African nations oppose Bharti's Zain purchase

Led by Kenya - whose Prime Minister Raila Odinga has, according to media reports formed a task force to investigate the deal - the governments are concerned they might not get a cent of the windfall that will accrue to Zain shareholders.

These concerns mirror a similar worry in India, where the UK's Vodafone is still fighting the decision by Delhi to slap it with a $2bn tax bill following its $11bn acquisition of a 67% stake in domestic mobile operator, Hutchison Essar (now Vodafone Essar) more than two years ago.

A telecoms analyst said Bharti might have underestimated the political and regulatory minefield it has to navigate to get government approvals in each African country that Zain has operations. "I am not sure they have done their homework properly," he said on Friday.

MTN seeks to redeem itself

Ghana and Malawi have been scrutinising the deal, while in Nigeria minority shareholders in Zain Nigeria are fighting the transfer of the company to Bharti because of unresolved shareholder disputes with previous partners.

Bharti founder Sunil Mittal is understandably desperate to wrap up the sale, which would make his group the largest mobile company operating exclusively in emerging markets, with up to 165-million customers in Asia and Africa. This compares with more than 123-million customers its main competitor in Africa - MTN - has on its operations in Africa and the Middle East.

Bharti and MTN twice failed to merge due to regulatory and price concerns, and the former moved quickly to snap up Zain. MTN is now seeking to redeem itself by buying parts or all of Egyptian based Orascom Telecoms, but that deal seems to have run into a brick wall in some countries, particularly in Algeria, whose government has claimed first right of refusal to buy Orascom's Djezzy.

Scott & Sullivan analyst Spiwe Chireka said it was not surprising that "everybody wants a share" of the Zain sale proceeds, particularly when one considered that it was one of the single largest deals in Africa in recent years.

Still 'some way to go'

Bharti had "some way to go" before it could announce the purchase of the Zain assets was unconditional, she said. "This just shows that this is far from a done deal. It means they can't hit the ground running as MTN did when it bought Investcom."

Chireka said it would be particularly intriguing to see how Bharti wriggled out of the long running shareholder dispute in Nigeria, where SA-based Econet Wireless Group is still claiming pre-emptive rights over the previous sale of the company to Zain by its Nigerian partners.

Bharti has, however, shrugged off the dispute, insisting it would not derail its ambitions to become the second-largest mobile phone company in Africa. It says the wrangle is between former shareholders who should sort it out among themselves.

"Bharti can't afford to lose Nigeria because when you look at the other assets it has bought, like in Zambia and Malawi, they have been running at negative ebitda (earnings before interest, tax and depreciation)," Chireka said.

Source: Business Day