Tuesday, Mar 30, 2010

(Adds comments from Bharti chairman, Zain CEO.)



By Jessica Hodgson and Romit Guha
Of DOW JONES NEWSWIRES

LONDON (Dow Jones)--Bharti Airtel Ltd. (532454.BY) confirmed Tuesday it has agreed to buy most of the African assets of Kuwait's Mobile Telecommunications Co., (ZAIN.KW) better known as Zain, in a deal valued at $9 billion in cash, transforming the Indian carrier into the world's fifth-largest mobile phone operator.

The transaction, India's largest cross-border deal after Tata Steel Ltd.'s (500470.BY) roughly $13 billion acquisition of Anglo-Dutch steel maker Corus in 2007, will raise Bharti's subscriber base to around 180 million, giving it access to the fast-growing African market where average teledensity is lower than in India.

In a statement, Bharti, India's largest mobile phone operator by subscribers, said it will acquire Zain's assets in 15 countries, excluding its units in Morocco and Sudan.

Bharti would pay $8.3 billion on completion of the deal and $700 million a year after the closing, the firm's chairman, Sunil Bharti Mittal said, according to Kuwait's official news agency, or KUNA.

The deal includes Zain Africa's $1.7 billion debt, KUNA quoted Mittal as saying.

The deal comes after the two companies announced earlier this month that they would hold exclusive talks until March 25. Bharti has made two failed attempts to merge with South Africa's MTN Group Ltd. (MTN.JO) over the past couple of years. Indian carriers such as Bharti have been looking to expand overseas amid intense competition and price wars at home that have been hurting growth.

The deal is subject to shareholders' approval.

Global telecom operators are increasingly looking to Africa as one of the few regions in the world offering growth. Mobile penetration remains low and advances in mobile-phone technology are driving prices down to within reach of many African consumers. Many of the continent's biggest economies are seeing periods of relative political stability conducive to faster growth. Africa has been a long-coveted market for Bharti, as shown by its repeated attempts at entering it.

Zain has operations in 17 African countries, including Nigeria, the most populous nation on the continent. It has more than 70 million customers spread across Africa and the Middle East, including about 42 million in Africa. The Indian company has nearly 125 million subscribers.

Zain said in a separate statement that it intended to distribute a large proportion of the upfront net proceeds from the deal to shareholders in the form of dividends, subject to approval and the repayment of its $4 billion revolving credit facility.

"The transaction allows Zain to focus on its highly cash-generative operations in the Middle East and to substantially improve its balance sheet," Zain chief executive Nabeel Bin Salamah said in the statement.

Zain has said it expects net proceeds of up to $5 billion from the Africa asset sale after paying certain liabilities.

"With this acquisition, Bharti Airtel will be transformed into a truly global telecom company with operations across 18 countries fulfilling our vision of building a world-class multinational," Mittal said in a statement.

Analysts say Bharti's expertise at wringing profits out of its cellular business in a country where users on average spend only a few dollars per month on service would be valuable in other developing markets where Zain operates.

Shares in Bharti, in which Singapore Telecommunications Ltd. (SGAPY) owns around 32%, fell more than 13% in the two days after it emerged in mid-February that it was in talks to buy Zain, but have recovered in recent weeks.

Shares in Bharti closed Tuesday unchanged at 310.95 Indian rupees. Shares in Zain closed at 1.40 Kuwaiti dinars.

-By Jessica Hodgson, Dow Jones Newswires; +44207 8429373; jessica.hodgson@dowjones.com

(Summer Said in Cairo contributed to this report.)

(END) Dow Jones Newswires

30-03-10 2313GMT