|



  



@ Slow reform process.

ͻ Low penetration.

ͻ Service providers bears huge initial cost to make inroads and achieving
break-even is difficult.

ͻ Lack of infrastructure in semi-rural and rural areas, which makes it

difficult to make inroads into this market segment as service providers
have to incur a huge initial fixed cost.

ͻ Huge initial investments.

ͻ Limited spectrum availability and interconnection charges between the

private and state operators.
¦


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@ |rovides GSM mobile services in all the 22 telecom circles in
India, Srilanka, Bangladesh and now in 15 Countries of Africa.
@ |rovides telemedia services (fixed line and broadband services through DSL) in 88
cities in India.
@ Also offer suite of Enterprise solutions, DTH and I|TV Services
6   
 

 


  
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@Over 1 1 mn. subscribers in India in @Till Recently did not own mobile
Aug.2º1º tower.
@Over 18º mn. subscribers globally. @Failure of MTN deal will Signal no real
@|resence in 18 countries. market investment.
@Data services not delivering on its high
expectation

 






 

@ |resence of Close and strong @ Strategic partnership with Black Berry

competitors @Focus on expanding business in rural
@Increasing competition from GSM & areas.
CDMA @Tie up with other companies.
@|otential entry of Global players.
BHARTI ZAIN
 INTRODUCTION TO ZAIN
@ Kuwait- based telecom company.
@ Market leader in 12 country out of 15.
@ 2923 mn. $ revenues per annum.
@ Currently working in 24 nations.
@ Zain¶s overall revenues rose 14% in last
quarter.
 STATISTICAL COM|ARISON


 

Total revenues
.2 billion $
.1 billion $

Net income 1.
 million $ - million $

Customer base 125.º million 1.8º million

Global presence 5 countries 2 countries

Arpu.** .1 $ .ºº $

 ½
 D
 O  D
!"





#
$
Seller Mobile Telecommunications Company KSC
Target Zain Africa International BV
Acquisition 1ºº Indirect Acquisition in Zain International BV from Zain
Mode of Stake Sale
Acquisition
Date of Closure 8th June 2º1º
Consideration USD 1º. billion
Mode of 1. USD . billion
|ayment 2. USD ºº million upon achievements of certain milestones
. USD ºº million after one year from the date of closing the deal
. USD 1. billion assumed as debt on the books of Zain as on
1.12.2º1º
Funding Leveraged Buy-out
1. USD .5 billion from a consortium of banks led by Standard
Chartered Bank and Barclays Bank.
2. Rupee loan of USD 1 billion equivalent from SBI Group.
 Reasons for that deal
@ Competition in
ndia. (13 operator each of 22
circles)
@ Cut call rates from s 16.80 pm to .50 pm.
@ uge decrease in v. evenue per user. rom
500 s to 145 s today.
n last five years.
@ elecom density in
ndia is almost 47.89 %
@  pected 80% in 2015.
 STRATEGIC REASONS FOR THE DEAL-BHARTI AIRTEL
DEMISTIFIED ON COMPARISON

INDIA-BHARTI AIRTEL AFRICA-ZAIN

MOBILE PENETRATION
HIGH-53% LOW- 32%
AVERAGE REVENUE PER USER (ARPU)
1. ll
ndia 
 is 4.5 D 1. ll frica 
 is 7.5 D
2. alling verage per user (
) 2. Market in frica similar to what
ndian
3.
er second biling + rural customers = telecom market was 5 years back
educed ariffs
MINUTES OF USAGE (MOU)
verage Minutes of usage is 450 cope across 15 countries, minutes of
minutes, cope only in few rural areas usage is 110 minutes
COMPETITION-NO OF PLAYERS
13 players on an average 3-4 players on an average
OTHER REASONS
1. Market leader in 11 out of 15 nations
2.
ossible of more industry entrants low- balance spectrum available is low
 NEED FOR THE DEAL
Ô aturation in the
ndian Market
Ô ntapped frican Market against this
Ô eated Competition at home
Ô ll time low tariff rates driving subscriber growth thus low income earning
subscribers
Ô Cost of etting up Network is high in
ndia
Ô
ressure on the margins with costs going up
Ô ong time ambitions for the frican market-MN acquisition talks failed
twice
Ô ½harti irtel to become 5th largest telecom company in the world
Ô 180 million customers and 18 countries
 ROADBLOCK AHEAD FOR BHARTI
@ Zain͛s caltel Nigeria unit is muddled in an ownership
dispute with Econet wireless holdings.
@ Bharti would need clearance from telecom regulators
in each of 15 nations.
@ Bharti has to raise twice the debt it was to raise from
MTN. It also needs to convince the lender about the
viability of the zain deal
 ADVANTAGE |OINT
A) ZAIN from BHARTI
@ ½harti may bring in tariff schemes for a low

 but high volume market.
@ Zain can also benefit from ½harti µs efficiency in
managing network operations.
B) BHARTI from ZAIN
@ ½harti can understand frican market better.
@
t can learn a lot from zain e pertise in data
service such as 3G and 3.5G
 † Z
N OD 
CN O
 
ON O ½ 




V ocus on Kuwait Operations

V Company is making losses in many countries net profit including all

the countries is in negative.

