IHS Global Insight Perspective | |
Significance | The Essar Group does not say what percentage stake it is taking, although the statement says that it will acquire a majority stake in both assets. |
Implications | The agreement collectively values Dhabi Group's operations in Uganda and Congo-Brazzaville at US$318 million, although the value of the investment by Essar was not disclosed. |
Outlook | The Essar Group already has investments in Kenya and Uganda, and says that its investment in Warid Telecom is a part of its strategic plan to grow its businesses in Africa. |
In July 2009, the Essar Group announced that it had agreed to enter into exclusive talks with the Dhabi Group to invest in its Warid Telecom operations in Uganda and Congo-Brazzaville (see Sub-Saharan Africa: 20 July 2009: Essar Group in Talks to Invest in Dhabi Group’s African Telecom Portfolio). With an agreement now signed, Essar says that the deal reflects its plans to increase its presence in the Middle East and Africa by forging partnerships with prominent business groups, while at the same time reflecting Dhabi Group’s vision to partner with other leaders in growing and adding value to their telecoms investments. The transaction is subject to regulatory approval in both Uganda and Congo. Standard Chartered Bank acted as the exclusive financial advisor to the Dhabi Group. Essar added that it has committed growth capital to both Warid Telecom Uganda and Warid Telecom Congo for network expansion and marketing.
Essar Group
The Essar Group operates Kenya’s fourth mobile operator and recently acquired a licence in Uganda. According to Mint newspaper, Essar also plans to bid for more licences in Tanzania, Congo-Brazzaville and Cameroon, as well as looking to participate in the privatisation of Zamtel in Zambia.
- Kenya. Essar is now the largest shareholder in Essar Telecom Kenya (formerly Econet Wireless Kenya), the fourth mobile operator in Kenya. In January 2008, Essar acquired a 49% stake in Econet Wireless International Ltd, which in turn owns a 70% stake in Econet Wireless Kenya (see Kenya: 11 January 2008: Econet Wireless Kenya Sells Stake to Essar Communications). Essar Telecom Kenya reached 200,000 subscribers by January 2009, over 600,000 subscribers by November 2009, and is hoping to reach 4-5 million subscribers within two to three years.
- Uganda. Essar Teleholdings has reportedly acquired a licence and frequencies to operate a mobile service in Uganda and plans to launch services in August 2009 in a joint venture with local company Kanyan Telecom Uganda (see Uganda: 2 June 2009: Essar Telecom Acquires Mobile Licence in Uganda). According to Mint, Essar holds a 90% stake in the joint venture, with Kanyan Telecom Uganda holding the remaining 10% stake. The Uganda Communications Commission (UCC) has granted public service provider (voice and data) and public infrastructure provider licences to Kanyan Telecom Uganda.
Dhabi Group
The Dhabi Group and its chairman, HH Sheikh Nahayan Mabarak Al Nahayan, lead a consortium of investors composed of private equity and family offices in the region. Dhabi has diverse business interests with a focus on emerging market opportunities in financial services, telecoms and real estate, and expanded its portfolio in 2005 to include telecommunications services in Asia and Africa.
Warid Telecom is a joint venture between the Abu Dhabi Group and SingTel Group, has operations in Uganda and Congo-Brazzaville, holds a licence in Côte d’Ivoire (but has yet to launch services), and also bid (unsuccessfully) for a mobile licence in Ghana.
- Uganda. Warid Telecom was granted a public service provider (voice and data) licence in December 2006, has deployed a GSM and WiMAX network, and launched services in February 2008 (see Uganda: 14 January 2008: Warid Telecom Launches Services in Uganda). By November 2008, the operator had reported 1.2 million subscribers, up from 860,000 by the end of August 2008, 650,000 at the end of July, and 90,000 subscribers in the first month.
- Congo. In August 2006, Warid Telecom announced that it had entered into a joint venture with the Congolese fixed-line incumbent, Société Des Telecommunication du Congo (Sotelco), to offer mobile and other telecoms services (see Congo: 10 August 2006: Warid Telecom International Signs JV Agreement to Enter Congolese Telecom Market). Called Warid Congo SA, the joint venture was granted licences to operate mobile, fixed-line, wireless local loop, WiMAX and fibre-optic services, and launched services on 10 January 2008 (see Congo: 18 January 2008: Warid Telecom Launches Congolese Networks).
Outlook and Implications
“Essar is delighted to partner with the Dhabi Group to expand Essar’s telecom operations in Uganda and Congo,” said Prashant Ruia, chief executive of Essar Group, in a company press release, adding, “This is in line with Essar’s plan to be a part of the growing telecoms market in Africa. This transaction with the Dhabi Group augments our successful launch of telecom services in Kenya under the brand "yu", which was a stepping stone for Essar to expand its telecoms footprint to the African continent.”
The combination of the two groups will give them a footprint in three countries—Kenya, Uganda and Congo-Brazzaville—and allow them to consolidate and build scale, and jointly pursue future expansion opportunities. In a statement issued in July, the Essar Group said that the talks were “in line with Essar's strategy of expanding its operations in Africa”. In Uganda, for example, Essar has just acquired a licence and would be the seventh entrant in the market, but Warid Telecom is already an established player. Therefore, the pairing would allow for consolidation in Uganda rather than competition in what has become a very competitive market. Essar also plans to look for expansion opportunities into Congo-Brazzaville, for example, where Warid is already established.