Bharti Airtel poised to take over Zain’s African telecoms business

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Indian telecoms entrepreneur, Sunil Bharti Mittal, is poised to realise his vision of creating an emerging markets mobile phone empire after his planned takeover of the African assets of Kuwait's Zain passed its last big hurdle on Wednesday. 

In a board meeting, Zain agreed to sell all its African networks except Sudan and Morocco to Mittal's Indian flagship, Bharti Airtel, for $10.7bn, paving the way for a formal signing in the coming days. One person familiar with the matter said that following the agreement of Zain shareholders - and similar approval last Saturday from the board of Bharti - the deal was "done", barring last-minute surprises. The approval by Zain came ahead of a deadline on Wednesday for an agreement between the two sides and little over a month after news of the proposal emerged.   

The two companies have three weeks to arrange the sale documentation, but people familiar with the matter said this could be done in just a few days because Bharti had already lined up financing. The acquisition will be "third time lucky" for Mittal, who twice tried to take over MTN, South Africa's biggest mobile operator, but was thwarted by regulatory obstacles. 

While much smaller than MTN, Zain will make Bharti the world's biggest mobile group operating exclusively in emerging markets. The combined entity will have 165 million subscribers in Africa and South Asia. Standard Chartered and Barclays are advising Bharti while UBS is advising Zain. They declined to comment, as did Bharti.   

Mittal needs to expand internationally to sustain the rapid growth of Bharti as India's mobile market becomes overcrowded and hyper-competitive.  While India continues to add more than 10 million "subscribers" each month, many of these are not new customers but people who are buying more than one Sim card, attracted by cut-price offers from operators seeking to build market share. 

But Mittal will face challenges turning round Zain's underperforming networks, particularly in Nigeria, which is the Kuwaiti company's most important market. 

Zain is also under pressure from a legal suit from Econet Wireless, a South African telecoms company, which is opposing the sale of the Nigerian operations to Bharti.  Econet was a shareholder in Vee Networks, which is now called Zain Nigeria, and claims that it had first refusal over any shares in the Nigerian company when the latter was acquired by Celtel in 2006 - an African telecoms group that was subsequently bought by Zain. 

However, the Econet matter is not seen as a "deal- breaker" and any transaction with Bharti is expected to include clauses covering such potential liabilities.

Bharti Airtel poised to take over Zain's African telecoms business

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