The stock market gave a thumbs-up on Thursday to Bharti Airtel’s acquisition of the Africa assets of Kuwait-based telecom operator Zain. The markets seemed to shrug off questions linked to high debt incurred to fund the $10.7-billion deal. Bharti Airtel’s shares went up 2.7 per cent before closing the day with a gain of 1.7 per cent at Rs. 313 on the stock exchanges.
Analysts said the deal that would pose a management challenge to the Sunil Mittal-led company was significant for its potential linked to two lucrative markets –Asia and Africa. The deal would make Bharti, which already has operations in places such as Seychelles, Sri Lanka, Bangladesh and British isles, a true multinational corporation.
“The deal will help the company grow as it will provide access to over 15 countries of Africa with a customer base of 160 million and help the business grow,” said Aseem Dhru, CEO, HDFC Securities. “It will increase its size of operations and makes it’s a multinational player.”
The average revenue per user (ARPU), the holy grail that telecom service companies follow for growth, is considered high in Africa, where Bharti earlier failed in attempts to win over South Africa’s MTN for a friendly merger alliance.
“While in Europe there is little growth, South East Asia is crowded and Africa is the place where the next phase of growth will happen,” said Romal Shetty, telecoms analyst at KPMG.
“The deal is clear and uncomplicated as it was turning out to be in the case of MTN,” said Gaurav Dua, head of research at Sharekhan Securities.
While Bharti has seen its revenues and profits to witness a flat growth over the past three quarters, the deal will bring in volume growth for the company.
“While a company has to pay some premium for getting control on the company, at around Rs 300 per share the company looks very attractive to invest in,” said Dhru.