Bharati Airtel & Zain Finall

8/4/2019 Bharati Airtel & Zain Finall

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P R E S E N T E D B Y : -

BHARTI AIRTEL ZAIN

ACQUISITION


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BHARTI

AIRTEL

.


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BHARTI AIRTEL

Bharti enterprise is one of India's leading businessgroups with interests in telecom , financial services ,retail and manufacturing.

Out of the 15 group companies, Bharti Airtel is theflagship company, and is one of asias leading

integrated providers of telecommunications withoperation in India and Sri Lanka


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Enterprise services

enterprise services provides a broad portfolio ofservices to large enterprise and carrier customers.

Digital TV services

Airtel also provides digital TV services.


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ZAIN

Zain is the leading telecommunications operatoracross the middle East and Africa

providing mobile voice and data services to over 70

million active customers as at 30 september2009with a commercial presence in 23 countries .

Zain is listed on kuwait stock exchange with a marketcapitalisation of over US$ 20 billion.


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Contd

Year to year the customer growth of zain is 14%

The company surves 72.5 million managed activecustomers as of december 31, 2009.and zain group addedover 9 million new active customers in the year 2009.

Zain Africa has operates in burkina faso, chad, the therepublic 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 over450 million with telecom penetration of approx32%


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Structure of Acquisition

* The fifteen jurisdictions are: 1) Burkina Faso, 2) Chad, 3) Republic of the Congo, 4)

Democratic Republic of the Congo, 5) Gabon, 6) Ghana, 7) Kenya, 8) Malawi, 9) Madagascar,

10) Niger, 11) Nigeria, 12) Sierra Leone, 13) Tanzania, 14) Uganda and 15) Zambia.


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Transaction Details of Bharti Airtel-ZainAcquirer Bharti Airtel Limited

Seller Mobile Telecommunications Company KSC

Target Zain Africa International BVAcquisition Bharti Airtel Limited indirectly acquired 100% of Zain Africa

International BV and its business operations in Africa from Zain under

a privately negotiated agreement.

Mode of

acquisition

Security (Share) Sale

Consideration USD 10.7 billion

Mode of Payment All cash deal Bharti Airtel to pay:

a) USD 8.3 billion within three months from the date of closing;

b) USD 700 million after one year from the date of closing; and

c) USD 1.7 billion assumed as debt on the books of Zain.

Funding Leveraged Buy-out

a) Bharti Airtel to borrow USD 7.5 billion from a consortium of banks

led by Standard Chartered Bank and Barclays Bank.

b) Bharti Airtel to avail of a rupee loan of USD 1 billion equivalent

from SBI Group.


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THE DEAL

Bharti Airtel Ltd announced on 30th march 2010 its entryinto a legally binding definitive agreement with ZainGroup 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 customerbase of over 42 million.

Zain is market leader in 10 of these countries and rank 2ndin 4 countries.

With this acquisition, Bharti Airtel will be the worlds 5thlargest wireless co. with operations across 18 countries.


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Contd.

The co. network will now cover over 1.8 millionpeople-2nd largest population coverage amongtelecom co. globally.

With this acquisition, Bhartis total customer basewill increase to around to 179 million in 18 countries.

Standard Charteredwas the lead advisor in thedeal, Barclays Capitalwas the Joint Lead

Advior & SBI Group was the Lead OnshoreAdvisor.


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Contd.

Global Investment House KSCC was the RegionalAdvisor 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 choicefor building major presence in Africa after it twice

failed to finalise its tie up with South Africas MTNGroup Ltd.


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VALUING THE DEAL

Bharti have paid 10 time enterprise value to EBITDAfor the deal.

Acc. to analyst, the combind entry will have 163.5

million subscribers with Zain Africa constituting 41.9million and 121.6 million .

The combined EBITDA margin are 38.3% with ZainAfricas at 32% and Airtel at 41%.

The combined net margins are 15.4 % with ZainAfricas at 4.1% and Airtel at 23.8%.


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Contd

The transaction implies an equity value of US $9billion and consideration will be fully satisfied incash of which US $8.3billion will be paid on closingand US $0.7 billion will be paid after one year ofclosing.


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FINANCING THE DEAL

Bharti Airtel will assume US $1.7 billionconsolidation 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 Lynchetc.


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SWOT Analysis


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Strength

Post acquisition, Bharti Airtel will become fifth largestservice 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 thesuccess of India in Africa


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Weakness

Bharti has paid a heavy price for the deal

Zain Africa has made a net loss of USD 112 million in thenine months to September 2009. Seven of Zains African

units are loss-making, including its highest revenue earner,the Nigerian arm, Zain Nigeria.

The deal is highly volatile and carries huge commercial riskfor Bharti Airtel.

The loan would be a drag on Bharti Airtel's earnings with noimmediate returns expected from the loss-making target.


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Opportunity

Telecom penetration in African countries varies from 37 percent to 65 per cent. There are few markets with penetrationless than 40 percent

Monthly ARPU on the Continent averages USD 7.5, whichis higher than Indias ARPU of USD 5

Africa is too good an opportunity for Bharti Airtel toexperiment the model that it has mastered in India,particularly its rural strategy.


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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.

Documents

Bharati Airtel & Zain Finall