BHARTI AIRTEL ZAIN ACQUISITION

PRESENTED BY:-

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BHARTI AIRTEL

BHARTI AIRTEL
Bharti enterprise is one of India's leading business

groups with interests in telecom , financial services , retail and manufacturing. Out of the 15 group companies, Bharti Airtel is the flagship company, and is one of asias leading integrated providers of telecommunications with operation in India and Sri Lanka

Contd..
The company was established as a public limited

company in July 1995. It transforming the sector with its world-class services built on cutting edge technologies.

Business units
Mobile services

Bharti Airtel offers GSM mobile services in all the 23- telecome circles of India and is the largest mobile services provider in the country.
Telemedia services

Airtel offers high speed broadband internet with a best in its class network. It provides world class entertainment with one of indiass best direct to home (DTH) service digital TV in more than 150 cities.

 Enterprise services

enterprise services provides a broad portfolio of services to large enterprise and carrier customers.
Digital TV services

Airtel also provides digital TV services.

Vision
By 2010 Airtel will be the most admired brand in India: Loved by more customers Targeted by top talent Benchmarked by more businesses Vision 2020 To build India's finest business conglomerate by 2020 Supporting education of underprivileged children through Bharti Foundation.

ZAIN
Zain is the leading telecommunications operator

across the middle East and Africa providing mobile voice and data services to over 70 million active customers as at 30 september 2009with a commercial presence in 23 countries . Zain is listed on kuwait stock exchange with a market capitalisation of over US$ 20 billion.

Contd
Year to year the customer growth of zain is 14% The company surves 72.5 million managed active

customers as of december 31, 2009.and zain group added over 9 million new active customers in the year 2009. Zain Africa has operates in burkina faso, chad, the the republic of congo, the democratic republic of the congo, gabon, ghana, kenya, malawi, madagascar, niger, nigeria, sierra leone, tanzania, uganda, and Zambia. The total population of these 15 countries stands at over 450 million with telecom penetration of approx32%

Structure of Acquisition

* The fifteen jurisdictions are: 1) Burkina Faso, 2) Chad, 3) Republic of the Congo, 4) Democratic Republic of the Congo, 5) Gabon, 6) Ghana, 7) Kenya, 8) Malawi, 9) Madagascar, 10) Niger, 11) Nigeria, 12) Sierra Leone, 13) Tanzania, 14) Uganda and 15) Zambia.

Transaction Details of Bharti Airtel-Zain

Acquirer Seller Target Acquisition Bharti Airtel Limited Mobile Telecommunications Company KSC Zain Africa International BV Bharti Airtel Limited indirectly acquired 100% of Zain Africa International BV and its business operations in Africa from Zain under a privately negotiated agreement.

Mode of Security (Share) Sale acquisition Consideration USD 10.7 billion Mode of Payment All cash deal Bharti Airtel to pay: a) USD 8.3 billion within three months from the date of closing; b) USD 700 million after one year from the date of closing; and c) USD 1.7 billion assumed as debt on the books of Zain. Funding Leveraged Buy-out a) Bharti Airtel to borrow USD 7.5 billion from a consortium of banks led by Standard Chartered Bank and Barclays Bank. b) Bharti Airtel to avail of a rupee loan of USD 1 billion equivalent from SBI Group.

THE DEAL
Bharti Airtel Ltd announced on 30th march 2010 its entry

into a legally binding definitive agreement with Zain Group to acquire the sale of 100% of Zain Africa BV. Under the agreement , Bharti will acquire Zain s African Mobile services operation in 15 countries with a customer base of over 42 million. Zain is market leader in 10 of these countries and rank 2nd in 4 countries. With this acquisition, Bharti Airtel will be the worlds 5th largest wireless co. with operations across 18 countries.

Contd.
The co. network will now cover over 1.8 million

people-2nd largest population coverage among telecom co. globally. With this acquisition, Bhartis total customer base will increase to around to 179 million in 18 countries. Standard Chartered was the lead advisor in the deal, Barclays Capital was the Joint Lead Advior & SBI Group was the Lead Onshore Advisor.

Contd.
Global Investment House KSCC was the Regional

Advisor to Bharti for this deal. This deal made Bharti Airtel 2nd largest cellular co. in African continent. Bharti which is 32 % owned by Singapore Telecommunication Ltd. selected Zain as 2nd choice for building major presence in Africa after it twice failed to finalise its tie up with South Africas MTN Group Ltd.

VALUING THE DEAL

Bharti have paid 10 time enterprise value to EBITDA

for the deal. Acc. to analyst, the combind entry will have 163.5 million subscribers with Zain Africa constituting 41.9 million and 121.6 million . The combined EBITDA margin are 38.3% with Zain Africas at 32% and Airtel at 41%. The combined net margins are 15.4 % with Zain Africas at 4.1% and Airtel at 23.8%.

Contd
The transaction implies an equity value of US $9

billion and consideration will be fully satisfied in cash of which US $8.3billion will be paid on closing and US $0.7 billion will be paid after one year of closing.

FINANCING THE DEAL

Bharti Airtel will assume US $1.7 billion

consolidation debt obligations. Bharti has secured debt upto US $8.5 billion from leaders to fund the deal. The cos. purchase was finalised by a group of banks led by Standard Chartred plc, Barclays plc and SBI. Other lender include Autralia and New Zealand Banking Group Ltd., Bank of America Merill Lynch etc.

SWOT Analysis

Strength
Post acquisition, Bharti Airtel will become fifth largest

service provider in terms of the number of subscribers.

The deal would give Bharti 42 million subscribers in 15

African 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

Weakness
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.

Opportunity
Telecom penetration in African countries varies from 37 per

cent to 65 per cent. There are few markets with penetration less than 40 percent
Monthly ARPU on the Continent averages USD 7.5, which

is higher than Indias ARPU of USD 5

Africa is too good an opportunity for Bharti Airtel to

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

Threat
Zain Africa is in trouble and financial paralysis is looming over its head Bharti Airtel 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.

Bharti-Zain will be getting a tough fight with rival like MTN and China

Mobile
There are greater political and economics risks in Africa . Most of the countries are political unstable and operation are still loss making.