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Updated: Essar Buys Warid Telecom Uganda & Congo; Race For Coverage

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Update: Essar has acquired majority (51%) stake in the Dhabi Group’s Uganda and Congo-Brazaville telecom networks, which are collectively valued at $318 million. The capital will be used to expand networks and for marketing. Though the company statement did not disclose the size of the deal, Business Standard put it at around $150 million (Rs 692 crore). Last month, Essar Group revealed it was raising Rs 4500 crore by monetising its shareholdings in Vodafone Essar, an Indian telco.

Original Story (14th September 2009):

Essar Teleholdings, the telecom subsidiary of Mumbai group Essar Global, is in advanced stages of talks with Dhabi Group to acquire the latter’s African telecom companies, reports Uganda’s Daily Monitor. The deal is expected to close the deal in three months’ time. The Abu Dhabi group runs Warid Telecom in Pakistan, Bangladesh, Uganda and Congo-Brazaville with launch plans underway for Cote d’Ivoire (Ivory Coast). Essar is interested in the Uganda and Congo networks. It has a presence in Kenya (as Yu Telecom) and Uganda.

Believed to be a takeover, it might turn out to be a joint venture as an official communique dated August terms it as an  “equity infusion” that will be “the basis of a partnership to create a significant presence in Africa”.

Synergies

Essar’s Yu Telecom has had a similar low pricing strategy as has Warid in Uganda. Vodafone Essar offers international roaming coverage to Warid in Gujarat and Kerala. Essar Telecom Kenya has a 10% stake in The East African Marine System fiber-optic cable. Warid has launched Internet through WiMAX, reports Computer World Zambia. The merging of brands – Essar’s Yu and Dhabi’s Warid – and operations would cause a delay Essar’s growth plans. On the other hand, this alliance could add immense value to Essar in the long term.

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Essar In Africa; Race For Coverage

yuw Essar started in Africa with a joint venture in Kenya with Zimbabwe-based Econet Wireless International, and then with Kenyan Telecom Uganda Ltd, in which it recently increased it ownership from 35% to 80%, according to Bloomberg. BSNL was earlier eying a 10-15% stake in this firm but may have changed its mind to Zain – BSNL is said to be part of a consortium planning a 46% stake buy in Zain’s parent company.

Essar is now aggressively expanding its network to add customers. It is learnt to be investing $230 million and expects to reach 2 million subscribers by March 2010. It currently has 600,000 mobile customers and has completed its network roll outs in Kenya. Its upcoming acquisition or partnership with the Dhabi Group companies is in line with the strategy to establish itself as a trusted brand in the African mobile sector in preparation for facing bigger competitors such as Zain Telecom, Uganda Telecom, France Telecom’s Orange Uganda and the Airtel-MTN behemoth which is in the making.

As of June 2009, Africa recorded 390 million mobile phone subscribers and Nigeria is the largest market, according to AllAfrica. India’s was 441.66 million as of July 2009.

Essar In India; Hoop, Loop

Essar owns 33% stake in Vodafone Essar India,which is the second largest GSM player with 24.11% market share as of August, 2009. Read our telecom report on subscriber numbers in the GSM industry for August here. Essar indirectly holds a 9.9% stake in Loop Telecom (BPL), another telco. Under investigation by the CBI for allegedly infusing funds through BPL Communications into Loop, the company has walked away unhurt with the court closing the case. (via Indian Express)

Essar also owns handset retail chain The Mobile Store, and is in the process of raising $75 million for its expansion. Its competitor MobileNXT was acquired by jewellery brand Gitanjali Group, which has renamed it Hoop and added fashion merchandise to the store.

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Related

Ushacomm To Launch VAS Services In Africa; Appoints Anagat Pareek Business Head
Airtel & MTN Renew Merger Talks: What Has Changed?
African Adventure: After Kenya, Essar Telecom Goes To Uganda
BSNL, MTNL Mulling 46% Stake In Zain Telecom; Gains

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