Orange Buys Airtel Ops in Burkina Faso, Sierra LeoneOrange Buys Airtel Ops in Burkina Faso, Sierra Leone

French telecom incumbent Orange has agreed to acquire Bharti Airtel's businesses in Burkina Faso and Sierra Leone in a continuation of its expansion strategy in West Africa.

The announcement of the deal comes just a day after Orange (NYSE: FTE) said it would enter Liberia with the takeover of Cellcom, that country's biggest mobile operator, and will further enlarge the company's regional footprint. (See Orange Expands in Africa With Cellcom Liberia Acquisition.)

Orange has not disclosed the precise financial terms of its deal with Bharti Airtel Ltd. (Mumbai: BHARTIARTL) but says the "outlay" will be equal to 7.9 times the EBITDA of the Burkina Faso and Sierra Leone units for the year ending in March.

Those units generate combined annual revenues of €275 million ($297 million), according to Orange, and serve about 5.5 million mobile customers.

That equals around 5% of Orange's customer base in Africa and the Middle East in the third quarter of last year, when the operator made revenues of €3.6 billion ($3.9 billion) in the region -- 6% more than in the year-earlier period.

Airtel does not break out EBITDA details for each of its African markets but registered an EBITDA margin of 26.2% in Africa last year.

That suggests Orange is paying around €570 million ($617 million) for the Burkina Faso and Sierra Leone businesses, assuming they are as profitable as Airtel's African average.

The takeovers are to be executed through Orange's subsidiaries in neighboring Côte d'Ivoire and Senegal and are subject to regulatory approval.

Orange began negotiations with Bharti Airtel as far back as July and was originally in discussions about acquiring businesses in Chad and Congo Brazzaville as well. (See Orange in Talks to Buy Africa Ops From Airtel.)

Talks regarding those countries appear to have led nowhere, however, with Orange noting that "agreements regarding potential transactions in the remaining two countries have lapsed" in its statement.

Light Reading is seeking confirmation from Orange of whether this rules out any future deal with Bharti Airtel regarding the Chad and Congo Brazzaville assets.

Nevertheless, analysts reckon Orange could be interested in acquiring other businesses in West and Central Africa from Bharti Airtel. (See Bharti Airtel: Out of Africa?)

Potential targets could include operations in Gabon -- where Orange currently lacks any presence -- and the Democratic Republic of Congo (DRC), where a merger between Orange and the Bharti Airtel business would control about 40% of the mobile market.

Orange aims to grow revenues from Africa and the Middle East by 20% between 2014 and 2018 and says efficiency measures could lead to an even bigger increase in regional EBITDA over that period. (See Orange Aims for 20% Sales Growth in Africa.)

For all the latest news from the wireless networking and services sector, check out our dedicated mobile content channel here on Light Reading.

The involvement of its Côte d'Ivoire and Senegal subsidiaries in the latest deal is interesting given previously announced plans to monitor networks across a number of West and Central African markets from facilities in Abidjan (Côte d'Ivoire) and Dakar (Senegal).

Orange's other markets in West and Central Africa include Cameroon, the Central African Republic, DRC, Guinea-Bissau, Guinea Conakry, Mali, Niger and Senegal.

According to Guy Zibi, chief analyst at Xalam Analytics, Heavy Reading's Africa and Middle East research unit, the opportunities for cost savings could be significant following the latest deals.

"Orange is already present in surrounding countries, so there would be non-negligible cross-border synergies," said Zibi during a previous conversation with Light Reading. "Burkina Faso, for example, is landlocked and one of the largest markets for leased international bandwidth capacity in that region -- it could be pooled with units in Côte d'Ivoire, Niger and Senegal." (See Orange Lauds Attractions of Airtel Africa Deal.)

While expanding its presence in the Francophone region, Orange has also been exiting other parts of the continent, selling businesses in Uganda and Kenya, where it says competitive and regulatory conditions are unfavorable.

India's biggest operator, Bharti Airtel is under pressure to sell non-core assets so that it can pay off debts and fund network modernization plans in its domestic market.

The operator late last year said it would invest about $9 billion over the next three years on improving the quality of its Indian network through an initiative dubbed Project Leap. (See Bharti's $9B Network Splurge in India.)

— Iain Morris, , News Editor, Light Reading