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Saturday, 20 June 2009

Zain Africa Speculation Watch: Episode 4

Much of the commentary on the Zain-quitting-Africa rumours has focused on how such a move seems at odds with the Kuwaiti group's recently stated ambition to be a top 10 global mobile operator by 2011. I thought I'd also like to have a dig around for any recent evidence to suggest that Africa, specifically, continues to be of strategic importance to the company.

I found one piece of such evidence contained within the Q4 2008 Zain update by Gavin Patterson of Informa Telecoms & Media. I'm not 100% sure when this was written (as opposed to published). It refers heavily to Zain's Q4 2008 results announcement, which was made in March and contains references to events which took place in May - but the Informa piece itself is dated 16th June. If Patterson's article was written just this week, I wonder why there is no reference to the current speculation about the group's African assets. Whatever the timing, I find one particular statement from Zain's March announcement to be very interesting in the context of this week's rumours:

"[Zain CEO Saad] Al Barrak said the financial crisis was an opportunity to make more acquisitions in Africa and indicated that the group was "actively" pursuing a number of prospects. He said Zain would adapt its strategy – where it made commercial sense and where it was economically viable – to pursue opportunities involving share swaps and acquiring minority stakes in other telecoms operations."

Specifically in the African context, then, if recent rumours are to be believed, Zain has moved from acquisition mode to selling in just three months.

Share swapping would not be a new experience for Zain. Last month, the group announced a deal of this type with Paltel, owner of the only mobile network so far operating with dedicated coverage of the Palestinian Territories (although this monopoly is set to be broken this year by the entry of Wataniya Palestine, assuming issues around Israel releasing spectrum do not prove insurmountable).

In the context of discussions around Zain getting out of Africa, it's really interesting to see Gavin Patterson's article going into some detail about where in the continent the group might be looking to expand. He writes that "Zain has also made public its interest in South Africa and Mali and was disappointed not to win Rwanda's third mobile license at the end of last year, which went to Millicom International Cellular. According to Patterson, Zain plans to make "three or four" acquisitions in Africa this year.

Expansion of this kind - rather than the recently rumoured shrinking of the group - seems in line with the group's plans to have a subscription base of 150 million by 2011. To reach that figure, however, Informa Telecoms & Media's number crunchers feel that Zain would need to be even more aggressive in terms of acquisitions because, as Gavin Patterson writes, based on its current operations, his company forecasts that the group will fall well shy of that 150 million subs mark, with 83.4 million subs by the end of 2011.

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