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End of the road for Zain?

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1111.jpgTHE Zain brand has only been in the Kenyan market for less than a year, but if developments within the Zain Group in the last few days are anything to go by, it may be on its way out.

On Tuesday, media reports indicated that the Zain Group, the Kuwaiti based mobile telecommunication company with operations in 22 countries in Middle East and Africa, may agree to a deal to sell its African operations to a French company for up to USD 12 billion.

The media reports about the impending sale first appeared in the Kuwait-based Al Qabas daily reports. People familiar with the matter told the paper that Zain was waiting for a reply from the French company this week.

If the deal between Zain and the French company does not go through, Zain will study bids made by Chinese and European companies. But if it sails through, the French company will also buy Celtel Africa’s debts, which will be discounted from the African telecom operator’s price.

Asked for comment, Michael Okwiri, Zain Kenya communication director, was noncommittal only saying there is no official communication on the recent development.

“I know most media have learnt about this development through media alerts. However, we will let you know the official position when we get communication from Zain Group,” said Okwiri.

The sale, if it goes through, will mark another turning point in Kenya’s second largest and oldest mobile services provider’s colourful history. In Kenya Zain began life as Kenya Cellular Communications Ltd, or Kencell a joint venture between Vivendi of France and Sameer Investments of Kenya.
Sameer is controlled by Naushad N. Merali, one of Kenya’s wealthiest investors and former President Daniel Arap Moi.

At the time, the shareholding in Kencell was 40 percent for Vivendi and 60 percent for Sameer, in line with regulations of the Communications Commission of Kenya. Between 2000 and 2003, Kencell grew very fast due to its high quality voice and data network.

But poor revenue and high operational costs saw Kencell post huge losses in the period between 2003 and 2004. After the string of losses and stunted growth of the operator in 2005 Vivendi opted out of the venture selling off her 40 percent stake in Kencell to Celtel International. The buyout saw the operator rebrand to Celtel Kenya.

In only one year, Celtel International transformed the fortunes of the operator drastically. In 2005, the operators profitability changed by 175 percent posting profit after tax of $17 million from the loss after tax of $25 million incurred during 2004. This was the first time the company has made profits. But the following year was not as profitable as the operator only managed $ 1 million. By the time operator changed hands, again, in 2008 it had stopped making its results public. Yet interestingly, although Celtel Kenya was making only modest profits the rest of Celtel operations in Africa were posting impressive results.

Last year, Celtel International was bought out by Zain Groups predecessor Kuwaiti’s Mobile Telecommunication Company (MTC) at an all cash offer of
$3.4 billion. The buyout was to usher in the rebranding of Celtel to Zain.

As the holding company, Zain has been very profitable. In the year ended December 31, 2008 Zain Group posted record results for the financial year ended, with revenues increasing by 26 per cent to reach $7.441 billion, although fourth quarter results were hit by currency fluctuations.

The group’s customer base grew by 50 percent to reach 63.5 million subscribers, while net profit increased by 6 per cent compared with 2007 to reach $1.2 billion Zain. The profits were mainly pushed by growth in Africa where it has the largest presence. Zain has a presence 16 African countries and 6 in the Middle East.

Brian Adero
Nairobi, Kenya

ITNewsAfrica.com

2 COMMENTS

  1. The information presented here is not entirely true.
    MTC group bought Celtel in 2005 but waited 3 years before they could rebrand and have one global brand.

  2. You have copied most of this article form Business Daily. And you still got the facts wrong. Shame on you.

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