Vivek New Proooo (2)

8/6/2019 Vivek New Proooo (2)

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A

PROJECT REPORT ON

Acquisition of Bharti Airtel with Zain

SUBMITTED BY

Vivek Yadav

BBA 6TH SEMESTER

YEAR 2010-2011

UNDER THE GUIDANCE OF

Pradnya Kothari

(INTERNAL GUIDE)

SUBMITTED TO

UNIVERSITY OF PUNE

IN PARTIAL FULFILLMENT OF

GRADUATION IN FINANCE

(B.B.A)

SURYADATTA COLLEGE OF MANAGEMENT & INFORMATION

RESEARCH, PUNE 411030.


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Decl i

I, Mr. Vivek Yadav the stude t of Suryadatta Institute of

Management & Research, Karvenagar Kothrud, Pune (Batch 2008-

2011) hereby declare that I have completed the Project Report

entitled Acqui i i of B i Ai el wi Z i is written and

submitted by me to the University of Pune, in partial fulfillment of

the requirements for the award of degree of Bachelor of Business

Administration it is my original work and the conclusions drawn

therein are based on the material collected by myself from the

Company.

Date: _________ Vivek Yadav

Place: Pune. BBth

SEMESTER


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ACKNOWLEDGEMENT

This is my gratitude to all those people without whom this PROJECTwould

have never seen the light of day.

My project becomes a reality only because of co -operation of many people who

had helped me in completing this project. I sincerely extend my gratitude to

Mrs. Pradnya Kothari who has given me this golden opportunity to have an

insight in the corporate world and who has been a source of guidance and

support

I sincerely thank my esteemed guide Mrs. Pradnya Kothari (Fi ce)for her

valuable guidance and co -operation rendered to me throughout the project

report. It would not have been possible for me to complete this project without

their meticulous guidance and suggestions.

I give my thanks to Mrs. SurbhiBhuskute (B.B.A Co-ordi tor)and

MRS. VIDHYA SALUNKHE (PRINCIPAL SURYADATTA GROUPOF

INST

IT

UTE

) for their valuable contribution, co-operation and guidance fromtime to time for completion of this project.

Last but not the least I would like to thank my parents, friends, Colleagues who

directly or indirectly help me during the course of project without which project

would have been a Herculean task.

Vivek Yadav


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Content

Chapters

No.

Title oftheChapters Page No.

1 Objectives 06

2 ACQ ISITION 09

3

4

An Introduction to the Company

Bharti Airtel

An Introduction to the Company Zain

13

21

5Bharti shares up on Zain deal; execution a

challenge

25

6Bharti Airtel completes Zain acquisition

33

7 Key Drivers Of The Deal 34

8

Bharti Gets $8.3 Billion in Funding for ZainPurchase

35


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Objectives

o To understand the term Acquisition, on global platform.

o To study & to understand the various Legal Aspects

involved under such global M & A`s deal.

o To understand the criticalities & integrity involved like

what can be the payment structure, what can be the source

of funding etc. in such mega deal.

o To understand the strategy behind, why a particular

successful firm need to enter in to such M & A`s form of

business & what can be the long term advantages of the

same.


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ACQUISITION

When one company takes over another and clearly established itself as the new

owner, the purchase is called an acquisition. From a legal point of view, the Target

company ceases to exist, the buyer "swallows" the business and the buyer's stock

continues to be traded. Like TATA`s acquisition of Land Rover & Jaguar from Ford

& Tea Brand Tetley of U.K./Steel Company Corus of U.K.

Sector Volume USD mn %

Telecom 6 13,518 52

Pharma & 21 4,854 19Metals, Ores & 6 2,524 10

Banking & Financial

Services 18 2,192 8

FMCG, Foods &Beverages 9 541 2

Top 5 Acquisition Sectors - 2010


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Bharti Airtel

Founder, Chairman and Group CEO : Sunil Bharti Mittal

Established : July 07, 1995, as a Public Limited Company

Business description:

Provides GSM mobile services in all the 22-telecom circles in India, Srilanka,

Bangladesh and now in 15 Countries of Africa.

Provides telemedia services (fixed line and broadband services through DSL)

in 88 cities in India.

Also offer suite of Enterprise solutions, DTH and IPTV Services

It is one of Asias leading integrated telecom services providers with

operations in 19 countries across Asia and Africa.

