Zain may hit Bharti 3G bid

Bharti Airtel said on Tuesday that it will pay close to $9 billion in cash for acquiring Zain’s Africa operations, the company has said in a statement. The operations will also come with $1.7 billion in debt — leading to the total enterprise valuation of $10.7 billion that’s doing the rounds.

Although the cash outgo for Bharti will be somewhat lower than anticipated, it will still force the company to go for large borrowings. Analysts feel this may have some impact on the company’s other big plan — the 3G rollout. “Yes, surely their 3G expansion will get a bit slow as they will have a huge debt on their balance sheet,” said a telecom analyst who did not wish to be identified. Due to the high debt, Bharti Airtel balance sheet is expected to remain under strain for the next two to three years.

The auction for 3G licenses in India is expected to happen over the next six months. The reserve price for a pan-India 3G license is Rs 3,500 crore, but with a limited number of slots available, the final amount could be higher. Once it has got the licenses, there will also be some capex commi-tments for the 3G rollout.

“The solution for the Bharti Airtel is that it should try to rebound the African operations of Zain. This I think will be possible as Zain has operations on ground,” said KPMG’s director for telecom, Mr Romal Shetty.

However, Bharti could face problems in implementing its outsourcing model in Africa.

“The outsourcing market in Africa is not mature enough for an operator to outsource network related maintenance. However call centres and other business processes may be outsourc-ed,” says brokerage house Goldman Sachs in a research report.

The report adds that if the company wants to move to the to low ARPU and high usage pattern then it needs to invest more in capex as currently African operators relatively underspend on infrastructure.

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