31.3.10

Bharti is third time lucky


Bharti Airtel took a big step towards fulfilling its international ambitions with a deal on Tuesday to acquire most of the African assets of Kuwait’s Zain Telecom. Sunil Bharti Mittal, the founder and CMD of India’s largest mobile phone firm, described the acquisition as a “pioneering step towards South-South co-operation” as he started laying the groundwork for the more important tasks that lie ahead — winning regulatory approvals in 15 countries and replicating Bharti’s successful low-cost model of operations in Africa. The $10.7-billion deal, including $1.7 billion of Zain’s debt, was signed in Amsterdam, the base of Zain’s African unit. With Zain Africa’s 42 million customers, Bharti Airtel will have 179 million subscribers, making it the world’s fifth-largest mobile phone operator. The Bharti stock closed almost unchanged at Rs 310.95 on BSE before the deal was signed.The newly-acquired business, Mittal assured, would be an operation led by Africans and supported by the Indian team. Mr Mittal also said his company is committed to partnering with African governments to take “affordable telecom services to the remotest geographies and bridging the digital divide” Winning regulatory approvals will be an important hurdle for Bharti Airtel to cross. Twice, political sensitivities scuppered its attempts to merge with South Africa’s MTN, the largest mobile phone company in Africa. The Nigerian unit of Zain is embroiled in tussles over ownership and Reuters reported on Monday that the Gabonese government “disapproves” of the sale of Zain’s assets in the country. Bharti Airtel, the pioneer of the low-cost outsourced model of operations has started discussions with partners to transplant the successful example in Africa, Mr Mittal said. Bharti was the target of criticism from analysts who said it may be overpaying when the deal with Zain was first unveiled in the middle of February. Ratings agencies S&P and Fitch have put Bharti’s long-term credit rating on watch with negative implications, citing a likely heavy debt burden. Bharti will be inheriting an operation that made a net loss of $112 million in the nine months to September 2009. Seven of Zain’s African units are lossmaking, including its highest revenue earner, the Nigerian arm. Zain’s profitability is lower than Bharti’s despite average higher spending by its users.

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