It is structured into four strategic business units - Mobile, Telemedia,

Enterprise and Digital TV.

The mobile business offers services in India, Sri Lanka and Bangladesh.

Acquirer Target % Stake USD mn

Bharti Airtel Zain Africa 100% 10,700

Abbott Labs Domestic

Formulations

Business of PrimalHealthcare

European Solutions to

100% 3,720

Hinduja Group

Private Bankers

100% 1,863

GTL Infrastructure Aircel's 17500

telecom towers

100% 1,787

Vedanta Resources Zinc business of

Anglo American Plc

100% 1,340

Top 5 Acquisition Deals - 2010


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Telemedia business provides broadband, IPTV and telephone services in 94

Indian cities.

Bharti Airtel is the leader in Indian Wireless market with 24.0% market

share, followed by Reliance Communications 18.3%,Vodafone 17.5 %.

Its Mobile Services partners are Nokia Siemens, Ericsson, Huawei.

Telemedia & Long Distance Services partners are Nokia Siemens, Juniper,

Cisco, Alcatel Lucent, ECI, and Tellabs.

Call Centre Operations partners are IBM Daksh, Hinduja TMT,

Teleperformance, Mphasis, First source & Aegis.

Today, Airtel innovates in almost everything that it presents to the market. An excellent

example is Easy Charge - India's first paperless electronic recharging facility for prepaid

customers. As evidence of its fine record, Airtel has also been conferred with numerous

awards. It won the prestigious Techies Award for 'being the best cellular services provider'

for four consecutive years between 1997 and 2000 - a record that is still unmatched. And in

2003, it received the Voice & Data Award for being 'India's largest cellular service provider',

amongst others.


Zain

(Zain was established in 1983 in Kuwait as the region's first mobile operator)

Services include:

Mobile telecommunication and data services, including operation, purchase, delivery,

installation, management and maintenance of mobile telephones and paging systems in

Kuwait and 21 other countries in the Middle East and North Africa.

ZAIN AFRICA :

Wholly owned subsidiary of Zain

Incorporated in Netherlands and held the African operations of Zain.

The company was originally named Celtel which was acquired by Zain in 2005

and renamed as Zain International BV


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Zain, formerly MTC, was the first mobile telecommunications company in the

Middle East when it started its operations in Kuwait back in 1983.

Its subsidiaries include; Mobile Telecommunications Company Lebanon (MTC)

SARL, Lebanon, and Sudanese Mobile Telephone (Zain) Company Limited,

Sudan.

It is a public company engaged, together with its subsidiaries, in the provision ofmobile telecommunication and data services, including operation, purchase,

delivery, installation, management and maintenance of mobile telephones and

paging systems in Kuwait and 21 other countries in the Middle East and North

Africa.

Zain Africa is Wholly owned subsidiary of Zain, incorporated in Netherlands and

held the African operations of Zain.

ZAIN ANNOUNCES HALF-YEAR 2010

FINANCIAL RESULTS

Period highlighted by Middle East revenues of US$2.33 billion, a year

on year increase of10%

Net Income soars 488% to US$3.085 billion (including capital gain of

US$2.653 billion from the sale of Zain Africa)

Number of served customers reaches 34.2 million, an increase of 28%

Kuwait, August 9, 2010

Zain announces its consolidated financial results for the half -year,

ending 30 June, 2010.


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H1, 2010 KeyPerformance Indicators (in KuwaitiDinars & USD)

Total Managed Active

Customers34.2 million up 28% on

H1, 2009Consolidated Revenues KWD 672.6 million (US$2.33

billion)

EBITDA KWD 287.2 million (US$ 995

million)

EBIT KWD 206.8 million (US$ 716million)

Net Income (including capital

gain)

KWD 895.3 million (US$ 3.085

billion)Earnings Per Share Fils 232 (US$0.80)

Bharti shares up on Zain deal;

execution a challenge

Bharti Airtel now needs to work on getting regulatory clearances for its $9 billion dealto buy 15 African operations of Kuwaiti telecom Zain, and turning around the loss-making assets would be its priority. The acquisition, which would help Bharti become

the world's No. 5 wireless firm by subscribers with presence in 18 countries, alsocomes with tough financial and management challenges for the Indian mobile marketleader already battling a highly-competitive home turf.

"A big challenge is streamlining operations across all these countries with limitedresource availability," said Kamlesh Bhatia, principal analyst at research firm Gartner."They also have to turn the company around in the fastest time possible."

