NEWS APRIL2010
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Bharti’s purchase of Zain Africa a done deal
As MCI went to press, the ground breaking deal between two emerging markets giants was confirmed. Indian carrier Bharti Airtel is to acquire Zain’s sub Saharan African assets for $10.7bn, representing a landmark deal for the carriers involved as well as for the African region itself. As a result of the
acquisition, Bharti’s total customer base will increase to around 179 million subscribers in 18 countries, transforming the carrier into the world’s fifth largest operator by
customer footprint. Zain, on the other hand, will refocus on its “highly cash generative operations” in the Middle East. The transaction implies
an equity value of $9bn for Zain’s assets, which will be fully satisfied in cash, of which $8.3bn will be paid upon closing and $700m will be paid one year from closing. Bharti will also assume $1.7bn of consolidated debt obligations. Zain shareholders, which
were probably growing impatient, will benefit from the deal as Zain intends to
distribute “a large proportion of the upfront net proceeds” to shareholders in the form of dividends. But while Africa provides
tremendous growth opportunities, entering 13 countries with very different market dynamics in one go will create a number of challenges, warns Nick Jotischky, principal analyst at Informa Telecoms & Media. “Whilst it will, no doubt,
be confident of controlling its costs, Airtel will aim to build up its brand equity
characterised by reliability very quickly,” said Jotischky. “But reliability alone will not be enough – the newcomer will have to show itself to be innovative as well. In an already competitive marketplace, Bharti will not just be competing with other mobile operators for a share of wallet but with other brands in adjacent consumer goods sectors. This means that Bharti will be under pressure to offer services that are directly relevant to end-users and this will differ from market to market.” For Zain, the deal
represents a retrenchment of the company’s strategy as well as good value. The company may have succeeded in transforming its brand and building up an impressive customer base across sub-Saharan Africa, but it has struggled to operate profitability. “Perhaps it turned to the managed services model too late in the
day and failed to leverage its supplier relationships so as to build in sufficient economies of scale – this is where Airtel will focus its efforts,” said Jotischky, adding that Zain may still look to enter new markets, but within North Africa and Middle East, which it sees as more lucrative in the longer term. The move also has
repercussions for the African region, with the likes of MTN, Orange, Vodafone and Millicom joined by a new and rather different pan-regional operator. Bharti has a heritage in making network sharing and outsourcing deals work and will not be afraid of being aggressive on per minute pricing. The company is also well versed in addressing the difficulties of serving a largely rural, high- churn, low-revenue market.
For a more detailed analysis see the Top Ten Tips for Investing in Africa on page 16.
Nokia snaps up mobile browser firm Novarra for undisclosed sum
In late March Nokia announced the acquisition of privately held mobile browser developer Novarra for an undisclosed sum. The Chicago–based firm, which develops mobile internet browsers, is not exactly a household name, which may be surprising given that it has a part in the mobile
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internet experience on more than one billion handsets worldwide. As the company says: “One quarter of all users globally have access to some form of mobile internet service via the Novarra platform today—perhaps without even realising Novarra is behind their mobile internet experience.”
Nokia, said that
Novarra’s mobile browser and services platform will be used by the Finnish handset giant to deliver enhanced internet experiences on its Symbian Series 40 devices – the world’s most widely used handset operating system. The handset vendor said it , “expects a new
service offering utilizing the Novarra technology platform to be available later this year.” The announcement is vague, but suggests the Finnish vendor may have more plans for disruption up its sleeve. After making its Ovi
Maps navigation service available free to the masses in late January, Nokia said it racked up
1.4 million downloads of the platform within the first week. In the wake of its 2008
acquisition of location and mapping firm Navteq, which it bought for $8.1bn, the world’s biggest handset seller made mapping and turn by turn navigation available for free to a potential 83 million users.
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