India's Bharti Airtel – which has twice in two years failed to conclude merger talks with MTN – has entered into negotiations with Kuwait's Zain telecom after Zain accepted an offer for its African operations.
According to a statement issued by Zain: "Zain's Board issued a resolution today (Sunday) to accept a proposal received from Bharti Airtel to enter into exclusive discussions until 25 March 2010 regarding the sale of its African unit for a total consideration of $10,7-billion."
Lindsey Mc Donald, ICT consultant at Frost & Sullivan, comments: "Zain's interests in Africa have been under scrutiny for sometime as news surfaced that the operator was considering a sale of its African assets. This was met with surprise from market watchers, conscious of the fact that the business had invested heavily in order to acquire it's status as a leading regional mobile player. Frost & Sullivan believes that its African operations represent the jewels in its crown.
"This move would indicate a period in which Zain is set to reconsider its strategy. An additional dimension to this situation is the recent resignation of the CEO – an individual widely credited with turning Zain into the success story it has become. The operator also announced yesterday that Nabil bin Salama will now be assuming the role," she says.
Frost & Sullivan believes that this move indicates a sea change in strategy for the operator – with a focus on core assets.
"While there is a lot of potential in the African market, it is an expensive region in which to deploy assets," Mc Donald says. "Given the force of the global downturn, it is likely that this has had a role to play in Zain's decision to sell. The company is therefore a suitable partner for Bharti Airtel, which has sought to gain access to the African market for the past two years via negotiations for merger with MTN. This move will pitch them as highly competitive rivals.
"The African mobile consumer is set to benefit most from this latest move and Frost & Sullivan believes that Bharti will employ its market winning strategies utilised in India, for the African market. Zain's success on the continent lays a favourable foundation for the fulfilment of this objective and 2010 is likely to be a very dynamic year for the African mobile market."
Regarding Zain's future direction, Frost & Sullivan believes that this is a unique opportunity for the operator to focus on its core markets which are known to be very lucrative, with high-growth potential.
"Opportunities to gain greater hold of the telecoms value chain could be an area of interest to Zain in an attempt to move beyond being seen as a simple mobile operator," says Mc Donald. " While there are clearly challenging times ahead for the new management of the operator, this is certainly a chance for it to emerge as a much stronger organisation."