Due diligence on Zain assets over, says Bharti

Due diligence on Zain assets over, says Bharti

New Delhi: India’s biggest telecom services provider Bharti Airtel Ltd said on Thursday that it had completed due diligence on the African assets of Kuwait-based Mobile Telecommunications Co. KSC, better known as Zain.

The announcement came a day after Zain’s board approved the sale of the assets to Bharti Airtel for $10.7 billion (around Rs48,795 crore), including $1.7 billion of debt.

“Bharti is now working with Zain towards finalizing the definitive agreements, which will address all key terms and findings arising out of the due diligence," Bharti Airtel said in a statement. “Definitive agreements are expected to be signed soon. Upon signing, the parties will move towards obtaining any required approvals."

Zain also announced the conclusion of the due diligence process in a statement that said agreements would be signed “in the coming days".

“Upon signing, the parties will move towards getting any required approvals. It has been reported that Bharti has already secured the entire financing requirement of $8.3 billion for this transaction," the Zain statement added.

Bharti Airtel shares rose 2.27% to Rs313.75 at the close of trading on the Bombay Stock Exchange on Thursday as the benchmark Sensex index rose 0.62% to 17,558.85 points.

Bharti shares have surged 11% since 15 February, when both firms entered into exclusive discussions on the sale of Zain’s African assets.

Bharti’s acquisition of the assets is unlikely to have any immediate adverse impact on its balance sheet because it plans to carry out the transaction through a special purpose vehicle (SPV) based in the Netherlands. This SPV will take on the borrowings onto its balance sheet.

The deal with Zain had the potential to raise Bharti’s debt-equity ratio to around 1.2, from 0.4 at the end of the third quarter of this fiscal. That would have limited Bharti’s ability to raise money for the coming auction of 3G (third-generation) spectrum on 9 April.

“Even if the deal is expensive for Bharti, it is a good deal... They are getting so many assets at once. Most firms have to go about acquiring the assets one licence at a time," said Romal Shetty, director (telecommunications) at audit and consulting firm KPMG.

The two businesses combined will be among the top 10 telecom firms in the world with at least 165 million subscribers and revenue of $13 million.