The deal marks one of the biggest cross-border transactions in the Middle East in years and a turning point in the long-running saga around the third-biggest telecom operator in the region.
“If the transaction values the African operations at $10.7bn, it would be a nice premium,” said analyst Simon Simonian at investment bank Shuaa Capital. “We expect Zain to pay a special dividend to shareholders from the proceeds.”
The Kuwaiti bourse suspended trading in Zain shares before the open but optimism that the deal would be approved sparked a rally in Kuwaiti shares, pushing the benchmark index up 1.8 per cent, in its biggest gain in six months.
The sale of Zain’s African positions would mark a strategic reversal that saw the local player rise to international status and then revert to that of a regional player. Zain has spent more than $12bn alone to expand in Africa since 2005.
Zain’s expansion from Burkina Faso to Zambia and its ubiquitous logo has transformed it into a symbol of national pride synonomous with Kuwait’s faltering aspirations to diversify its economy beyond the oil sector.
“Zain grew a little bit too fast and was facing some growing pains in the past two years,” Simonian said.
Confirmation that India’s Bharti was the bidder showed the telecom operator was back in the hunt for emerging market acquisitions after its planned $24bn merger with South Africa’s MTN failed in September.
In October, Akhil Gupta, deputy group CEO at the Indian mobile operator’s parent, said Bharti would look at buying a stake in Zain if there was an opportunity.
Last month, Bharti agreed to buy 70 per cent of Bangladesh’s Warid Telecom for an initial investment of $300m. It also set up a new unit to drive its foreign expansion, focused on opportunities in emerging markets where it can replicate its low-price, high-volume model.
Bharti’s home mobile market is facing margin pressures from intense competition and price wars, resulting in lower tariffs and shrinking profits.
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