V nlocking the value in the Zain frican ssets and improve the groups
evenues
 SWOT Analysis
* Strength:

ost acquisition, ½harti irtel will become fifth largest service provider in
terms of the number of subscribers.

he deal would give ½harti 42 million subscribers in 15 frican

countries, which have a combined estimated annual revenue of $3.6 billion

½harti, largest telecom player in
ndia, can replicate the success of
ndia in
frica

trategic lliance with other stake holders, including Nokia, ingel & ony
ricson
*   

V ½harti has paid a heavy price for the deal

V Zain frica has made a net loss of D 112 million in the nine months to
eptember 2009. even of Zain¶s frican units are loss-making, including its
highest revenue earner, the Nigerian arm, Zain Nigeria.

V he deal is highly volatile and carries huge commercial risk for ½harti irtel

V he loan would be a drag on ½harti irtel's earnings with no immediate

returns e pected from the loss-making target.
 * Opportunity

ë elecom penetration in frican countries varies from 37 per cent to 65 per

cent. here are few markets with penetration less than 40 percent

ë he frican market is homologous to
ndian market in term of its

structural similarities.

ë Monthly 
 on the Continent averages D 7.5, which is higher than

ndia¶s 
 of D 5

ë frica is too good an opportunity for ½harti irtel to e periment the model
that it has mastered in
ndia, particularly its rural strategy.
 * Threat

ë Zain frica is in trouble and financial paralysis is looming over its head

ë ½harti irtel 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.

ë ½harti-Zain will be getting a tough fight with rival like MN and China Mobile

ë here are greater political and economics risks in frica .

ë Most of the countries are political unstable and operation are still loss making.
 tructure of cquisition

* he fifteen jurisdictions are: 1) ½urkina aso, 2) Chad, 3) epublic of the Congo, 4)
Democratic epublic of the Congo, 5) Gabon, 6) Ghana, 7) Kenya, 8) Malawi, 9) Madagascar,
10) Niger, 11) Nigeria, 12) ierra eone, 13) anzania, 14) ganda and 15) Zambia.
 FUNDING OF THE DEAL

|
 


  


USD 1º. billion

USD 1. billion of

USD 8. biilion USD ºº million
Zain Debt as on
after a year
1.12.2ºº

USD . USD ºº

billion million
  NC
ON ND
NG
½harti irtel has availed a loan up to D 8.5 billions from various bankers
the break up of that is given below

USD 8.5 Billions

Consortium of 11 banks
led by Standard Chartered
½
rupee loan of 1$ billion
and Barclays

USD 7.5 billion

Tenure is 6 years
First payment 2.5 years
after rollout of operations
 C 
ON O 
C


O V
C O
½NC  NC
NG

BHARTI AIRTEL

USD USD
Bharti Airtel
2.8 Singapore SPV 5.5
Netherland SPV
billion billion

Zain Africa
International BV

15 AFRICAN COUNTRIES
 PROBLEMS AND ISSUES

NIGERIAN TROUBLE

1. ½road Communications td the single largest shareholder in Zain Nigeria also objected
2. conet †ireless
vt ltd raised the issue of ownership of Zain Nigeria

CONGO CONTROVERSY
1. epublic of Congo refused to give the approvals
2. llegations of Zain had not informed it about the deal

GABON GLITCH
1. llegations that Zain had not compiled with certain telecom regulations in Gabon
2. Disapproval of sale of Zain ssets to ½harti irtel
3. ater it approved the deal

International reports note that Bharti has already secured indemnities and
warrants to prevent it from any potential legal ownership disputes.
 ½ 

 ½O  ND   D

Parameters Bharti Airtel Zain (Africa) Combined Estimated

FY11E
Revenues 8.03 billion 3.667 billion 11.697 12.01
USD USD billion billion
USD USD
PAT 1.84 billion -0.1 billion USD 1.83 1.77
USD billion billion
USD USD
EBITDA 3.4 billion 1.1 billion USD 4.5 billion 5.5 billion
USD USD USD
EBITDA Margins % 40.5 % 29.6% N.A 38.1%

6


 
  
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 Continue͙
@ Netherlands also boasts one of the widest
networks of bilateral investment treaties
and
has entered into close to 1ºº such treaties with
various jurisdictions. Since most African
nations are evolving economies and to that
extent may face certain political
uncertainties, bilateral investment treaties
provide much required safety to a foreign
investor with respect to its investments. It would
be interesting to note that more than half the
jurisdictions in which Zain Africa has subsidiaries
have entered into a bilateral investment treaty
with Netherlands.