Bharti shares rose as much as 2.7 percent on Wednesday morning after the companysigned definitive agreements with Zain late on Tuesday. At 0518 GMT, the shareswere trading 1.3 percent up in a Mumbai market that was down 0.1 percent.

The deal would give Bharti 42 million subscribers in 15 African countries, which havea combined estimated annual revenue of $3.6 billion, but are currently making losses."The main challenge forBharti lies in raising revenues and adding subscribers as Zainhas been losing both in some of the countries," said Amit Ahire, analyst with AmbitCapital.

Also, issues in Gabon and Nigeria are examples of what Bharti is going to face in a


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new continent. The government ofthe small central Africannation of Gabonweighedin on Mondayagainstthedeal, saying Zain Gabon hadnot compliedwith regulationsand that it reserved the right to take "all necessary measures".

Minority ownership of Zain's operations in Nigeria, thebiggestmarketinthedeal, isalso indispute. "Gabonis a very smallmarketandinmost cases regulators canalwaysbedealtwith. But Nigeriais abiggerstumbling block, becauseitis akeymarketand

shareholders are always tricker to deal with," said Gartner's Bhatia.

Bharti Chairman Sunil Mittal has said the companywouldworkwith regulators andexpected "tremendous support" in countries including Gabon. Bhartiwouldalso talkto theminority shareholders in Zain Nigeria. Bharti is paying $9 billion in cash toZain, whatmanyregardas a fullprice, andafterassumption of $1.7 billion ofdebt onthe target firm's books, the deal is valued at around 10 times EBITDA, more thanBharti's own valuations.

Bharti has secureddebt of upto $8.5 billion froma clutch oflenders to fundthedealandmay have to spendmore to expand thenetworks, which analysts say havebeen

under-invested foryears. Andadding to thatwouldbe spending fornextmonth's 3Gspectrumauction in India, which analysts estimate could costa firm upto $2 billion

just forthelicence.

Bh r A r e o e e

q o


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Bharti Airtel Chairman and CEO Sunil Mittal (centre) with Bharti Enterprises Deputy

Group CEO Akhil Gupta (left) and Bharti Airtel CEO International Manoj Kohli at a

press conference in New Delhi.

Becoming the world's fifth largest mobile operator, Sunil Mittal led Bharti Airtel onTuesday announced that it had completed the acquisition of Zain Telecom's Africaoperations for $10.7 billion.

The company has now 180 million subscribers in 18 Asian and African nations. Thecompany announced that it would launch the Airtel brand in Zain's operations in allthe 15 nations in October.

Announcing the completion of the deal at a press conference here, Bharti groupChairman Sunil Mittal said the transaction is the largest ever cross-border deal in an

emerging market and will result in combined revenues of about $13 billion.''

Bharti finally entered Africa after aborting negotiations twice for merger with MTNsince 2008, with Mr. Mittal stating that in the Zain's case Airtel would have a totalcontrol.

He said Zain Africa would now be 100 per cent subsidiary of Bharti International.This deal would signal many new investments that would go to Africa, he added.

At present, China Mobile is the world's largest mobile player with a subscriber base of522 million, followed by Vodafone (348 million), Telefonica (206 million) andAmerican Movil (201 million).

AFRICA STRATEGY

Elaborating on Africa strategy, Bharti's international operations in-charge ManojKohli said the company had set a target of 100 million subscribers and $5 billionrevenues by 2012-13.

Bharti has acquired Zain Telecom's operations in 15 African nations, excluding Sudanand Morocco. Zain has operations in 17 countries in the region and is claiming to bethe second largest operator afterMTN.


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Asked whether he regretted missing a deal with MTN twice and whether that was hisfirst choice, Mr. Mittal said MTN was the first opportunity that was available at thattime. In MTN's case, we would have had board control but no management controland no change in brand.

There were compromises to be made (in MTN). Zain is the second largest operatorand that is the only difference. But we will have full control and our own brand.''

With this acquisition, we will have an unparalleled footprint in one of the fastestdeveloping regions in the world. We are looking at more opportunities as we buildmore roll outs in Africa,'' he remarked.

The company has also reached a settlement with Broad Communications, the singlelargest shareholder in Zain Nigeria, following which its chief Otudeko would nowhead Bharti's operations in Nigeria.

