Bharti Airtel and Zain come to terms

Last week Bharti Airtel, the leading mobile provide in India, announced its intentions to purchase the African assets of Zain, a Kuwaiti telecom company, for US $10.7 billion. Bharti currently has a customer base of 125 million and with the Zain acquisition will add another 42 million subscribers.  So other than getting Bharti into the African market in 15 countries, which they have tried twice before with interest in South African mobile giant MTN, what will the net effect be for mobile in Africa?

Zain has had a tough go of it recently and has lost money in seven of it’s African subsidiaries last year.  Of the estimated $10.7 billion dollar price tag, approximately $1.7 billion is debt.  For Bharti, this gets them into the African mobile market, with its hundreds of millions of potential customers.  Bharti has tried twice to work a deal with MTN, but to no avail.  Zain brings Bharti technology like mobile money to the table, through their Zap offering, something surely to be introduced to India as a way of transferring funds for the unbanked.  The penetration rates in the countries in which Zain is active amounts to about 36%, as opposed to 45% in India, so there is definitely room for growth.

The only possible hurdle at this point is an ownership dispute between Econet Wireless and Zain Nigeria.  Prior to the Zain purchase of Celltel in 2005 for $3.4 billion, Celltel bought a 65% stake in Vmobile in Nigeria.   Apparently Zain Nigeria has undergone a number of name changes over the past five years.  Either way, this is in the courts with Econet Wireless trying to overturn the original purchase by Celltel.

So, the long and short of this looks to be like a win for Bharti, getting them into a the booming African mobile market, and a win for Zain, reducing their debt and slimming them down to a more profitable telecom.  The real question is how this will affect the consumer.  I guess over time this too will be answered.


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