zain-mtnl-bsnlThe two Indian PSUs BSNL and MTNL may be joining a consortium that is buying a 46% stake in the Kuwait-based Mobile Telecommunications Company K.S.C., also known as Zain Telecom. However, the telcos have issued a formal clarification saying the decision to participate has not yet been made. Zain has been trying to sell its African operations, which Indian telecom major Reliance Communications was believed to be interested in.

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According to Business Line, the consortium is led by New Delhi based Vavasi Group’s Telegence division and Malaysian magnate Syed Mokhtar al-Bukhary. Information on Vavasi is limited; it is not known who its promoters are. Its site vaguely puts it as having a division in the telecom infrastructure and service segment.

A Kuwait News Agency report on Zain’s site claims the deal has already been concluded for $14 billion (Business Line puts it at $13.7 billion) and will take four months to be legally completed.

It reports the group’s Deputy Chairman for Industrial Activity and Information Technology Bader Al-Kharafi as saying the per share value would be two Kuwaiti dinars. It also reports that the Asian consortium includes an Indian private company; again an unknown entity. These developments should be viewed in the context of a potential merger between Bharti Airtel and MTN, which is a Zain competitor in Africa. MTN is yet to conclude its $24 billion merger withBharti Airtel, exclusive negotiations are still ongoing. The new deadline for the talks is now the 30th of September.

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Zain’s Aim, BSNL’s Gain

Zain operates in 23 countries in Middle East and Africa, and had 69.5 million active connections as of July 2009. It aims to be one of the top 10 mobile operators in the world by 2011, according to a recent presentation on H1 2009. A reverse-stake deal with an Indian telco could have been the perfect start for the telco. But with BSNL and MTNL, will Zain really benefit?

Till date, Zain’s growth has been a mix of organic and inorganic – it acquired telcos in Africa and then reaped growth in the continent.  It could do the same in India with a flurry of fledgling telcos launching and was learnt to be in talks with Loop Telecom in March but nothing materialised. With a minority stake in BSNL, Zain could not only bring an infusion of capital but managerial changes that will could, probably, reverse BSNL’s fortunes.

As of July 2009, BSNL had 55.9 million mobile connections or 12.67% of the market share; MTNL had 4.64 million and 1.05% share. Zain’s Middle East market has an ARPU that is higher than India’s but its African operations are assailed by low ARPUs.

Can They Afford It?

BSNL and MTNL have been planning an international foray to grow out of the increasingly competitive Indian telecom landscape and both appear to have the funds for it – BSNL has $7.6 billion and MTNL $2.2 billion for acquisitions, according to Mint. Buying a stake in the Zain group, however, might be the case of biting off too large a bite to swallow for the PSUs who were eying a minority stake in smaller African telcos.

Related

India’s Telco RCOM Eyes Zain’s African Network; Zain’s Acquisitions & Competitors
AT&T Eyes Minority Stake In BSNL; Why It’s A Bad Call
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