Zain board approves Zian-Bharti deal

by khalid on 26/03/2010 · 1 comment

Zain is Kuwait based telecom company. The board of Zain has approved the sale of its African assets to India’s telecom giant Bharti Airtel for $10.7 billion (around Rs 48600 crore). The acquisition is the second largest by an Indian company since Tata Steel’s $13.6-billion acquisition of Anglo-Dutch steel maker Corus.

The deal paves the way for one of the largest telecom cross-border deals which will give Bharti access to 15 African countries at one go.

Bharti Airtel was in 10th position in world ranking before this deal with Zain, now after the deal cleared, the Indian telecome giant will get 7th position in world ranking. The subscriber base of the combined company will go to 171 million in 19 countries (15 in Africa). The rankings are based on the number of subscribers a company has in all operations in which it has any stake.

Telecom major Bharti Airtel to gain 42 million subscribers from this deal with Zain. Presently the company have 125 million subscriber in India, 2.9 million in Bangladesh and 1 million in Sri Lanka. The key countries to be added to Bharti’s network theough this deal will be Tanzania (Zain has 39 per cent share), Zambia (70 per cent), Nigeria (25 per cent), Congo (45 per cent) and Chad (70 per cent) amongst others.

Bharti has been eyeing the African market for several years as growing competition in Indian markets and slowing markets impact domestic margins. Africa is among the world’s fastest-growing telecom markets.

Analysts have mixed opinion on the deal. Rahul Jain of Angel Broking says they are “positive” on the deal. “Bharti’s balance sheet is very strong and it has tied up enough debt to fund the deal. This will only add value to the stock. The benefit that it will get in the long term will be more than the cost they will pay.” On the other hand Harit Shah of Karvy Stock Broking is of the view that there are challenges for Bharti because the acquisition entails an upfront cost and it will take two or three years to see any benefits that might come out of the deal. I do not think it will be positive and don’t expect the stock price to go up.

Share’s Data :-
BSE Code : 532454
Mkt. Cap: Rs 119115 Crores
P/E: 15.04
EPS: Rs 20.40
Face Value : Rs 5
Last dividend : 20% in Apr 2009
52 Week H/L : Rs 495.00 / 229.50
Bharti Airtel Ltd. share’s CMP is Rs 313.75 on 25th Mar 2010

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Tefrodderoist May 10, 2010

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Jeff

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