IHS Global Insight Perspective | |
Significance | This announcement confirms the news of last month that Zain was considering selling off at least some of its African operations, and comes at a time of expansion and consolidation in the African mobile market. |
Implications | Zain (formerly MTC) expanded into Africa in 2005 with the US$3.4-billion acquisition of Celtel and now operators in 15 countries in sub-Saharan Africa (16 including Sudan). |
Outlook | Vivendi said that the potential acquisition under discussion with Zain is "in line with its clearly defined strategy of seeking growth opportunities in emerging countries". |
Vivendi said in a company press release yesterday (9 July) that it is “interested in acquiring a majority stake in the Zain group’s telecommunications activities in Africa, in line with its clearly defined strategy of seeking growth opportunities in emerging countries”. Last month it emerged that Zain could be looking to sell its African operations and was in discussions with an unnamed French company for US$12 billion (see Sub-Saharan Africa: 15 June 2009: Zain Considers Selling African Operations). According to reports at the time, Zain would consider bids from Chinese and European companies if it could not reach a deal with Vivendi. In its statement yesterday, Vivendi said, “At this stage there is no certainty that the discussions currently in progress will lead to a successful outcome. In any event, Vivendi will examine this investment according to its usual profitability criteria and will adhere strictly to its usual principles of financial discipline.”
Outlook and Implications
Zain, which acquired Celtel in 2005 for US$3.4 billion, is now the second-largest African mobile operator in terms of subscribers after MTN. Some two-thirds of Zain’s subscribers are in Africa; the operator had 46.2 million African subscribers by the end of December 2008 (see Sub-Saharan Africa: 31 March 2009: Zain Reports 46.2 mil. African GSM Subscribers).
The news of the possible sale follows Zain's announcement in May 2009 that it was restructuring its global operations, during which it would align its head office and operational structure by centralising and outsourcing certain back-office/non-core functions to strategic partners (see Sub-Saharan Africa: 8 May 2009: Zain Restructures Global Operations to Reach 2011 Growth Target). As part of this restructuring, Zain would reduce its current workforce of 15,500 by 2,000, a 13% reduction across its global workforce.
Vivendi has said that the acquisition would enable it to capitalise on its successful experience of developing mobile telephony in Africa. Vivendi, meanwhile, owns France’s second-largest mobile operator, SFR, and Maroc Telecom, which has fixed and mobile subsidiaries in Onatel (Burkina Faso), Gabon Telecom, and Mauritel (Mauritania), and has just acquired a controlling stake in SOTELMA Mali (see Mali: 9 July 2009: Maroc Telecom Takes 51% Stake in SOTELMA for US$383 mil.). However, the acquisition could run into regulatory difficulties in both Burkina Faso and Gabon. Maroc Telecom had 17.184 million African mobile subscribers by 31 December 2008: 14.456 million in Morocco, Mauritel (Mauritania) had 1.141 million, Onatel (Burkina Faso) had 977,000, Gabon Telecom had 447,000, and Mobisud had 163,000. Zain notably has subsidiaries in both Burkina Faso and Gabon, where it is the leading operator. Zain Burkina Faso had 1.307 million subscribers by the end of December 2008 and Zain Gabon had 809,000.