Bharti Board Said to Approve $9 Billion Zain Africa Unit Offer

March 21 (Bloomberg) -- Bharti Airtel Ltd., the Indian phone company planning a $9 billion purchase of Zain’s African wireless assets, intends to make a formal offer this week, after Bharti’s board yesterday approved the bid, according to two people with knowledge of the negotiations.

Zain, Kuwait’s biggest phone company, may be asked to provide legal protection from a dispute in Nigeria, one of the people said, declining to be identified because the discussions aren’t public. The board didn’t specifically ask for this protection, and was satisfied with the proposals that Bharti management made with regards to Nigeria, the second person said.

Bharti and Zain are in exclusive talks until March 25 to complete a transaction that would give India’s largest wireless carrier 42 million new subscribers in 15 African countries. Bharti has sought overseas businesses as competition at home has reduced call rates for many of its 122 million Indian subscribers to as little as half a U.S. cent a minute. This is Bharti’s third attempt to enter Africa, after being thwarted twice in efforts to merge with South Africa’s MTN Group Ltd.

“I don’t expect Bharti to materially lose value on this deal,” G.V. Giri, an analyst at IIFL Capital Ltd. in Mumbai, said by phone. “They may have at most overpaid by $1 billion to $1.5 billion, but through cost cutting they should be able to recover that sort of value.” Giri maintained his “buy” rating on the stock.

“This was an offer made as per guidelines set by the board, so the approval doesn’t surprise us,” Giri said.

Nigeria Dispute

Senjam Raj Sekhar, a spokesman for New Delhi-based Bharti declined to comment.

Bharti added 3.9 percent on March 19 to close at 311.90 rupees in Mumbai trading, posting its biggest gain since Nov. 30. The stock was the best performer on the benchmark Sensitive Index, which advanced 0.3 percent.

Econet Wireless Holdings Ltd., based in a suburb of Johannesburg, is disputing control of Zain’s unit in Nigeria.

The Nigerian operations are the single-largest revenue producer for Mobile Telecommunications Co., known as Zain, and have been described by Bharti chairman Sunil Mittal as the most important piece of its planned purchase. Econet Chief Executive Officer Strive Masiyiwa said March 18 that there has been no agreement or settlement in the dispute over the Nigerian unit.

India’s largest wireless company’s plan can’t include the purchase of Zain’s Celtel Nigeria BV unit, Econet has said.

Econet

Econet is seeking to overturn a 2006 deal in which Celtel bought a 65 percent stake in Nigerian mobile operator Vmobile, since renamed Zain Nigeria. Econet, with 5 percent of Zain Nigeria, says it should have had the right of first refusal on those shares.

Econet’s Masiyiwa has said that the case is still in arbitration and that until that process has been completed the unit in Nigeria cannot be sold.

Zain bought Celtel International for $3.4 billion in 2005 to expand into 13 African countries, including Kenya and Nigeria.

The Nigerian unit is a key asset for Zain. In 2008 Zain generated about 21 percent of its total earnings before interest, tax, depreciation and amortization in Nigeria and about 22 percent of its total sales.

It was now up to Zain to agree to Bharti’s terms in the offer to conclude a deal, one of the people said.