The Zain saga: and then came the rent seekers

Beep Beep co-blogger David George-Cosh had a story yesterday on the various hassles that now surround the US$9 billion sale of Zain's African mobile networks to India's Bharti Airtel.

In Nigeria, a local shareholder is claiming he has right of first refusal to buy the network there, as part of a contract drawn up when Zain acquired the it some years back. In Congo and Gabon, governments are objecting to the sale.

Expect more of this. Even the smoothest merger deal typically runs into issues, but it is hard to imagine a deal trickier to execute than this one.

You have a Kuwaiti company, headquartered in Bahrain, selling a whole bunch of companies across Africa to an Indian company. This is going to get very complicated, very fast.

And they aren't just any companies, they are telecommunications networks, which are usually among the more regulated and government-sensitive businesses to buy and sell. Most countries see their telecoms as strategic national assets, and the more troubled the country, the more sensitive the telecoms become (Lebanon has been unable to privatise its telecom sector for more than a decade, with disastrous results).

There is also the issue of desperation coming into play here. I am in the process of moving house, and currently "between addresses" (classy speak for homeless). I need to find a place fast, and property agents can sense that desperation. So when, five minutes before signing the contract, they tell me they need an extra Dh5000, what am I going to do, walk away?

The same goes for Zain, whose shareholders have proven over the last year that they are in a real hurry to cash out (the doomed and desperate deal to sell the whole company to a totally unknown an unproven Indian investor being the best example). Every spanner in the works for this deal is a potential threat to the whole sale, and you can bet that Zain will go to great lengths to see this deal go ahead.

Combine that with a series of countries with less-than-stellar reputations for rule of law and good governance, and imagine the results - a lot of people are going to step up, publicly or behind closed doors, and place a roadblock in the way of this deal, knowing that there is an air of desperation surrounding getting it done. You can capitalise on that desperation in any number of ways.

It is still fair to assume that this sale will happen. But you can also assume that it will not be easy, and will face more roadblocks. As the camel falls to its knees, more knives are drawn.

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