Key Drivers Of The Deal


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Bh r A r e sh re shoo s up o

Zain deal

Shares of Bharti Airtel gained nearly threeper cent on the Bombay Stock

Exchange (BSE) after the Indian firm announced signing of themega $10.7-

billiondealto acquire Kuwait-based Zain Telecom's Africa . business.


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After a firm opening, Bharti shares surged 2.75 per cent to a high ofRs 319.50.

Under the agreement, Bharti would acquire Zain's African mobile operations in

15 countries for an upfront payment of $8.3 billion and pay another $700million after a year. Besides, it would take debt liability of $1.7 billion.

On the National Stock Exchange (NSE), too Bharti Airtel moved up 2.85 per

cent to Rs 319.70. Over 23 lakh shares changed hands on the two bourses in

morning trade.

The two companies had entered into exclusive talks on February 15. Since then

the stock has gained Rs 33 a share or nearly 12 per cent.

With the acquisition, Bharti Airtel will enter the world's fastest growing

telecom market in Africa. The two businesses combined will have more than

179 million subscribers with total revenue of $13 billion.

With this deal, Bharti Airtel is set to become the world's fifth largest wirelesscompany with operations in countries including, Kenya, Nigeria, Uganda and

Zambia.

Bharti Gets $8.3 Billion in Funding

for Zain Purchase


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Bharti Airtel Ltd., Indias biggest mobile-phone company, said it obtained $8.3billion in funding for its proposed acquisition of Zains African assets; a day after itsboard gave approval for a formal offer this week.

Bharti will get $7.5 billion in loans from a group of banks led by Standard CharteredPlc and Barclays Plc, the New Delhi- based company said in an e-mail statement.

Bhartis board yesterday approved the planned $9 billion purchase of the Africanwireless assets of Zain, Kuwaits biggest phone company, according to two peoplewith knowledge of the negotiations. The carriers have until March 25 to reach anagreement that would give Indias largest mobile-phone operator 42 million newsubscribers in 15 African countries.

Bharti shares have declined 5.4 percent this year, trailing a 0.6 percent advance by the benchmark Sensitive Index. The stock was the second-worst performer of 87companies on the Bloomberg World Telecommunications Index in the past sixmonths.

FINANCING

The phone operator was seeking a six-year $8.5 billion loan with an average life of4.75 years, two people with direct knowledge of the matter said last week. Bharti may

pay interest of 2 percentage points more than the London interbank offered rate, thepeople, who declined to be identified, said.

Senjam Raj Sekhar, a Bharti spokesperson, declined to comment on the interest rateoffered on the financing announced today. The company will get a rupee loanequivalent to as much as $1 billion from the State Bank of India, which would also

cover transaction costs, Bharti said.

The other banks participating in the financing led by Standard Chartered and Barclaysinclude State Bank of India, Australia & New Zealand Banking Group Ltd., Bank ofAmerica Merrill Lynch, BNP Paribas SA, Credit Agricole CIB, DBS Group HoldingsLtd., HSBC Holdings Plc, Bank of Tokyo-Mitsubishi UFJ Ltd. and Sumitomo MitsuiBanking Corp., Bharti said.

Global Investment House KSCC is acting as regional financial adviser on the deal,Bharti said.

ZAIN CLIMBS

Zain climbed as much as 2.9 percent to the highest level in five months in Kuwaittrading on speculation of Bhartis formal bid before closing 1.5 percent higher at


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1,380 fils. The stock has gained 35 percent this year, outperforming a 5.7 percentadvance by the benchmark Kuwait Stock Exchange Unweighted Index.

Due diligence for the proposed acquisition of its African assets by Bharti isproceeding smoothly and as planned, Zain said in an e-mail statement today. Zainsboard will meet on March 24 to discuss the latest developments, it said.

Bharti has sought overseas businesses as competition at home has reduced call ratesfor many of its 122 million Indian subscribers to as little as half a U.S. cent a minute.This is Bhartis third attempt to enter Africa, after being thwarted twice in efforts tomerge with South Africas MTN Group Ltd.

The Indian carrier wont materially lose value on the deal, G.V. Giri, an analyst atIIFL Capital Ltd. in Mumbai, said yesterday. Bharti may overpay by as much as $1

billion to $1.5 billion and should be able to recover that through cost cutting, he said.Giri maintained his buy rating on the stock.

