BHARTI AIRTEL – ZAIN
ACQUISITION
PRESENTED BY:-
VIPIN
SHALINI
SONAL
.
BHARTI
AIRTEL
BHARTI AIRTEL
Bharti enterprise is one of India's leading business
groups with interests in telecom , financial services ,
retail and manufacturing.
Out of the 15 group companies, Bharti Airtel is the
flagship company, and is one of asia’s leading
integrated providers of telecommunications with
operation in India and Sri Lanka
Contd…..
The company was established as a public limited
company in July 1995.
It transforming the sector with its world-class
services built on cutting edge technologies.
Business units
Mobile services
Bharti Airtel offers GSM mobile services in all the
23- telecome circles of India and is the largest mobile
services provider in the country.
Telemedia services
Airtel offers high speed broadband internet with a
best in its class network. It provides world class
entertainment with one of indias’s best direct to
home (DTH) service digital TV in more than 150
cities.
Enterprise services
enterprise services provides a broad portfolio of
services to large enterprise and carrier customers.
Digital TV services
Airtel also provides digital TV services.
Vision
By 2010 Airtel will be the most admired brand in
India: Loved by more customers Targeted by top
talent Benchmarked by more businesses Vision 2020
To build India's finest business conglomerate by
2020 Supporting education of underprivileged
children through Bharti Foundation.
ZAIN
Zain is the leading telecommunications operator
across the middle East and Africa
providing mobile voice and data services to over 70
million active customers as at 30 september
2009with a commercial presence in 23 countries .
Zain is listed on kuwait stock exchange with a market
capitalisation of over US$ 20 billion.
Contd…
Year to year the customer growth of zain is 14%
The company surves 72.5 million managed active
customers as of december 31, 2009.and zain group added
over 9 million new active customers in the year 2009.
Zain Africa has operates in burkina faso, chad, the the
republic of congo, the democratic republic of the congo,
gabon, ghana, kenya, malawi, madagascar, niger, nigeria,
sierra leone, tanzania, uganda, and Zambia.
The total population of these 15 countries stands at over
450 million with telecom penetration of approx32%
THE DEAL
Bharti Airtel Ltd announced on 30th march 2010 its entry
into a legally binding definitive agreement with Zain
Group to acquire the sale of 100% of Zain Africa BV.
Under the agreement , Bharti will acquire Zain’ s African
Mobile services operation in 15 countries with a customer
base of over 42 million.
Zain is market leader in 10 of these countries and rank 2nd
in 4 countries.
With this acquisition, Bharti Airtel will be the worlds 5th
largest wireless co. with operations across 18 countries.
Contd….
The co. network will now cover over 1.8 million
people-2nd largest population coverage among
telecom co. globally.
With this acquisition, Bharti’s total customer base
will increase to around to 179 million in 18 countries.
Standard Chartered was the lead advisor in the
deal, Barclays Capital was the Joint Lead
Advior & SBI Group was the Lead Onshore
Advisor.
Contd….
Global Investment House KSCC was the Regional
Advisor to Bharti for this deal.
This deal made Bharti Airtel 2nd largest cellular co. in
African continent.
Bharti which is 32 % owned by Singapore
Telecommunication Ltd. selected Zain as 2nd choice
for building major presence in Africa after it twice
failed to finalise its tie up with South Africa’s MTN
Group Ltd.
VALUING THE DEAL
Bharti have paid 10 time enterprise value to EBITDA
for the deal.
Acc. to analyst, the combind entry will have 163.5
million subscribers with Zain Africa constituting 41.9
million and 121.6 million .
The combined EBITDA margin are 38.3% with Zain
Africa’s at 32% and Airtel at 41%.
The combined net margins are 15.4 % with Zain
Africa’s at 4.1% and Airtel at 23.8%.
Contd…
The transaction implies an equity value of US $9
billion and consideration will be fully satisfied in
cash of which US $8.3billion will be paid on closing
and US $0.7 billion will be paid after one year of
closing.
FINANCING THE DEAL
Bharti Airtel will assume US $1.7 billion
consolidation debt obligations.
Bharti has secured debt upto US $8.5 billion from
leaders to fund the deal.
The cos. purchase was finalised by a group of banks
led by Standard Chartred plc, Barclays plc and SBI.
Other lender include Autralia and New Zealand
Banking Group Ltd., Bank of America Merill Lynch
etc.
SWOT Analysis
Strength
Post acquisition, Bharti Airtel will become fifth largest
service provider in terms of the number of subscribers.
The deal would give Bharti 42 million subscribers in 15
African countries, which have a combined estimated annual
revenue of $3.6 billion
Bharti, largest telecom player in India, can replicate the
success of India in Africa
Weakness
Bharti has paid a heavy price for the deal
Zain Africa has made a net loss of USD 112 million in the
nine months to September 2009. Seven of Zain’s African
units are loss-making, including its highest revenue earner,
the Nigerian arm, Zain Nigeria.
The deal is highly volatile and carries huge commercial risk
for Bharti Airtel.
The loan would be a drag on Bharti Airtel's earnings with no
immediate returns expected from the loss-making target.
Opportunity
Telecom penetration in African countries varies from 37 per
cent to 65 per cent. There are few markets with penetration
less than 40 percent
Monthly ARPU on the Continent averages USD 7.5, which
is higher than India’s ARPU of USD 5
Africa is too good an opportunity for Bharti Airtel to
experiment the model that it has mastered in India,
particularly its rural strategy.
Threat
Zain Africa is in trouble and financial paralysis is looming over its head
Bharti Airtel will have to put in a lot of effort to align the varied cultures; with
15 countries to tackle it definitely will be a nightmare.
Bharti-Zain will be getting a tough fight with rival like MTN and China
Mobile
There are greater political and economics risks in Africa .
Most of the countries are political unstable and operation are still loss making.
