Kencell to Celtel, then Zain...next?
By Macharia Kamau
Vivendi Universal has emerged as one of the suitors for Zain's operations in Africa. The deal would be worth an estimated Sh936 billion ($12 billion).
If Vivendi succeeds, it would mark an ironical return of the company to the Kenyan market, after selling its 60 per cent stake in KenCell — the predecessor of Zain Kenya — to Celtel in 2005, for $230 million. Celtel in turn sold the business to the Kuwait-based company, Zain, in August last year, as part of the larger Celtel Africa, which spans 12 African countries, for $3.4 billion.
South Africa's MTN is said to be another contender.
Vivendi is one of the largest European entertainment companies. It has a 56 per cent stake in a French mobile network — SFR — that offers mobile services in Re-Union Islands and Morocco, and it is likely that this is the brand the African operation will don.
MTN has operations in much of the region, but Kenya has remained elusive for it. It unsuccessfully attempted to buy KenCell in 2004.
Zain has grown the Kenyan operation.
It has, for instance, built the 13 per cent market share it had at the time of the takeover, to over 20 per cent currently.
However, it sill remains a distant second to Safaricom with a market share of about 70 per cent.
For Sh930 billion, Zain could make a handsome profit for the company it bought for $3.4 billon.
However, Zain Kenya refused comment on the latest developments, saying they were awaiting instructions from the head office in Kuwait.
Zain Group has posted record results for the financial year ended December 31, last year, with revenues increasing by 26 per cent to reach $7.441 billion, although fourth quarter results were hit by currency fluctuations, according to an unnamed company official.
Zain, which has operations in 22 countries across the Middle East and Africa, increased its customer base by 50 per cent to reach 63.5 million subscribers, while net profit increased by 6 per cent compared with 2007 to reach $1.2 billion.
Ground-breaking
"Despite a very challenging environment on many fronts and huge investments in network expansion, the group was able to achieve appealing and realistic levels of profitability during 2008," said Dr Saad Al Barrak, CEO, Zain recently.
He added that Zain committed more than $3 billion in network upgrades and expansion in 2008, mainly in Ghana, Iraq, Nigeria, Saudi Arabia and Sudan, which contributed to the company's customer acquisition and revenue growth.
"These markets will continue to grow and we expect to further reap further rewards in the years ahead especially since they are all part of our ground-breaking and customer alluring 'One Network'," he added.
But even these developments were not enough to completely shelter Zain from the global economic downturn, which dented growth in the fourth quarter, according to a report from Zawya Dow Jones.
"Results would have been much better if it wasn't for the depreciating currencies in the Middle East and Africa. Year-on-year we are expecting an increase but it will be limited as currencies in Kuwait and Africa have depreciated against the dollar," an unnamed Zain official was quoted as saying on Zawya Dow Jones' website.
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