Zain's $13.7B Mystery Investors

For a massive $13.7 billion, investors in Zain Group have agreed to sell 46 percent of the company's shares to a consortium comprised of a Malaysian billionaire and a little-known Indian conglomerate.

It's one of the largest deals the region has ever seen, and it reportedly includes India's state-owned telcos, Bharat Sanchar Nigam Ltd. (BSNL) and Mahanagar Telephone Nigam Ltd. (MTNL) as well, although their roles remain uncertain.

Zain has informed the Kuwait Stock Exchange that the sale has been agreed to at a price of 2 Kuwaiti Dinar ($6.97) per share, which equates to a total of about $13.7 billion, and the company states that the deal will be completed within four months. This ends months of speculation about which companies would invest in Zain and how. (See Zain Stake on the Block and Vivendi Wants Zain's African Assets.)

Malaysian billionaire Syed Mokhtar al-Bukhary and the Vivasi Group of India were named as purchasers of the shares. BSNL and MTNL have also been named as part of the consortium involved in the purchase, according to this Reuters report. However, this seems to have been something of a presumptive statement, as both India's Economic Times and Reuters report there's no agreement, although Vivasi is in discussions with the two state companies.

MTNL could not be reached, and BSNL would not answer Light Reading Asia's requests for a clarifying statement.

The deal is more confusing than many, as it has been conducted by a group of Zain's smaller shareholders and the Kharafi Group, a Kuwaiti family conglomerate that holds around 20 percent of Zain's shares. Kharafi is taking the opportunity to cash in its investment, but this means that Zain's management will have to create a working relationship with the new major stake holder. What's surprising about the consortium is its lack of mobile operator experience.

The Vivasi Group is an Indian conglomerate that covers the real estate, renewable energy, and steel and cement business sectors, as well as telecom. Its telecom flagships are Vavasi Telegence Pvt. Ltd. -- which has developed its own next generation mobile radio technology, called NG-1, targeted at emerging markets -- and Next Generation Telecommunications India Pvt. Ltd.

NG-1 is not based on any internationally recognized standard, meaning it has a major uphill struggle toward adoption, and the company doesn't give any examples of deployments. Meanwhile NGTL is an operator but does not hold a telecom license in India, although it claims to be planning to gain a universal license to operate mobile services based on NG-1 in all 22 of India's telecom circles. This contrasts starkly with the experiences of India's state-owned operators.

MTNL provides services in Mumbai and Delhi, and BSNL operates in the other 20 of India's telecom zones, known as circles. (See A Guide to India's Telecom Market.) Both BSNL and MTNL have made their interest in foreign investments public, and African ventures are high on their shopping lists. Zain had previously been looking to sell its African assets, which attracted BSNL's interest, but the new set-up is a very different proposition.

Zain operates in 24 countries, 16 in Africa, and has more than 70 million mobile customers. It has invested heavily in emerging markets and, along with Egypt-based Orascom Telecom , is one of the new wave of international operators groups coming out of the Arab World that are impacting on the global mobile market. (See Zain Bets Billions on Emerging Markets.)

— Catherine Haslam, Asia Editor, Light Reading

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