NIGERIA PROTECTION

Zain may be asked to provide Bharti legal protection from a dispute in Nigeria, one ofthe people said yesterday, declining to be identified because the discussions arent

public. The board didnt specifically ask for the protection, and was satisfied with theproposals that Bharti management made with regards to Nigeria, the second personsaid.

Econet Wireless Holdings Ltd., based in a suburb of Johannesburg, is disputingcontrol of Zains unit in Nigeria.

The Nigerian operations are the single-largest revenue producer for MobileTelecommunications Co., known as Zain, and have been described by BhartiChairman Sunil Mittal as the most important piece of its planned purchase.

ACCUMULATE BHARTI AIRTEL


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Bharti Airtel is showing a negative move on the basis of news thatBharti Airtel Offers $10.7 Billion for Zain African Assets,Bharti Airtel Ltd, SouthAsias largest mobile phone company offered 10.7 billion U.S. dollars for the majorityof African assets Zain Kuwait, a move which would lead to one of the largestemerging markets-phone operators.

Quarter No. Q 3

Difference

Q1+Q2+Q3

Difference

PeriodEnding

Dec-2009 Dec-2008Till Dec-

2009Till Dec-

2008

TypeUn-

AuditedUn-

AuditedUn-Audited Un-Audited

Net Sales /

InterestEarned /OperatingIncome

87,554.50 88,301.10 -0.85 % 266,976.20 249,974.90 6.80 %

TotalIncome

87,715.60 88,502.50 -0.89 % 267,549.50 251,053.70 6.57 %

Expenditure 54,503.60 54,762.40 -0.47 % 162,699.70 155,431.50 4.68 %

OperatingProfit (Rs.

in Millions)

33,212.00 33,740.10 -1.57 % 104,849.80 95,622.20 9.65 %

Interest -2,256.60 4,016.60-156.18

%-5,758.20 14,191.80

-140.57%

ProfitBeforeDepreciation and tax

35,468.60 29,723.50 19.33 % 110,608.00 81,430.40 35.83 %

Depreciation

9,901.80 8,143.80 21.59 % 28,872.20 23,039.50 25.32 %

Profit beforeTax

25,566.80 21,579.70 18.48 % 81,735.80 58,390.90 39.98 %

Tax 2,445.80 1,406.80 73.86 % 8,770.30 1,702.30415.20

%

Profit afterTax

23,121.00 20,172.90 14.61 % 72,965.50 56,688.60 28.71 %

Net Profit 23,121.00 20,172.90 14.61 % 72,965.50 56,688.60 28.71 %


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(Rs. inMillions)

EquityCapital

18,984.80 18,982.20 0.01 % 189,848.00 189,822.00 0.01 %

Reserves331,223.6

0240,860.9

037.52 %

3,312,236.00

2,408,609.00

37.52 %

Basic AndDiluted EPSafterExtraordinary item

2.40 1.10 118.18 % 6.20 3.00106.67

%

OperatingProfitMargin

379.30 382.10 -0.73 % 392.70 382.50 2.67 %

Net Profit

Margin 264.10 228.50 15.58 % 273.30 226.80 20.50 %

Cash EPS 60.90 106.30 -42.71 % 263.00 298.70 -11.95 %


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S ructureofAcquisition

[*The fifteen jurisdictions are: 1) Burkina Faso, 2) Chad, 3) Republic of the Congo, 4)

Democratic Republic of the Congo, 5) Gabon, 6) Ghana, 7) Kenya, 8) Malawi, 9) Madagascar,

10) Niger, 11) Nigeria, 12) Sierra Leone, 13) Tanzania, 14) Uganda & 15) Zambia.]


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TransactionDetails ofBharti Airtel-Zain

Acquirer Bharti Airtel Limited

Seller Mobile Telecommunications Company KSC

Target Zain Africa International BV

Acquisition Bharti Airtel Limited indirectly acquired 100% of ZainAfrica International BV and its business operations inAfrica from Zain under a privately negotiatedagreement.

Mode of acquisition Security (Share) Sale

Consideration USD 10.7 billion

Mode ofPayment All cash deal Bharti Airtel to pay:a) USD 8.3 billion within three months from the date ofclosing,

b) USD 700 million after one year from the date ofclosing,c) USD 1.7 billion assumed as debt on the books ofZain.

