Bharti Airtel clinched a deal on Tuesday to buy most of the African operations of Kuwait’s Zain for $9 billion, making it the No.2 cellular firm on the continent and setting India’s biggest carrier a tough financial and management challenge.
The two companies, which entered exclusive talks in mid-February, signed a legally binding definitive agreement in Amsterdam, where Zain’s Africa subsidiary is based, Bharti said in a statement.
“We are excited at the growth opportunities in Africa, the continent of hope and opportunity,” Bharti Chairman Sunil Mittal said in the statement.
“We believe that the strength of our brand and the historical Indian connect with Africa coupled with our unique business model will allow us to unlock the potential of these emerging markets.”
The Indian firm said, post the acquisition, it would become the world’s fifth-largest wireless company with operations across 18 countries and with a total customer base of about 179 million.
Zain was Bharti’s second choice for building a major presence in Africa after it twice failed to finalise tie-ups with South Africa’s MTN, the continent’s biggest operator.
In a sign of the challenges Bharti may face, the government of the small central African nation of Gabon on Monday weighed in against the deal, saying Zain Gabon had not complied with regulations and that it reserved the right to take “all necessary measures”.
Bharti, facing ferocious competition at home, is betting that the opportunities in Africa are worth the risks of operating there and is paying what many regard as a full price, at 10 times enterprise value to EBITDA (earnings before interest, tax, depreciation and amortisation) as a cost of entry.
The deal, which still needs regulatory clearances, brings Bharti 42 million subscribers and a presence in 15 African countries.