Norconsult Telematics

Jobs, News and Information for Jobseekers in the Gulf

Upload Your CV

Go Back

9 Billion US Dollar Zain Deal is Fine: Bharti

Middle East : 26 February 2010

Bharti Airtel said 9 billion US Dollar was a fair price for Kuwaiti telecom Zain’s African assets in light of the growth opportunities, although it could diminish earnings in the short-to-medium term for India’s prominent telecom.

In their initial comprehensive remarks to analysts since confirming the talks with Zain, Bharti officials told that Africa had good growth potentials among budding markets, due to its relatively less competition, lower mobile access and high population,.

CEO of brokerage Unicon Financial Intermediaries, Gajendra Nagpal said that no one was suspecting their ability to turn around businesses. But if it is going to be an earnings-decreasing deal, if it is going to be a burden on their balance sheet, naturally the market will be worried.

Bharti’s stock has decreased by 12% since it confirmed the discussions; worrying analysts that the debt required to acquire Zain’s operations in 15 countries would put a burden on its balance sheet.

Deputy group CEO at the mobile operator’s parent Bharti Enterprises, Akhil Gupta said that they have cautiously assessed the financial implication of the deal and valuation. The valuation is fine and realistic and the fiscal implication would be well within accepted and practical standards, even if totally funded by debt.

Bharti has not yet detailed its financing strategies. Bankers have said the company is searching to increase debt from offshore and the local markets to finance the transaction.

Gupta also said equity financing through the mobile company or its tower unit was a probability to reduce debt after a transaction. They are little reluctant and they would certainly desire this debt level to reduce. It does remain a probability, to raise more funds at Airtel or at passive infrastructure (unit), however they have not yet taken any decision.

Though in the short-to-medium term there could be some burden on the company’s earnings per share to finance the gigantic deal, it was not a cause for concern.

When you learn growth stories like this, earnings-per-share decline must take a backseat for some time, he said.

Sunil Mittal, Chairman said he was convinced the company he established would be able to harness its ‘minutes factory’ model in Africa, referring to a low-cost, high-volume form that has made it the market leader of 120 million subscribers in India.

Mittal said that the total population of the 15 African countries where Zain operates was about 500 million, and approximately 35 people in every 100 used mobile phones. Bharti can significantly increase usage and achieve profound access, resulting in quick increase in general traffic and expansion in margins.

Mittal said Bharti was yet to complete due diligence but was optimistic of finalizing a transaction by March 25, when a phase of exclusive talks end. Gupta said they had not yet faced any ‘extraordinary regulatory issues’ that would jeopardize the deal.

Manoj Kohli, CEO who will be head of Bharti’s latest international unit in April, said the telecom would endeavor to repeat its distribution, infrastructure sharing and outsourcing plans in Africa. Bharti must be capable to incorporate Zain’s operations within six months.

Andrew Reid, Staff Writer, Gulf Jobs Market News
Bookmark or share this page:

  • E-mail this story to a friend!
  • LinkedIn
  • StumbleUpon
  • Technorati
  • TwitThis