South AsiaÔÇÖs biggest mobile phone company Bharti Airtel has offered $10.7 billion to buy most of ZainÔÇÖs African assetsÔÇöa deal that would create one of the largest emerging market phone operators.
KuwaitÔÇÖs Zain and IndiaÔÇÖs Bharti will hold exclusive negotiations until March 25, the companies said in statements today.
This is New Delhi-based BhartiÔÇÖs third attempt to enter Africa, highlighting the companyÔÇÖs ambitions to expand overseas as competition intensifies at home. ZainÔÇÖs African business would give Bharti access to an estimated 42 million customers across 15 African countries; however, the proposal doesnÔÇÖt include ZainÔÇÖs Morocco or Sudan operations.
At $10.7 billion, Bharti would be paying about $250 for each of ZainÔÇÖs African customers.
Africa represents about 62 per cent of Zain's nearly 65 million customers but accounts for only 15 per cent of its net profit.
BhartiÔÇÖs move mirrors efforts by other phone companies seeking growth in emerging markets as their home markets get tougher. Vivendi, owner of the French mobile operator SFR, said at the end of last year that it had acquired BrazilÔÇÖs GVT for $4.1 billion.
Newbury, UK-based Vodafone has also made recent acquisitions in India, Turkey and Qatar to make up for falling demand in its European markets. In 2008, it also took control of South AfricaÔÇÖs Vodacom.
BhartiÔÇÖs purchase of Zain assets would be the second largest overseas acquisition by an Indian company, after Tata Steel paid $12.9 billion for the UK steelmaker Corus in 2007.
"Zain's Board issued a resolution today (Sunday) to accept a proposal received from Bharti Airtel to enter into exclusive discussions until 25 March 2010 regarding the sale of its African unit for a total consideration of 10.7 billion dollars," the Zain statement said.
The statement continued: "Bharti's proposal 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.ÔÇØ
Zain entered the African market in 2005, buying the assets of Dutch Celtel for $3.5 billion. It later made acquisitions in several other African countries and also expanded in the Middle East through investments of around $12 billion.
Zain also operates in Bahrain, Iraq, Jordan, Lebanon and Saudi Arabia, as well as Kuwait. The company has a market capitalisation of $16.1 billion.
Bharti currently has 125 million subscribers, with significant future growth potentialÔÇöcurrently less than half of India's 1.14 billion population own a phone.
