Bharti backs off Zamtel buy, aims at Zain

Singapore Telecommunications' offer to help Bharti Airtel's US$9 billion acquisition of Zain Africa's operations has led Bharti to abandon its bid to buy the Zambia Telecommunication Company (Zamtel).

Bharti Airtel was the favorite to buy the financially troubled Zamtel. But Singtel's offer has induced Bharti to go all-out in its effort to acquire the Zain holdings.

Even if Bharti had wanted to acquire both the Zain holding and Zamtel, it would have had difficulty. The Zambia Competition Commission (ZCC) has blocked Zain and other operators in Zambia from participating in the purchase of shares in Zamtel, in order to allow entry of international service providers to enhance competition in the Zambian telecom market.

The Zambian government is selling Zamtel after failing to recapitalize the company. Zain has assets in 15 African countries including Zambia, Uganda, Rwanda and Nigeria. However, Bharti Airtel feared that buying Zamtel while at the same time owning the Zain Zambia operation would mean that it would have two competing operations in one country.

Singtel CEO International Lim Chuan Pol said Bharti's bid for Zain's businesses is in line with Singtel's ambitions. Singtel is sitting on more than $1 billion in cash and wants to enter the fast-growing African market to offset its presence in more saturated telecom markets like Singapore and Australia.

Zambia Development Agency Manager for Privatization Henry Sakala announced earlier this week that Bharti Airtel is no longer in the race to buy Zamtel.

"Bharti Airtel has pulled out of the race and is not among the three suitors who have remained in the race to buy Zamtel," Sakala said at a bid-opening ceremony in Lusaka, Zambia.

Sakala named three companies that are remaining in the race to buy Zamtel: Angola's consortium of Unitel and Angola Cable; Libya's LAP Greencom and LAP Green Networks; and the Russian consortium of Altimo Holdings.

Bharti Airtel is in exclusive talks with Zain for the acquisition of all Zain's African units and has agreed on an enterprise value of $10.7 billion for the assets. Singtel, Southeast Asia's biggest telecom company, owns 32 percent of Bharti Airtel.

Bharti Airtel is however acquiring Zain Africa operations at a time when the company is facing network problems and accusations of lack of transparency in its billing system. In Zambia, Zain has a reputation as being the most expensive network, owing to high interconnection charges being slapped on customers who call other networks, as well as having an unreliable network and help lines that are not always answered.

This has forced the regulator, the Zambia Information and Communication Technology Authority (ZICTA), to move in and set prices. In Niger, Zain's license has been shortened by five years because of the poor quality of service.

Zain customers complain of difficulties accessing the Internet using Zain modems because of the company's poor network. Zain is pushing for data services, which places further pressure on the quality of voice.

"When I put up ZMK50,000 (about $10) worth of airtime in my modem, it finishes without me accessing the Internet and checking my e-mails," said Jeff Kapembwa, a Zain customer.

As a result of mobile service providers failing to offer quality voice services, Internet service providers (ISPs) are now pushing the Zambian government to allow them to start dealing in voice communication.

Bringcom CEO Festo Mpundu said it would be fair for the Zambian government to allow ISPs to offer voice communication to subscribers in addition to data in the same manner mobile service providers are allowed to deal in Internet services through handheld devices.

Currently, the playing field is not level because mobile service companies were having undue advantage over ISPs by offering telephone and Internet services, according to Mpundu.