Professional Documents
Culture Documents
AIRTEL
Presented By:
F - 7 Jenice Victoria Crasto
F 17 Shaila Joseph James
F - 19 Shweta Vijay
Waingankar
F 22 Jyotshana Vinod
Parmar
The Deal
US $10.7 billion
15 countries across
Africa
MOU (Memorandum of
Understanding) 15
February 2010
Deal signed 31 March
2010
Deal closed 8 June
14
2
1
1. Sierra Leone
9. Zambia
2. Burkina Faso
10. Malawi
3. Ghana
11. Tanzania
4. Niger
12. Kenya
5. Nigeria
13. Uganda
6. Gabon
14. Chad
7. Congo
15. Madagascar
8. DR Congo
13
7
12
8
11
10
15
CLIENTS PERSPECTIVE
This
FINANCIALS
VALUATION REPORT
REASONS
The deal made sense for Bharti for the following reasons:
Low Financial leverage
Bharti had a very low Net Debt to Equity Ratio of 0.05 at the end of
Dec., 2009 which means that it was virtually a debt free company
It is good to have low debt but zero debt is not adesirablesituation
as debt can increase the shareholders returnon their
investmentdue to taxadvantages associated with borrowing
Bharti is a profitable company with over 40% EBIDTA margins which
is higher than the cost of debt. This means that it is better for the
company to pay interest than paying dividends to a large number of
shareholders and hence it should either reduce the shareholding
(through share buyback) or increase debt and deploy debt in a
profitable way. Bharti selected the second option and took debt to
buy Zain that would return higher profits in the long term
Free Cash
Bharti is one of the few carriers across the world
that has free cash flow and it didnt make sense
for the company to keep sitting on the pile of
cash when it can deploy it in productive assets
The capex in the Indian operations had started to
decline and hence the free cash flow was likely
to increase even further in future
The company would not have found much
problem in servicing the debt raised to fund the
acquisition due to generation of free cash flow in
the years to come
Per the agreed upon terms, Bharti was to pay Zain $10.7 billion, of
which $1.7 billion were to go towards debt payment. Bharti will be
obligated to pay $10 billion upon closing and remaining $700 million
one year after the conclusion of the deal.
With Zain currently losing money in several of the key markets,
Turner believed that the acquisition would reduce Bhartis earnings
in the short term. Moreover, the all-debt deal would increase in
Bhartis leverage for funding the deal. Bharti had agreed upon a
price of $10.7 billion, of which $1.7 billion was debt that Bharti
would assume. In September 2009, Zain Africa collectively reported
an annual net loss of US$112 million against a profit of US$169
million in the corresponding period of the previous year. Seven of
the 15 countries reported losses. The highest revenue earner,
Nigeria, which was optimistically pushing the US$1 billion mark, lost
US$88 million
ATTRACTIVENESS OF AFRICAN
MARKET
SWOT ANALYSIS
Strength:
ThedealwouldgiveBharti42millionsubscribersin15African countries,
which have a combined estimated annual revenue of $3.6 billion
WEAKNESS
Zain Africa has made a net loss of USD 112 million in the
nine months to September 2009. Seven of Zains African
units are loss-making, including its highest revenue earner,
the Nigerian arm, Zain Nigeria.
OPPORTUNITY
THREAT
Bharti Airtel will have to put in a lot of effort to align the varied
cultures; with 15countries to tackle it definitely will be a nightmare.
Bharti-Zain will be getting a tough fight with rival like MTN and
China Mobile
Most of the countries are political unstable and operation are still
loss making.
THANK YOU