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Zain: Bharti pays more for less

Is Bharti Airtel paying too high a price for the Africa assets of Kuwait’s Zain?, reports Manoj Gairola.

business Updated: Feb 16, 2010 21:46 IST
Manoj Gairola

Is Bharti Airtel paying too high a price for the Africa assets of Kuwait’s Zain?

Zain’s Africa assets were valued between $7.5 billion and $ 8 billion in an earlier attempt to sell the company last year by one of the largest shareholders of Zain, according to a source associated with the deal.

In fact, these included operations in Sudan and Morocco that have been excluded in the current round.

While Zain’s stock has been surging Bharti has been hit by downgrades after it offered to pay $10.7 billion (Rs 50,000 crore) in an all-cash deal for its Zain Africa operations.

For Bharti, this could mean a big digestion challenge to justify the hefty price. Only 15 per cent of Zain’s revenues come from Africa.

Last year, a consortium led by India’s Vavasi had entered into an agreement with the Kharafi family, one of the largest shareholders of Zain, to buy controlling stakes in the company. France-based Vivendi is the other company that sought the deal. Both did not materialise.

“Sunil Mittal has proved his management skills in Indian market. However, it would not be so easy to manage Zain’s Africa operations as Zain faces a lot of challenges in important markets such as Nigeria,” said Subodh Aggarwal, chairman of Euromax Capital, a London-based investment bank.

Zain and Bharti did not reply to emails sent by Hindustan Times seeking their views.

Bharti said in a release that the $10.7 billion value will involve a payout of $9.0 billion after deducting a debt of $1.7 billion.