India's top telecom company Bharti Airtel was set to become the 7th largest global player in this business, with an approval from Kuwait's Zain to buy its African assets, other than those in Morocco and Sudan, for $10.7 billion.
"The company confirms that the board of directors of Zain met in Kuwait on Wednesday, March 24 to review the latest developments and negotiations related to this matter," the Kuwaiti company said in a statement Thursday.
"The board is pleased to report that due diligence process has been completed and that the parties are finalising definitive agreements which are expected to be signed in the coming days."
Thursday was the final day of their exclusive talks.
Based on regulatory approvals, the Sunil Mittal-led Bharti will pay $9 billion to acquire Zain's assets spread across 15 African countries. It will also adopt $1.7 billion of Zain's debt. Bharti has already tied up $.8.3 billion to fund the acquisition.
The confirmation saw the scrip of Bharti Airtel gain nearly 2.5 percent, or Rs.7.5, on the Bombay Stock Exchange Thursday, to rule at Rs.314.30. The scrip had earlier shot up to Rs.316.70.
This has been Bharti's third attempt to enter the largely untapped African market after failing to enter into a merger pact with South Africa's MTN on two occasions. Africa accounts a little over 60 percent of Zain's 71.8 million customers.
"Bharti's acquisition of Zain can be seen as a natural evolution of their business, as they have now reached critical mass in terms of size and share in the domestic market," said Kamlesh Bhatia, principal research analyst with leading tech think tank Gartner.
"Zain presents a suitable opportunity to expand in a region that has a similar market condition, allowing Bharti to leverage its nearly perfected low cost, but high volume model," Bhatia said, adding adapting to cultures in 15 countries will be a challenge.
Bharti Airtel is among Asia's leading telecom service providers with operations now in India, Sri Lanka and Bangladesh. As on Jan 31, It had the largest market share of 23.33 percent in India's mobile telephony segment with 121.71 million subscribers.
The Indian firm is currently the 10th biggest player in the global mobile phone service business, as opposed to Zain's 20th rank. Post the acquisition of the African assets of Zain, it is set to climb three places to the 7th position.
Some of the highlights of the deal with Zain are:
- Offer of $10.7 billion for Zain's assets
- Deal excludes Zain's operations in Morocco and Sudan
- Zain has over 71.8 million customers in 23 countries
- In the Middle East, it has 29.9 million and in Africa 41.9 million customers
- Zain is listed on Kuwait Stock Exchange with 100 percent free float
- Its largest shareholder is Kuwait Investment Authority with 24.6 percent
- The company's consolidated revenue amounted to $6.1 billion last year
Bharti Airtel, which has been on the lookout for an overseas acquisition for over two years now, said last month that it would acquire a 70 percent controlling stake in the Bangladesh-based Warid Telecom to expand its global footprint.
The company had late last year failed to strike a deal for the second time with MTN.
The MTN deal, worth some $24 billion in cash and equity, envisaged Bharti getting a 49-percent stake in MTN, and the South African firm and its shareholders 36 percent equity in the Indian telecom major. But it got stuck over policy issues.
Now, MTN will be a major competitor in the territories the Indian company is entering.