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Presented By:
F - 7 Jenice Victoria Crasto
F 17 Shaila Joseph James
F - 19 Shweta Vijay
F 22 Jyotshana Vinod



The Deal
US $10.7 billion
15 countries across
MOU (Memorandum of
Understanding) 15
February 2010
Deal signed 31 March
Deal closed 8 June





1. Sierra Leone

9. Zambia

2. Burkina Faso

10. Malawi

3. Ghana

11. Tanzania

4. Niger

12. Kenya

5. Nigeria

13. Uganda

6. Gabon

14. Chad

7. Congo

15. Madagascar

8. DR Congo






Bharti press release on 31

March 2010:


agreement is a landmark for

global telecom industry and game
changer for Bharti. More importantly,
this transaction is a pioneering step
towards South South cooperation and
strengthening of ties between India and
Africa. 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
Sunil Bharti Mittal, chairman and managing
director, Bharti Airtel


Bharti Airtel Limited is a leading global

telecommunications company with operations in 20
countries across Asia and Africa
Headquartered in New Delhi, India, the company
ranks amongst the top 4 mobile service providers
globally in terms of subscribers
In India, the company's product offerings include 2G,
3G and 4G wireless services, mobile commerce, fixed
line services, high speed DSL broadband, IPTV, DTH,
enterprise services including national & international
long distance services to carriers
In the rest of the geographies, it offers 2G, 3G
wireless services and mobile commerce. Bharti Airtel
had over 269 million customers across its operations
at the end of March 2013


On March 30, 2010, Bharti had entered the deal to acquire

Zain Telecom's operations in 15 nations,
excludingSudanandMorocco (This potential
transaction does not include Zains operations in Morocco
and Sudan and remains subject to due diligence,
customary regulatory approvals and signing of final
transaction documentation. There can be no assurance
that a transaction will be consummated. Further
announcements will be made in due course. )
On June 8,2010 Bharti Airtel completed the deal for an
Enterprise Value $10.7 billion (about Rs 48,000 crore)
This acquisition, besides giving Bharti its much-desired
presence in Africa, made it the world's fifth largest wireless
company with operations across 18 countries and a
subscriber base of around 179 million

The African business widened Bharti's reach, which

was hitherto restricted to Asia and the Indian
Ocean region with businesses inSri
Lanka,Bangladesh andSeychelles
Bhartisentry into Africa gave the company access
to a population of about 470 million people from
the Atlantic coast to the Indian Ocean, with just
over a third of them carrying mobile phones
The Zain acquisition was contemplated to take the
revenue of the combined entity to an estimated
$13 billion
The combined business was estimated to have 180
million customers and generate EBIDTA of $4.7
billion on revenue of $12.4 billion, according to


Of the $10.7 billion enterprise value of Zain, Bharti

paid $8.3 billion upfront and $700 million after a year
It also take over approximately $1.7 billion of Zain's
debts as on December 31, 2009
Of the $8.3 billion paid to Zain, Bharti raised debt
from a consortium of foreign banks and State Bank of
India with the lead-arranger and leadadvisorStandard Chartered Bank committing the
highest amount $1.3 billion, followed byBarclays at
$900 million.
The rest of the co-advisors ANZ, BNP, Bank of
America-Merrill Lynch, Credit Agricole CIB, DBS,HSBC,
Bank of Tokyo-Mitsubishi UFJ and Sumitomo Mitsui
Banking Corporation allocated $600 million each.
State Bank of India agreed to an up to $ 1 billion loan


The deal enterprise value of USD 10.7 billion

implied a valuation of:
USD 320 per proportionate subscriber
3.6 times revenue
11.6 times EBITDA, a 30-70% premium versus
Bharti's valuation at that time
Zain's peer, MTN traded at 5.5-6 times EV/EBITDA

The deal made sense for Bharti for the following reasons:
Low Financial leverage
Bharti had a very low Net Debt to Equity Ratio of 0.05 at the end of
Dec., 2009 which means that it was virtually a debt free company
It is good to have low debt but zero debt is not adesirablesituation
as debt can increase the shareholders returnon their
investmentdue to taxadvantages associated with borrowing
Bharti is a profitable company with over 40% EBIDTA margins which
is higher than the cost of debt. This means that it is better for the
company to pay interest than paying dividends to a large number of
shareholders and hence it should either reduce the shareholding
(through share buyback) or increase debt and deploy debt in a
profitable way. Bharti selected the second option and took debt to
buy Zain that would return higher profits in the long term

Free Cash
Bharti is one of the few carriers across the world
that has free cash flow and it didnt make sense
for the company to keep sitting on the pile of
cash when it can deploy it in productive assets
The capex in the Indian operations had started to
decline and hence the free cash flow was likely
to increase even further in future
The company would not have found much
problem in servicing the debt raised to fund the
acquisition due to generation of free cash flow in
the years to come


Per the agreed upon terms, Bharti was to pay Zain $10.7 billion, of
which $1.7 billion were to go towards debt payment. Bharti will be
obligated to pay $10 billion upon closing and remaining $700 million
one year after the conclusion of the deal.
With Zain currently losing money in several of the key markets,
Turner believed that the acquisition would reduce Bhartis earnings
in the short term. Moreover, the all-debt deal would increase in
Bhartis leverage for funding the deal. Bharti had agreed upon a
price of $10.7 billion, of which $1.7 billion was debt that Bharti
would assume. In September 2009, Zain Africa collectively reported
an annual net loss of US$112 million against a profit of US$169
million in the corresponding period of the previous year. Seven of
the 15 countries reported losses. The highest revenue earner,
Nigeria, which was optimistically pushing the US$1 billion mark, lost
US$88 million


The tariffs had declined significantly in India and

the penetration levels had crossed 45% in India,
there was little opportunity left in the domestic
market for Bharti
The penetration levels in Africa were around 33%
and the ARPU levels were high varying from $8 12
(apart from Kenya and Ghana where it is closer to
India ARPU levels of $4)
Bharti could replicate its low cost model in the
African market which would not only bring the cost
down but would also result in significantly higher
subscriber addition
The level of competition in Africa was not as


Post-acquisition, Bharti Airtel will become fifth largest service

provider in terms of the number ofsubscribers.

ThedealwouldgiveBharti42millionsubscribersin15African countries,
which have a combined estimated annual revenue of $3.6 billion

Bharti, largest telecom player in India, can replicate the success of

India in Africa

Strategic Alliance with other stake holders, including Nokia, SingTel

& Sony Ericson


Bharti has paid a heavy price for the deal

Zain Africa has made a net loss of USD 112 million in the
nine 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 risk

for Bharti Airtel

The loan would be a drag on Bharti Airtel's earnings with no

immediate returns expected from the loss-making target.


Telecom penetration in African countries varies from 37 per

cent to 65 percent. Thereare few markets with penetration
lessthan 40 percent

The African market is homologous to Indian market in term of

its structural similarities.

MonthlyARPU on theContinent averages USD 7.5,which is

higher than IndiasARPU ofUSD 5

Africa is too good an opportunity for Bharti Airtel to

experiment the modelthat it has mastered in India, particularly
its rural strategy.


Zain Africa is in trouble and financial paralysis is looming over its


Bharti Airtel will have to put in a lot of effort to align the varied
cultures; with 15countries 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 economic risks in Africa .

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