Bharti-Zain inch closer to inking deal

Kuwaiti operator Zain Telecom has accepted Indian telecom giant Bharti Airtel's $10.7 bn offer to buy its South African operations, a development that will take the two to the next level of the sealing the deal.

According to a statement issued by Zain, the proposal was approved unanimously. Kuwait Investment Authority, the emirate's sovereign fund, the largest shareholder with a 24.6% stake also gave a go ahead, indicating that the government supports it as well.

Not to forget the Bharti-MTN deal is understood to have failed in September last year, more due to political rather than commercial factors.

With this approval from the Zain's board, the operators have entered into an exclusive discussions until 25 March 2010.

This potential transaction, exclusive of Zain's operations in Morocco and Sudan, remains subject to due diligence, customary regulatory approvals and signing of final transaction documentation, the Indian operator said in a statement.

The final value of the deal "is subject to negotiations and final approvals," Zain had said in its statement. Based on information from sources Al-Qabas newspaper says as per the initial agreement, Bharti is required to pay $10 billion before the middle of April and the remaining $700 million by the end of the year.

Faced by stiff price war at home, the operator has been desperately looking at gaining access to other fast-growing markets. Its endeavors has brought success and failure. Last year, the wireless operator faced disappointment during its second attempt to buy South Africa's MTN group for about $23 billion.

Early this year, Bharti agreed to buy 70% of
Bangladesh's Warid Telecom for an initial investment of $300 million.

Zain's assets definitely look alluring. It bought Celtel International for $3.4 billion in 2005 to expand into 13 African countries, including Kenya and Nigeria, the continent's most populous nation. The company has more than 40 million subscribers in Africa, about 62% of its client base.

It is yet to be seen whether Bharti would be willing to play a higher price and invest in a loss-making company in order to realize its ambition to expand overseas. The largest operator in India has been closely watching the international market. It recently announced the creation of a new, empowered and dedicated International Business Group that will be responsible for expanding the company's operations beyond India and South Asia region.

heenaj@cybermedia.co.in