Zain clears Bharti's $10.7b buyout deal
It is a case of third time lucky for Sunil Bharti Mittal's African safari.
After two unsucessful attempts to acquire South Africa-based MTN, he now seems set to create a major presence in Africa.
On Wednesday, the board of Kuwait's telecom firm Zain approved the $10.7-billion sale of the firm's African assets to Bharti, news agencies reported. Bharti had tied up the $8.3 billon debt required some days back.
Post the transaction, Bharti Airtel will figure amongst the world's largest telecom companies with about 172 million (17.2 crore) customers.
Bharti now gets a foothold in 15 African countries. The company has been trying to grow beyond the home terrain - India, for some time now as increasing competition pushes down margins.
This will be the second largest cross border deal ever by an Indian company. In 2006, Tata Steel had purchased Corus at a valuation of $12 billion, putting it amongst the top global steel firms.
Bharti's stock price had witnessed a sharp drop after the company announced its intention to bid for Zain's African assets. The price being paid is seen as too high. However, the market has already discounted the deal, so a large upsurge or downside on the company's stock can be ruled out, says Mr Rajen Shah, chief investment officer, Angel Broking.
The deal comes at a time when Indian telecom companies are also readying for the 3G spectrum auction. Both the transactions simutaneously could put a strain on Bharti's balance sheet, says Mr Romal Shetty, telecom head, KPMG. But it shouldn't be a major problem given the $2-3 billion internal accruals of Bharti, he adds.
While the buyer and the seller have agreed to the deal, there is one major hurdle still. The minority shar-eholder in Zain's Nigerian asset, Econet Wireless is opposing the deal.
Econet says that it has the right of first refusal in case of an asset sale. Regulatory issues may also emerge in any of the 15 odd markets where Zain operates.