Bharti Airtel Closes Zain Africa Deal

Broad Communications owned by Oba Otudeka and his family in Nigeria that had raised objections to the Bharti-Zain deal, have settled the differences and agreed to withdraw all court cases. In lieu, Otudeka has been appointed as the chairman of the company in Nigeria.

The deal had also run into hurdles after the government of Gabon had come out against the deal, but later approved the sale. The government of Congo Republic had also said Bharti-Zain deal broke law.

Of the $10.7 billion enterprise value of Zain, Bharti will be paying $8.3 billion upfront and $700 million after a year. It would also take over approximately $1.7 billion of Zain’s debts as on 31 December, 2009.

At the Bombay Stock Exchange, Bharti's stock dropped 3.8 per cent on the news. In fact, Bharti Airtel stock had to face hammering at the bourses since the beginning of the negotiations. “We were warned as we went into this significant deal, but we were overwhelmed by the response we got from bankers,” said Deputy Group CEO of Bharti Enterprises, Akhil Gupta.

“Managing nearly 200 million subscribers has to be seen on operational and management efficiencies and AirTel has to be given more time, before making an assessment of its financials,” says Sridhar Pai, founder and CEO of Tonse Telecom, a Bangalore-based research firm.

Sunil Bharti Mittal, Chairman and Managing Director, Bharti says: “The market will take its own position and analysts would take their own positions; we are clear that our job is to lay down our vision and get work done.” He added: “I have seen the height of Rs 1,200 and low of Rs 20. We have a job to do.”

Addressing the press conference to announce the completion of the deal, Mittal asked Gupta if he could sleep peacefully without having to worry about the financing. Gupta, sitting to his right, smiled and nodded in the affirmative.

Significantly, all the deals out of India had to depend on bridge financing and this deal was fully tied up, says Gupta. A consortium of 11 banks has provided a long-term financing for six years with a moratorium of two years. “This shows the strong balance-sheet and the 15 years of relationship we have built with the financial community,” says Gupta. The overall cost per dollar financing is less than 2.25 per cent including the LIBOR.