Zain to sell most of its African assets

The Kuwaiti company agrees to sell most of its African assets to Bharti Airtel, India's largest mobile operator, in a deal analysts say is worth as much as $5bn.

Zain, the Kuwaiti telecommunications company, has agreed to sell most of its African assets to Bharti Airtel, India's largest mobile operator, in a deal analysts say is worth as much as US$5 billion (Dh18.36bn). The sale will mark one of the largest cross-border telecoms transactions in the Middle East and mark a turning point in the months-long effort by the region's third-largest telecoms operator to sell all or most of its assets.

The Kuwaiti state news agency reported that Zain's board has unanimously approved an offer to sell most of its African operations to Bharti Airtel, but did not disclose the sale price. The African unit is valued at $10.7bn. Neither Zain nor Bharti Airtel would comment on the deal. The Shuaa Capital telecoms analyst Simon Simonian said that Bharti Airtel would probably purchase a majority stake in Zain for about $5bn, which would include $2bn in debt.

"A special dividend would be a top priority for the board," said Mr Simonian. "If Kharafi [the largest private shareholder in Zain] tried to sell a 46 per cent stake, it didn't work, which is why they tried to go back to the first option, which is to sell a stake in Africa." Trading in shares of Zain were halted yesterday on the Kuwaiti bourse following word that the company had received an offer. Zain shares closed up 8 per cent at 1.08 dinars (Dh13.70) on Thursday. In September, a consortium led by the Vavasi Group from India and reportedly including the Indian telecoms Bharat Sanchar Nigam, Mahanagar Telephone Nigam and Malaysia's Al Bukhari Group offered $13.69bn to purchase the Zain stake.

But the deal was put on hold last month after Kharafi, a Kuwaiti investment firm, said it needed more time to finalise the deal. "This deal likely torpedoes the earlier offer," said Irfan Ellam, a telecoms analyst with Al Mal Capital. Zain has more than 40 million subscribers in Africa, about 62 per cent of its client base. More than half of its $7.4bn of annual sales in 2008 came from Africa, but it accounts for only about one third of its net earnings, Mr Ellam said.

Nadine Ghobrial, a telecoms analyst with EFG-Hermes, said the sale would help Zain concentrate on improving the value of their Middle Eastern assets, including its troubled Saudi Arabian unit. "Frankly, they've been facing a lot of problems, especially in the Saudi operations," Ms Ghobrial said. Last month, Zain's Saudi Arabian unit said it was in discussions with creditors after it failed to meet payments last year connected to a $2.5bn loan to help finance its growth in the country. Zain's parent owns 25 per cent of its Saudi Arabian unit.

On Thursday, Zain announced it had appointed Nabil bin Salama as the new chief executive of the company effective from yesterday. He would replace Saad al Barrak who led the telecoms operator since 2002. @Email:[e-mail]