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Johannesburg - Bharti Airtel, which last year proposed a merger with South African cellular operator MTN, at the weekend said it was in exclusive talks to acquire Kuwaiti telecommunications group Zain Telecoms' African assets - a move that could result in Bharti Airtel being one of MTN's most competitive rivals on the continent.
But Zain Telecoms' announcement that it was considering the sale of its African assets to India's Bharti Airtel for $10.7bn has surprised market watchers.
Zain and Bharti on Sunday announced that they had entered into exclusive negotiations following Zain's acceptance of Bharti's proposal.
The deal, which excludes Zain's Sudan and Morocco operations, is subject to due diligence with Bharti being given until March 25 to examine Zain's books.
Global growth consultance Frost & Sullivan said Zain's interests in Africa have been under scrutiny for some time 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 its status as a leading regional mobile player. Frost & Sullivan believes that its African operations represent the jewels in its crown," said Frost & Sullivan ICT consultant Lindsey McDonald.
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 would now be assuming the role.
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. Given the force of the global downturn, it is likely that this has had a role to play in Zain's decision to sell," said Frost & Sullivan in a note.
"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," said Frost & Sullivan.
But at the end of the day the African mobile consumer could benefit most.
Frost & Sullivan believes that Bharti will employ its market winning strategies used in India, for the African market.
"Zain's success on the continent lays a favourable foundation for the fulfillment of this objective and 2010 is likely to be a very dynamic year for the African mobile market," said Frost & Sullivan.
While many are likely to question where to next for Zain, 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.
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 organization, said Frost & Sullivan.
- I-Net Bridge