Bharti Airtel, India's largest mobile services company, said Tuesday that it has completed the acquisition of the African operations of Mobile Telecommunications Company (known as Zain), thus fulfilling the company's ambitions to expand into markets outside India.
The agreement signed with Zain earlier this year covers 15 countries in Africa but not Zain's operation in Sudan, nor its investments in Morocco.
Bharti Airtel said it had acquired Zain Africa for an enterprise value of US$10.7 billion. The acquisition gives Bharti Airtel a total customer base of 180 million, including 131 million subscribers it had in India at the end of April.
A challenge for Bharti Airtel will be to integrate the operations of Zain Africa in all 15 countries, which currently operate largely as stand-alone units, said Kamlesh Bhatia , a principal research analyst at Gartner.
Zain said Tuesday that it had received $7.9 billion in cash from Bharti Airtel. Over the next six months, Zain expects to receive an additional $400 million upon certain milestones being achieved, it said. The balance of $700 million is due one year from completion of the acquisition.
Bharti Airtel will also assume $1.7 billion of consolidated debt obligations, under the agreement between the two companies.
The large payout by Bharti Airtel comes in addition to Indian rupees 123 billion ($2.6 billion) it paid last month to the Indian government for 3G spectrum in a recently concluded auction.
The large payouts on both counts by Bharti Airtel is likely to have increased the company's debt considerably, Bhatia said. A new investment that is coming up for the company is the roll out of 3G services once spectrum is allotted to it by the government by September this year.
Bharti Airtel's bid for Zain's operations came after the company failed twice to arrive at an agreement with the MTN Group in South Africa. That plan did not meet with the approval of the South African government, which wanted to maintain MTN's separate identity.
By expanding its business outside the country, Bharti Airtel can in the long term benefit from economies of scale, including getting better deals from suppliers, Bhatia said.
Bharti Airtel is also looking outside India to boost its margins, as the Indian market has become very competitive, with voice call rates sometimes as low as 0.01 rupees per second. Voice calls were earlier charged by the minute.
The company reported a decline in profits and flat revenue for the quarter ended March 31, even though its customer base grew 35 percent over the same quarter last year.
Bharti has operations in Sri Lanka, and also acquired a majority stake in Warid Telecom, the fourth largest operator in Bangladesh.
This story, "India's Bharti Airtel completes acquisition of Zain Africa" was originally published by IDG News Service .