Funding Leveraged Buy-outa) Bharti Airtel to borrow USD 7.5 billion from aconsortium of banks led by Standard Chartered Bankand Barclays Bank.

b) Bharti Airtel to avail of a rupee loan of USD 1 billionequivalent from SBI Group.


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Problems in the Execution of the

Deal

NIGERIAN HURDLE

Econet Wireless International:

A major telecom player in Nigeria, wanted to use its pre-emption

Rights of right of first refusal in respect of shares had been breached

When Econet"s predominantly Nigerian partners decided to sell their

Shares in Vie Networks (or V-Mobile) to Zain in 2006.

Econet has also applied for interim measures to prevent Zain from selling,

transferring, disposing of, dealing with or otherwise encumbering the disputed

stake until the matter is resolved.

Until the time the ownership issue over Zain Nigeria is resolved, Zain faces a

hurdle in transferring its Nigerian assets to Bharti Airtel.

CONGO CONTROVERSYThe Government ofRepublic ofCongo said that they had not been

informed of Bharti Airtels deal with Zain and that the deal was a

clear violation of the law in our country.

The Government also claimed that the deal is in contravention to

Zain`s local mobile license.

Until it would be difficult for the Bharti to get all regulatory

upproval.


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GABON GLITCH

In this case, the Government of Gabon raised a regulatory objection to the

deal alleging that Zain had not complied with certain telecom regulations

in Gabon.

The Gabonese Government has disapproved the sale of Zain`s Gabonese

assets & reserves the right to take all necessary measures.

But off late, Government of Gabon gave its approval to the sale of Zains

assets in Gabon to Bharti.


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SWOT Analysis of the Deal

STRENGTH: Post acquisition, Bharti Airtel will become fifth largest service provider

in terms of the number of subscribers.

The deal would give Bharti 42 million subscribers in 15 African

countries, which have a combined estimated annual revenue of $3.6

billion

Bharti, largest telecom player in India, can replicate the success of India

in Africa

Strategic Alliance with other stake holders, including Nokia, SingTel &

Sony Ericson

WEAKNESS: Bharti has paid a heavy price for the deal

Zain Africa has made a net loss of USD 112 million in the nine months to

September 2009. Seven of Zains African units are loss -making,

including its highest revenue earner, the Nigerian arm, Zain Nigeria.

The deal is highly volatile and carries huge commercial risk forBharti

Airtel

The loan would be a drag on Bharti Airtel's earnings with no immediate

returns expected from the loss-making target.


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OPPORTUNITY:

Telecom penetration in African countries varies from 37 per cent to 65

per cent. There are few markets with penetration less than 40 percent

The African market is homologous to Indian market in term of its

structural similarities.

Monthly ARPU on the Continent averages USD 7.5, which is higher than

Indias ARPU of USD 5

Africa is too good an opportunity for Bharti Airtel to experiment the

model that it has mastered in India, particularly its rural strategy.

THREAT:

Zain Africa is in trouble and financial paralysis is looming over its

head

Bharti Airtel will have to put in a lot of effort to align the varied

cultures; with 15 countries to tackle it definitely will be a nightmare.

Bharti-Zain will be getting a tough fight with rival like MTN and

China Mobile

There are greater political and economics risks in Africa .

Most of the countries are political unstable and operation are still loss

making.


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CONCLUS ONOFTH D AL

Inthelargestevertelecomtakeoverbyan Indian firm, Bharti Airtel on Tuesday

completedadealto buy Kuwait-based Zain Telecom's Africanbusiness for

$10.7 billion (about Rs 48,000 crore).

Announcing the closure ofthedeal, Sunil Mittal said, "Wearedelightedatthe

closure ofthis transformationaldeal forIndiaand Bharti Airtel. Thetransaction

is thelargestevercross-borderdealinanemerging marketandwillresultin

combinedrevenues ofabout $13 billion."

On March 30, 2010, Bharti hadenteredthedealto acquire Zain Telecom's

operations in 15 nations, excluding Sudanand Morocco. Zain has operations in

17 African countries.

The closure ofthedealimplies that Bharti has receivedalltheapprovals from

the governments andregulators ofeach ofthese 15 nations.

This acquisition, besides giving Bhartiits much-desiredpresencein Africa ,makes ittheworld's fifth largestwireless companywith operations across 18

countries anda subscriberbase ofaround 179 million.

