of its low-cost model of operations in Africa."The three big Indian IT firms (TCS, Infosys and Wipro) along with IBM are in the race as Bharti Airtel is looking for the best deal.
Ericsson and Nokia Siemens, which maintain and manage Bharti Airtel's networks in India through multi-billion-dollar contracts, are not guaranteed similar deals with Zain. Nokia, Siemens and Ericsson will have to compete with China's ZTE and Huawei and bids have already been called for. While Bharti has maintained it will take its partners along when it goes overseas, it has also been open to engaging with new vendors who offer a better deal. For instance, Bharti awarded the contract to build, manage and maintain its networks in Sri Lanka to China's Huawei. Bharti is now among the five largest mobile operators in the world. This will further strengthen the historic Indo-Africa economic and social ties and provide a big boost to South-South cooperation
The African countries in which assets have been acquired are Burkina Faso, Chad, Congo Brazzaville, Democratic Republic of Congo, Gabon, Ghana, Kenya, Madagascar, Malawi, Niger, Nigeria, Sierra Leone, Tanzania, Uganda, and Zambia. Zain is the market leader in 10 of the 15 countries and second in four countries.Of the $8.3 billion paid to Zain, Bharti has raised debt from a consortium of foreign banks and State Bank of India with the lead-arranger and lead-advisor Standard Chartered Bank committing the highest amount -- $1.3 billion, followed by Barclays at $900 million. The rest of the co-advisors -- ANZ, BNP, Bank of America-Merrill Lynch, Credit Agricole CIB, DBS, HSBC, Bank of Tokyo-Mitsubishi UFJ and Sumitomo Mitsui Banking Corporation -- have allocated $600 million each.
Posted By:
KARTIK GALA
(Business Development)
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