Zain finally sold for Sh700bn

Chief Executive of Africa's Kuwaiti mobile telecommunications service provider Zain Chris Gabriel speaks during a news conference in Nairobi, November 11, 2008. Photo/REUTERS

It’s a done deal.

That’s the message that filtered through from Zain headquarters on Wednesday as it emerged that the board of Kuwaiti telecoms operator had approved a $9 billion (about Sh700 billion) sale of most of its African assets to India’s biggest telecoms firm, Bharti Airtel, ahead of Thursday's deadline for exclusive talks.

Due diligence on the deal, which will extend Bharti Airtel’s reach into African emerging markets dramatically, is completed and the sale documents will be signed in several days, the sources said.

Bharti had said on Sunday it had tied up the entire financing requirement of $8.3 billion, with major international banks committing to underwrite the amount.

Spokesmen for Zain and Bharti declined to comment, according to a Reuters report, while the Kenya office did not respond to email enquiries.

The sale, however, excludes Zain’s Morocco and Sudan operations.

This has set up Zain for a re-brand, which would be the third for the Kenyan subsidiary that had earlier changed from Kencell to Celtel, which was bought out by Kuwait-based Mobile Telecommunications Company (MTC).

“Bharti Airtel can enter into an agreement with Zain to use the Zain brand in Africa,” said Mr Paul Ng’ang’a, the chief executive of Catapult Brand Consulting.

Brand equity

“In this scenario, an arrangement where licence fees are paid for brand equity would ensure continuity for consumers, and would favour Bharti in its quest for new customer acquisition since the brand enjoys relative awareness and loyalty. For Bharti, however, it would be self-defeating to buy-out a rival and then proceed to promote its brand.”

He noted, though, that Bharti is highly likely to re-brand Zain.

If Bharti could commit $9 billion to purchase the assets then they can commit enough cash to carry out a complete re-brand and successfully migrate the 42 million subscribers to the new brand.

“In this scenario, one of the items of negotiation would be how much to pay for brand equity.”