Kuwait: Kuwaiti telecom group Zain has agreed to offload its African assets to India's Bharti Airtel, Kuwait's state news agency said on Sunday, in a deal valued at $10.7 billion.
The deal marks one of the biggest cross-border transactions in the Middle East in years and a turning point in the long-running saga around the third-biggest telecoms operator in the region.
"If the transaction values the African operations at $10.7 billion, it would be a nice premium," said analyst Simon Simonian at investment bank Shuaa Capital. "We expect Zain to pay a special dividend to shareholders from the proceeds."
The Kuwaiti bourse suspended trading in Zain shares before the open but optimism that the deal would be approved sparked a rally in Kuwaiti shares, pushing the benchmark index up 1.8 percent, in its biggest gain in 6 months.
The sale of Zain's African positions would mark a strategic reversal that saw the local player rise to international status and then revert to that of a regional player. Zain has spent more than $12 billion alone to expand in Africa since 2005.
Zain's expansion from Burkina Faso to Zambia and its ubiquitous logo has transformed it into a symbol of national pride synonymous with Kuwait's faltering aspirations to diversify its economy beyond the oil sector.
"Zain grew a little bit too fast and was facing some growing pains in the past two years," Simonian said.
Confirmation that India's Bharti was the bidder showed the telecom operator was back in the hunt for emerging market acquisitions after its planned $24 billion merger with South Africa's MTN failed in September.
In October, Akhil Gupta, deputy group CEO at the Indian mobile operator's parent, said Bharti would look at buying a stake in Zain if there was an opportunity.
Last month, Bharti agreed to buy 70 percent of Bangladesh's Warid Telecom for an initial investment of $300 million. It also set up a new unit to drive its foreign expansion, focused on opportunities in emerging markets where it can replicate its low-price, high-volume model.
Bharti's home mobile market is facing margin pressures from intense competition and price wars, resulting in lower tariffs and shrinking profits.
Transformation
Analysts have pointed to Zain's underperforming assets in Nigeria and Kenya as a burden on the group but said its large presence in sub-Saharan Africa harboured valuable growth.
The group pulled back from an expansion spree in 2009 and rejected an offer from France's Vivendi for its African assets. It then halted talks to sell the assets to appease potential buyers of a 46-percent stake in the parent company.
A consortium of Asian investors has been trying to buy the 46 percent stake from Kuwaiti family conglomerate Kharafi Group for 2 dinars per share, or about $13.7 billion, although selling the African operations would likely end that initiative.
In one indication of an imminent deal, Zain last week appointed Nabil bin Salama as the firm's chief executive, replacing Saad al-Barrak, seen as the driving force behind the growth into 23 countries across Africa and the Middle East.
Barrak resigned earlier this month amid uncertainty about the fate of the sale of the parent company stake.
Last May, Zain announced a rare cut of 2,000 jobs of its 15,500 workforce, signalling that the heyday of expansion might be over.
Africa represents about 62 percent of Zain's 64.7 million customers but only 15 percent of the groups's net profit. Zain operates in 24 countries including Saudi Arabia and Nigeria.
Shares in Zain have risen 23 percent since February 4.
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