Last week, Bharti Airtel said that it had bought Zain’s African assets for $10.7 billion, the largest ever cross-border deal in emerging markets. But has it really? A Tanzanian newspaper thinks otherwise and strangely, Bharti is keeping mum

On 8th June, Indian operator Bharti Airtel Ltd announced with great fanfare that it has completed the acquisition of Zain Group's mobile operations in 15 countries across Africa for an enterprise valuation of $10.7 billion. Sunil Bharti Mittal, chairman and managing director, Bharti announced with great elan, “We are delighted at the closure of this transformational deal for India and Bharti. We would like to express our deep gratitude and thank the governments of all the 15 countries as well as the government of India for their overwhelming support to this landmark event. This will further strengthen the historic Indo-Africa economic and social ties and provide a big boost to South-South cooperation.”

Mr Mittal also thanked the Zain team for their professionalism, which enabled them to close this transaction in a record time.

The question is has the deal been truly consummated?

On 14th June, The Citizen, a Tanzanian newspaper, reported that the takeover of Zain Tanzania by Bharti Airtel has not been concluded as there were certain issues that still needed to be sorted out. According to The Citizen, the Zain-Bharti Airtel deal could not be finalised as the deal does not involve the government, which has a 40% stake in the Zain business. The paper quoted two Cabinet ministers saying this. One was Peter Msolla, minister of communications, science and technology, who said, “The two companies could not claim to have completed the multi-billion dollar deal, when its (government) talks with Zain had not been concluded. He further said, “A big mistake has been made. We are shareholders and our involvement is a must. As far as I am concerned, we are not done yet. They cannot say they have sealed a deal when we are still on it.”

The newspaper also quoted Mustafa Mkulo, finance minister, who said negotiations were still going on between Zain and the government, but he would not reveal the pending issues. He elaborated, “This matter has not been finalised. We are still in touch with them (Zain) and have not concluded any issues. Let’s just leave it for now. I’m still in touch with the company.”

So, how did Bharti announce the conclusion of the deal? When contacted by Moneylife, Bharti refused to clarify. When we pointed out the article in The Citizen that says that the deal was not done, a Bharti spokesperson based in New Delhi replied by an email: “We have no comments beyond our press release dated 8 June 2010.” He also insisted on not being identified.

The Citizen tried to contact the managing director of Zain Tanzania, Khaleed Muhtadi, for comments on the government’s position but failed. The newspaper estimated that from the $10.7-billion transaction, Zain is expected to earn as much as $3 billion, which will be shared among its shareholders. Besides being consulted as a shareholder in the business in Tanzania, the government would under normal circumstances also have been entitled to a dividend like the other shareholders. The paper quoted some unnamed analysts as saying that this would still have been a raw deal since the government’s privilege of right of first refusal (ROFR) before the other shares of Zain Tanzania were sold had been disregarded. Generally, ROFR is the right of a person or company or business partner to purchase something before the offering is made available to others as the Zain Group did to its shares in Zain Tanzania.

“How can it be over, when a task force in Kenya, which was formed to look into the deal in that country, hasn’t finished its work?,” an industry insider in Dar-es-Salaam, reported The Citizen, when informed about the Bharti announcement. “From what has happened, it is clear the Zain-government partnership in Tanzania disfavours us. Can you imagine the government as a shareholder who has even no right to be consulted when the business is sold and who is not accorded the right of first refusal before the shares are sold?” reported the paper. The Citizen also reported a comment from an industry player, who sought anonymity, that the government should have used the ROFR to acquire Zain Tanzania or become a majority shareholder and use the lucrative business to boost Tanzania Telecommunications Company Ltd. He said it was wrong to deny the government the ROFR privilege. The Citizen also reported the comment of a chairman of a mobile phone operator, who spoke on condition of anonymity, that although the government had not approved the deal, Bharti’s announcement meant it could do so soon or had conditionally approved the transaction.

It remains to be seen whether the local opposition to the deal will blow up into something big or whether the dealmakers will be able to buy peace with the politicians.