Finally, Bharti Airtel can now be termed as emerging-market multinational. Bharti and Zain Telecom on Tuesday signed a legally binding agreement in Amsterdam where Bharti acquired most of the African assets of Kuwait’s Zain telecom for a $10.7 billion deal.
This acquisition is the second biggest overseas purchase by an Indian company after Tata Steel’s $13.6 billion acquisition of Anglo-Dutch steel maker Corus in 2007. This deal will give Bharti a firm foothold in the relatively untapped African markets, making it the world’s fifth largest wireless company.
Before signing this deal, Bharti had attempted twice to spread its foothold in the growing market of Africa through the acquisitions talks with MTN, which failed due to regulatory issues related to the restructuring of MTN with Bharti Airtel.
Bharti Airtel aims to replicate its success story in India in the fast growing market of African telecom market. With Zain’s taken over Bharti Airtel will gain Africa’s 42 million customers and not to mention the huge untapped market which Bharti can benefit from in years to come.
Zain’s profitability is lower than Bharti despite average higher spending by its users. However, as per an estimate only one in two Africans holds mobile phone and with Zain having a strong presence in most of the countries in Africa, Bharti is well set to dream big in terms of global ambitions.
Call it irony or unfortunate, Bharti’s new competitor, after Zain’s acquisition in Africa, would be none other than MTN with which the company held close talks for take over restructuring agreement. The combined entity after Bharti-Zain deal would lead to a group with approximately 160-170 million of subscribers, including 42 million subscribers of Kuwait’s Zain.
With Indian telecom market almost reaching a saturation point with some scope of expansion in the inner part of rural India still left, but urban Indian market more than saturated, Bharti Airtel’s move to go for geographical diversification of its business operations is more than a welcome move.
It is a pioneering move by Airtel to look for ambitious dream abroad which no Indian telecom player has done at such a magnitude. Possibly, in future, we could see other big telecom players’ line-up for geographical diversification taking a cue from Bharti-Zain deal.
In fact, now, even the stock markets have given thumbs up to the Bharti-Zain deal.
Will Bharti Airtel come out stronger with Zain’s Acquisition?
[…] Airtel acquired Zain at about US $ 10.7 billion to become the third biggest telecom major in the world. Since Zain is one of the biggest players in Africa covering over 15 countries, Airtel’s acquisition gave it the opportunity to establish its base in one of the most important markets in the coming decade […]
Lets hope so.
Mr. Mittal was quite optimistic about this deal and now its done so lets hope it help Bharti grow further.
Airtel have very good business and operation model..if they could able to adopt the team from Zain to airtels business/opration model.then they can easily capture the market.
Hello S Nathan,
As you’ve rightly pointed out, Bharti’s low cost business model and excellent management could well adopt the African operations of Zain Telecom going forward.
In fact, Bharti’s ability to compete with other major telecom companies in a highly competitive market in India, may give the company a razor sharp edge to fight against domestic and global companies vying for the wireless business in Africa.
This could prove out to be a major turn around decision for the Airtel over a longer duration of period. Thanks for your input Mr S Nathan.