R65bn deal gets the Africa Bharti started

2010-04-03 09:52

INDIA’S Bharti Airtel sealed a $9 billion (R65.3 billion) deal this

week to buy most of the African ­operations of Kuwait’s Zain, making it the

number-two cellular firm, after MTN, on the African continent. But the

transaction still needs regulatory clearances in Gabon and Nigeria.

“This is great news for Africa because Bharti is far more

aggressive than Zain,” said Steven Ambrose, managing director of World Wide Worx

Strategy.

“This means that the competition will be tougher, forcing MTN and

Vodafone to up their game and ­improve their offering.

“Furthermore, there will be a growth in infrastructure and greater

focus, seeing that Bharti is much more in tune and in sync with the dynamics of

African markets.”

The deal will give Bharti a presence in 15 African countries.

It will also make it possible for Bharti to enter the South

­African market. One possibility could be to make a deal with Cell C because

it’s less established and smaller than Vodacom or MTN.

“This, of course, would benefit South Africa because competition

would intensify, which is likely to force operators to improve their

service.”

This week’s acquisition, according to Bharti, would add 42 million

subscribers in Africa, making it the world’s fifth-largest wireless company,

with operations across 18 countries and with a total customer base of about 179

million.

MTN, Africa’s biggest mobile ­operator by subscribers, has a

customer base of 116 million.

“We are excited at the growth ­opportunities in Africa, the

continent of hope and opportunity,” Bharti chairperson Sunil Mittal said.

Bharti, which is 32% owned by Singapore Telecommunications,

­selected Zain as its second choice for building a major presence in Africa,

after it twice failed to finalise tie-ups with MTN.

Bharti faces strong opposition, firstly from the Gabon government

which weighed in against the deal, saying Zain Gabon had not complied with

regulations and that it reserved the right to take “all necessary

measures”.

Its second challenge is the toughest: Zain Nigeria shareholders and

Econet Wireless International head Strive Masiyiwa are in dispute over minority

ownership of Zain’s operations in Nigeria.

Econet Wireless Holdings, which owns 5% of Zain’s Nigerian assets,

is seeking to overturn a 2006 deal in which Zain (then called Celtel) bought a

majority stake in Nigerian mobile operator Vee Networks Limited (VNL), in a

transaction that led to the name change to Zain Nigeria.

An Econet spokesperson said they were pursuing arbitration

proceedings against Celtel because ­under the original VNL shareholders’

agreement Econet had right of first refusal over the stake, a right which was

denied in 2006.

Afena Capital portfolio manager Khulekani Dlamini said Masiyiwa’s

chances of overturning the deal were very low.

“Firstly, he ­already has two failed attempts at trying to stop

transactions from materialising in the past,” he said. “Secondly, he may have

burnt bridges with regulatory authorities in Nigeria and it is unlikely that

they will be going out of their way to help him, so therefore the probability of

derailing the deal is considerably low.”

If Masiyiwa loses the dispute, his chances of realising whatever

pecuniary benefits were supposed to ­accrue to him diminish as well. But

Masiyiwa is very tenacious and is unlikely to throw in the towel.

“He has engaged in this dispute for over half a decade,” said

Dlamini.

Mittal told India’s CNBC that they were happy to work with the

local Nigerian partners.

“In the coming weeks we will sit with them and assure them of our

strategy for Nigeria.”

Bharti director Akhil Gupta told the channel that “sufficient

indemnities” were in place in the event of any problems with the transaction.



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