Bharti had failedtwiceinthelasttwo years to forgean $23 billionmergerdeal

with South Africantelecom giant MTN.


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The Zain acquisition, the second largest by an Indian entity after Tatas' Corus

deal, would take the revenue of the combined entity to an estimated $13 billion.

The African business would widen Bharti's reach, which was hitherto restricted

to Asia and the Indian Ocean region with businesses in Sri Lanka, Bangladesh

and Seychelles.

Of the $10.7 billion enterprise value of Zain, Bharti will be paying $8.3 billion

upfront and $700 million after a year. It would also take over approximately

$1.7 billion of Zain's debts as on December 31, 2009.

Of the $8.3 billion paid to Zain, Bharti has raised debt from a consort ium of

foreign banks and State Bank of India with the lead-arranger and lead-advisor

Standard Chartered Bank committing the highest amount -- $1.3 billion,followed by Barclays at $900 million.

The rest of the co-advisors -- ANZ, BNP, Bank of America-Merrill Lynch,

Credit Agricole CIB, DBS, HSBC, Bank of Tokyo-Mitsubishi UFJ and

Sumitomo Mitsui Banking Corporation -- have allocated $600 million each.

State Bank of India has agreed to an up to USD one billion loan in rupee terms.

With Bharti Airtel sealing the $10.7-billion takeover deal for African assets ofZain , corporate India's outbound merger and acquisition (M&A) activity in2010 so far has touched $15 billion.

The deal marks the second biggest overseas acquisition by an Indian company,after Tata Steel purchased Corus Group for $12.2 billion in an all cash deal in

January 2007.

The Corus deal was the largest Indian takeover of a foreign company and madeTata Steel the world's fifth-largest steel group.

The acquisition of Zain's African assets would catapult Bharti Airtel to becomethe fifth largest telecom operator in the country with revenues of an estimated$13 billion and a subscriber base of over179 million.

Led by Bharti-Zain, the outbound M&As by Indian corporate have touched $15billion across 23 deals between January- March 23, 2010, according to ArunNatarajan, CEO of Venture Intelligence.


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REASONS FOR FAILURE OF

BHARTI AIRTEL Ac uisition WITHMTN Telecom

Finance Minister Pranab Mukherjee on Thursday described the failure of talksbetween India's telecom giant Bharti Airtel and South Africa's MTN on theUSD-23 billion merger deal as "part of the game".

"You know sometimes amidst the big companies ... these deals becomesuccessful, sometimes these deals fail. This is part of the game," Mukherjeetold.

The proposed mega deal, which would have been the world's largest in thetelecom sector, fell through for the second time in just over a year after the endof the exclusivity period yesterday.

Sunil Mittal-led Bharti called off discussions with MTN citing the SouthAfrican government's rejection of the proposed merger structure, which wouldhave created the world's third largest telecom company with combined revenuesof over USD 20 billion annually and a subscriber base of over 200 million.

The deal failed as the Indian laws did not provide for dual listing of shares,which was being insisted by the South African government.

When asked if the deal termination had political reasons more than legal issues,Mukherjee said, "I am not making any comment on this. I have st ated you thefact."


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Bharti Airtel: Reasons behind The

Downgrade

Telecom major, Bharti is in talks to buy Kuwaiti telecom firm ZainsAfrican business, excluding Morocco and Sudan. It is the Indian firmsthird attempt at gaining a foothold in a continent that offers a lastopportunity for major subscriber growth.

The deal marks one of the biggest cross-border transactions in the MiddleEast in years. Bharti has lined up USD 9 billion in loans from foreign andlocal banks for its planned acquisition. Global rating agency Standard &Poors has placed Bharti on credit watch with negative implications postthis bid.

The reason S&P placed BBB- credit rating on Bharti on a credit watch

negative on Friday was the direct result of the announ cement that thecompany has made about their plans to acquire Zain, Africa. Most of thereason for that is that it really has to do with the financing plan that would be used to execute that acquisition. That financing plan is largelycomprised of debt as far as we have been informed.

That financing plans could change going forward but at the moment I amassuming it would be a debt funded acquisition. The amounts would be

anywhere between USD 7-9 billion of additional debt to what thecompany already has on its books. In terms of its debt, as we look at it,we at S&P may look at the debt a bit differently than maybe otheranalysts in the sense that we do add back. We adjust some of theoperating leases that the company has and consider that as debtequivalent.


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