Bharti Airtel and Zain have set a deadline of March 25 for exclusivity on Bharti’s intended buyout of the Kuwait firm’s Africa operations excluding those in Sudan and Morocco. Bharti will soon begin due diligence to examine the details needed to seal the $10.7 billion deal.
A Bharti Airtel statement said the buyout discussions will be “mutually exclusive.”
It is a tough act for the Sunil Mittal-led group, which analysts say has to rise to the challenge and become a global player betting on its management strength to keep its lead while it faces pressure in domestic market following a price war waged by new GSM competitors such as Tata DoCoMo and Uninor, besides old rival Reliance Communications.
The numbers are showing up in a bad way. In the quarter ended December, 2009, Bharti’s net profit growth was only 2 per cent from the previous quarter while revenues grew by only one per cent.
“With the hotting up of competition in the domestic markets, especially the pressure on tariffs, looking outside to expand the footprint may be a good strategy from a long-term perspective,” said B. K. Syngal, senior principal, Dua Consulting and former chairman of Tata Communications.
A source involved in the deal said Bharti’s acquired expertise in growing the Indian market for 15 years can come in handy.
“Africa is the only market that has high potential. Therefore, it is natural for Bharti to look for expansion in Africa,” the source said.
The Zain deal follows Bharti’s abandoned bid to negotiate with South Africa based MTN for merger of their operations in a two-way $ 23 billion deal.