Following Bharti Airtel’s bid for Zain’s African assets for US$10.7 billion, the Indian operator’s shares closed 9.2 per cent lower yesterday at INR 285. The single day of share trading on the Bombay Stock Exchange since Sunday’s announcement left the company’s investors poorer by INR 110 billion (US$2.38 million). Bharti’s market capitalisation now stands at INR 1.1 trillion.

The view from analysts over Bharti’s intentions to buy telecoms operations in 15 African countries is varied with Merrill Lynch, Macquaire and domestic securities house Emkay saying the proposed acquisition is highly priced. However, Goldman Sachs, UBS and Deutsche Bank perceive the acquisition as being long-term positive for the telco.

In a research note from the Bank of America-Merrill Lynch, the foreign broking house reduced the stock’s rating from ‘buy’ to ‘underperform’. It cited three reasons: the deal valuation appeared rich, the growth outlook for Zain’s African portfolio appears unexciting and that a potential deal could materially stress Bharti’s balance sheet.

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Zain sells African assets for US$10.7 billion

The UAE’s Etisalat has announced its customer base has exceeded 100 million subscribers, across 18 markets in the Middle East, Africa and Asia. A breakdown of these numbers by market has not been disclosed.

Etisalat has operations and investments in the UAE, Saudi Arabia, Egypt, Sudan, Pakistan, Tanzania, Benin, Burkina Faso, Gabon, Niger, Togo, Republic of Central Africa, Ivory Coast, Nigeria, Afghanistan, India, Indonesia and Sri Lanka. It is interesting to note that the firm entered 10 of these markets only in the past five years.

In its domestic market, the operator counted more than 7.74 million mobile lines in the UAE in 2009, an increase of six per cent year-on-year. Fixed line subscribers numbered 1.31 million, while the telco’s Internet customer base rose 16 per cent to reach 1.33 million end-December.

Zain Saudi Arabia and Motorola have signed a contract to deploy the first Long Term Evolution (LTE) network in Saudi Arabia. Deployment will commence in the second quarter enabling Zain to offer high-speed 4G mobile broadband services to its subscribers.

Motorola will provide and end-to-end 4G solution including radio access network (RAN), evolved packet core (EPC), devices and optimisaton, and integration services. A FDD LTE network in the 2.6GHz band will be rolled out, overlaying Zain’s existing 3G network across the country.

"We want to provide Zain subscribers in the kingdom with the fastest high-quality network that can accommodate real-time multimedia applications such as video conferencing, high definition (HD) content streaming, video blogging, or the ability to quickly upload video onto social networking sites,” stated Ismail Fikree, chief operating officer of Zain Saudi Arabia. “With LTE, Zain customers will be able to experience unparalleled mobile broadband experiences.”

With the best performance and lowest cost per bit of any standards-based, cellular technology, LTE is expected to deliver throughput in excess of 100Mbps and 15ms roundtrip latency, to provide subscribers with a unique mobile broadband experience that is comparable or exceeding what they have at home today with fixed broadband connections. In addition, because of LTE’s lower cost per bit, it makes bandwidth-hungry applications more cost-effective for operators to deliver profitable mobile broadband to the mass market.

Zain has accepted an offer from India’s Bharti Airtel to purchase the African assets of the Kuwaiti telecoms operator for US$10.7 billion, reports The Times of India (TOI) according to sources familiar with the matter. The deal does not include Sudan or Morocco.

Zain posted a statement on its website on February 14, confirming it had received an offer and that its board of directors would be discussing the proposal at its board meeting on the same day. According to TOI’s sources, the Kuwait Investment Authority – which holds a 24.6 per cent stake in Zain, met on Sunday ahead of Zain’s board meeting and unanimously approved the transaction. It is believed the group’s shareholders also held talks with Bharti’s fellow Indian rival Reliance Communications.

Zain Africa, formerly branded Celtel, includes approximately 42 million subscribers and represents around 58 per cent of the operator’s customers as of end-September 2009. Bharti Airtel is India’s largest operator and has almost 125 million subscribers across India.

Zain’s CEO for the past seven years Saad Al Barrak resigned on February 3, prompted by frustration with unilateral shareholder action. Over the past six months, company shareholders led by the Kharafi Group held negotiations with a Malaysian-Indian consortium over the proposed sale of a 46 per cent stake in the Kuwait mobile operator group. The shareholders made it clear that the negotiations for the sale were taking place at shareholder level, with little-to-no input from Zain’s executive management. Kharafi Group, owned by one of the Middle East’s wealthiest families, holds 11 per cent in Zain.

Kuwait’s former minister of communication, Nabil Bin Salama, began his tenure as chief executive of the group commencing yesterday, replacing the outgoing Al Barrak.

Paris-based telecoms vendor Alcatel-Lucent claimed a minor profit in the fourth quarter, but failed to pull itself out of the red for the full year. Despite fourth quarter revenues being down 19.9 per cent year-on-year, it reported a Q4 net profit of €46 million. However, the full year net loss came in at €524 million (US$723 million), a stark contrast from the €5.215 billion loss for the full year 2008.

Fourth quarter revenues reached €3.967 billion, with an operating cash flow of €635 million. Annual revenues were down 10.8 per cent year-on-year to €15.157 billion. The net debt as of December 31, 2009 was €886 million.

“We delivered on our commitments for 2009 and I am pleased with the operational progress we have made,” commented CEO Ben Verwaayen.

“Revenue came in at the lower end of the indicated range for the year due to the fact that our fourth quarter was not as strong as expected. However, I am encouraged by the strong sequential growth in our orders and by the accelerated traction we are seeing in next generation technologies, as evidenced by our selection by AT&T as a key supplier for LTE.”

He added that Alcatel-Lucent materially exceeded its cost and expense reduction target in 2009, allowing the company to be around breakeven at the adjusted operating income level for the year. Additionally, in the last two quarters the firm demonstrated its ability to generate cash through a more disciplined management of its working capital.

During 2009, Europe remained the vendor’s most important market contributing 34 per cent of revenues, followed by North America with 31 per cent and Asia Pacific with 20 per cent. The rest of the world accounted for the remaining 15 per cent of revenues.