Vivendi breaks off talks to acquire Zain Africa

Normal 0 false false false EN-US X-NONE X-NONE MicrosoftInternetExplorer4 /* Style Definitions */ table.MsoNormalTable {mso-style-name:"Table Normal"; mso-tstyle-rowband-size:0; mso-tstyle-colband-size:0; mso-style-noshow:yes; mso-style-priority:99; mso-style-qformat:yes; mso-style-parent:""; mso-padding-alt:0in 5.4pt 0in 5.4pt; mso-para-margin:0in; mso-para-margin-bottom:.0001pt; mso-pagination:widow-orphan; font-size:11.0pt; font-family:"Calibri","sans-serif"; mso-ascii-font-family:Calibri; mso-ascii-theme-font:minor-latin; mso-fareast-font-family:"Times New Roman"; mso-fareast-theme-font:minor-fareast; mso-hansi-font-family:Calibri; mso-hansi-theme-font:minor-latin;} Vivendi has confirmed that it has broken off talks with Zain about the sale of the latterÔÇÖs African operations, calling into question the ambition of Zain to be a global mobile telecommunications leader.   According to senior analyst Emeka Obiodu at Ovum, when Zain outlined its ÔÇÿ3x3x3ÔÇÖ strategy in 2003, it set a three-year timetable to become a regional, an international and then a global leader by 2011.   To abandon that ambition with a potential sale of its African business, says Obiodu, seems rather like an admission of failure.   Admittedly, he says, ZainÔÇÖs African operations are underperforming. Africa accounts for about two-thirds of the groupÔÇÖs customers but less than 20 per cent of its profits. In fact, in 1Q09, seven operations in Africa made a net loss.   But such is the case for other global players, Obiodu points out. Indeed, what is the point of having a global footprint if not to enjoy economies of scale and offset poor performance in struggling units?   When Ovum compared Zain Group with its peers, they could not find any discernable rationale why it should sell its African units.   However, as Zain spent less than $5 billion to amass the assets, if reports of a valuation of over $12 billion are true then ÔÇÿsilly moneyÔÇÖ could be driving a sale.   Ultimately, if a sale proceeds, a decimated Zain group will have to worry about its own survival as an independent telecoms group.   Vivendi said talks broke off because a deal would not meet its ÔÇÿfinancial criteriaÔÇÖ for acquisitions ÔÇô in effect suggesting that Zain was asking for too much money.   Other Western operators could wade in, but Orange and Vodafone have already built up an extensive African footprint and an acquisition would overlap with their existing business.   Others such as Telefonica and T-Mobile are so far removed from Africa that it would represent a new path in their strategy.   The most likely owners for Zain Africa, Ovum believes, cold be fellow Middle Eastern players or Chinese and Indian operators.   Both Bharti and Reliance in India have flirted with MTN as they seek entry routes into Africa. Likewise, China Mobile has long wished for a global footprint. Could Zain Africa give it its first major breakthrough on the international stage?   *┬á┬á┬á┬á┬á┬á┬á┬á┬á *┬á┬á┬á┬á┬á┬á┬á┬á┬á *