It was revealed yesterday that three companies were in talks with African mobile operator Zain. At the time, it was mentioned that one of these was an Indian company. Today, that company has been revealed as Reliance Communications. But what does that mean for the deal?
What’s on offer?
Maybe everything. On Monday, Reuters reported that Kuwaiti daily newspaper Al-Rai said Zain was in talks to sell part, or maybe even all, of its African operations. Reports differ from place to place, but it looks like Zain is looking to sell off it’s Celtel properties.
What’s Celtel?
In May 2005, telecoms company MTC bought it’s rival, Celtel, for almost 3 billion dollars. Under the Celtel name, it expanded it’s mobile operations to a huge number of other countries in Africa. In 2007, MTC rebranded to Zain. One year later, it also changed Celtels name to Zain, to create a single international brand.
Now… let’s take a second to look at what its African operations actually are. Zain operates a single mobile brand that comprises wholly-owned networks in 22 African countries. This covers almost 50 million customers. Al-Rai determined the worth of Zains African networks to be around 10 billion dollars – a rise of 7 billion dollars over the four years since it bought Celtel.
There are a further 20 million or so customers in the Middle East, and partly-owned networks in Morocco and Sudan, but this deal is for the African operations.
All right, that’s Zain. What about this Reliance Communications?
RCom is the second largest telecoms operator in India, and is part of the much larger industrial giant Reliance-Anil Dhirubhai Ambani Group. RCom has been pretty pushy when it comes to mobile internet services. It became the first network in India to run both CDMA and GSM networks last December, when it launched it’s GSM services simultaneously in 17 of the 18 Indian telecoms regions. The company has also launched various video-on-demand and banking services for mobile consumers.
Via Domain B
What we think?
Given the size of Reliance-Anil Dhirubhai Ambani Group, there’s almost certainly enough money there to foot the possible 10 billion dollar bill. And it’s also a good fit Other potential buyers in this deal are Etisalat and China Mobile (which was also rumoured to be involved in an RCom deal in June), but anyone who buys these Africa properties would want to be ready for a challenge. Overall, they have not been profitable for Zain – which lead to its eagerness to sell. French group Vivendi pulled out of it’s talks with Zain last week, seemingly over price disagreements. The big difference here is that RCom is used to operating in a market far more similar to Zain than Vivendi is. That’s what I mean by “a good fit”.
I was almost disappointed that the Indian company wasn’t TaTa DOCOMO! But I guess its too busy spending it’s NTT money upgrading its GSM network to think about Africa. However, seeing as RCom also runs a GSM network, it’s not completely impossible that it would look at possible LTE upgrades to Zain properties.
