Bharti confirms talks with Zain

Bharti Airtel has confirmed talks with Zain Telecom to buy the latter's African assets for $10.7 billion.

Bharti has said it is going to hold exclusive talks with Zain until March 25. However, the company did not provide any assurance whether the deal will be comsummated.

Bharti: Bid for Zain Africa

Bharti offering $10.7 bn for most African assets of Zain
Zain's African assets do not involve Sudan and Morocco
Bharti  may begin due diligence on deal as soon as today
Bharti has exclusivity until the end of March
The board of Zain, Kuwait's mobile telecom, accepted the offer
This is the third attempt by Bharti to enter Africa
Zain's main shareholder is the Kharafi Group
Zain has previously attempted to sell the group and some have failed

Valuation

At $10.7 bn, Bharti would be paying $250 for Zain African subscribers
Vodafone paid $720 per subscriber for controlling stake in Hutch Essar

Valuation Matrix: EV/Subscriber
Zain African Assets  : $250
Bharti                 : $221
Idea                   : $77.64
RCom                 : $159.85

Benefit of the deal
Access to the fast growing market with low penetration level
Boosting Bharti brand overseas
Bharti's reach will increase to 20 countries from 5 countries at present
Combined subscriber base will be 164 mn, making it the 7th largest in the world

Other suitors
France's Vivendi walked away from buying Zain African assets in July
Vivendi said purchase didn't fit usual criteria of profitability and financial discipline
Millicom Int also said it would be interested in some of Zain assets

Coveted assets
Zain bought Celtel Int for $3.4 bn in 2005 to expand into 13 African countries
Co has more than 40 million subscribers in Africa, about 62% of its client base
More than half of $7.4 bn of annual sales in 2008 from Africa

Source BloombergUTV