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Airtel Completes Zain Acquisition; Plans, Targets & Nigeria

(Note: we were updating live, and this story has since been rewritten for improved coherence)

At 12:30 pm today, Zain Africa became a 100% subsidiary of Bharti Enterprises, Sunil Bharti Mittal said, addressing a press meet in Delhi today. This indicates that Bharti Airtel has received all regulatory approvals. Zain brings with it, 42 million customers, $3.6Bn revenue, $1.2B EBITDA. The combined entities will have approximately 180 million customers, $12.4 billion in combined revenues, and $4.7 billion in EBIDTA. This makes Bharti Airtel one of the five largest mobile operators in the world, at 180 million customers, close to America Movil and Telefonica.

Speaking at the press meet, Mittal said that they also hope the vendors will follow them to Africa, including tower companies, equipment suppliers, air conditioning companies, Value Added Services Companies are going to flock to Africa now. He also added that this deal is the largest deal ever across sectors in emerging markets, and it puts forth the notion that the developing world can do multi million dollar deals and not just the mandate of developed markets.

Manoj Kohli will lead the Airtel saga in Africa, operating out of Nairobi. Airtel raised $8 Billion in financing for this deal, Akhil Gupta, Deputy Group CEO and Managing Director of Bharti Enterprises and a Director of Bharti Airtel Limited said.

Africa Plans

Speaking at the press meet, Manoj Kohli, CEO (International) & Joint MD, Bharti Airtel said that he has set the following “personal” targets for the companys Africa operations by 2012-2013:
– 100 million customers (Zain Africa currently has 42 million)
– $5 Billion in revenue (Zain Africa currently does around $3.6 Bn)
– $ 2 Billion EBITDA (Zain Africa currently does $1.2 Billion EBITDA)

The Airtel brand will be launched in Africa in October – an overnight switch from Zain to Airtel in 15 countries. Kohli is flying out to Nairobi, where Airtel’s Africa operations will be headquartered, later this week. “Within this week, we’ll take charge, and we have a huge Africa leadership workshop planned.” Arond 40-50 people from Airtel’s India operations will move to Africa, and in next few months, it is planned that around 20-25 from Africa will come to India, in order to initiate cross-market learnings.

Kohli added that the addressable base in Africa is around 1 billion” currently there are 500 million people in the continent of working age, and by 2040, this number is expected to exceed 1.1 billion. The median age of Africa’s population is 17 years, lower than that of India. The urbanization is 40% in Africa, and is expected to be 50% by 2030. As urbanization increases, need for telecom increases. There are 53 cities with more than a million people.

Airtel is currently number 1 in 10 countries in Africa, and there are, on an average 2-3 telecom operators in a country. In the continent, Airtel-Zain is number 2 after MTN, and covers a population of 450 million.

Nigeria Issues

Bharti Airtel also announced that the issues that the company was facing in Nigeria have now been (partially) resolved. In a statement, the company said – “The long standing litigation on multiple fronts by our main local partner, Broad Communications Group and it’s affiliates, owned, controlled and managed by Mr. Oba Otudeko and his family has been satisfactorily settled. Broad Communications will withdraw all its court cases in this regard. Mr. Otudeko is being appointed as the Chairman of our company in Nigeria”. Mittal referred to Nigeria as one of the largest growing markets in the world.

A deal with Broad was struck a few hours before this announcement, and no additional money was paid. “It is in his (Otudeko) interest and ours to make this company grow,” Mittal said. Broad is the largest shareholder in Zain Nigeria. Mittal said he was stunned by the pace of growth in the Nigerian market – “it is buzzing and reader for higher usage of minutes. The distribution of phones and SIM cards is higher than in India – there are people there selling SIM cards at the roadside. Zain is number 2 in that market.”

He also said that the company had not had any contact with Econet Wireless, but were told that it is within the rights for Airtel to take over Zain, and “we are satisfied”. In any case, he added, the company is fully indemnified.

Responding to a question, he also said that in Gabon, there is no issue, and payments will be made on the basis of some milestones that are met from Zain’s side.

Zain versus MTN

Mittal was quite categorical in stating that MTN, at both attempts, was the only opportunity at the time: “MTN was the first opportunity, not the first choice”, he said. He feels that this (Zain) is a better deal for Airtel since in case of MTN, Airtel would have had board control but not management control, so they might not have been in a position to replicate their low cost model, which they can do so with Zain. An out-and-out acquisition is a much better deal for Airtel. He also added that the company received overwhelming support from the Indian government, which supported and pushed Airtel to go to Africa – Manoj Kohli was in regular touch with High Commissioners in the countries where Zain operates,

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