Bharti shares rise on Zain Africa deal hopes

MUMBAI/KUWAIT Mon Mar 22, 2010 5:07pm IST

A boy talks on a mobile phone as he walks past a billboard of Bharti Airtel in Amritsar January 18, 2010.REUTERS/Munish Sharma/Files

A boy talks on a mobile phone as he walks past a billboard of Bharti Airtel in Amritsar January 18, 2010.

Credit: Reuters/Munish Sharma/Files

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MUMBAI/KUWAIT (Reuters) - Shares in Bharti Airtel rose on Monday on hopes India's top telecoms firm is heading towards a smooth landing in its $9 billion deal talks to buy Kuwaiti telecom Zain's African operations.

Bharti said on Sunday it had tied up the entire financing requirement of $8.3 billion, with major international banks committing to underwrite the amount, in a sign of progress as the deadline for exclusive talks with Zain expires on Thursday.

Bharti shares closed up 1.43 percent at 316.30 rupees in a weak market on Monday after rising as much as 2.4 percent, reversing losses made since confirming talks with Zain on Feb 15.

Zain's shares also gained altitude on Monday, closing up 1.45 percent on the Kuwait bourse. The shares are up 30 percent since the deal was announced.

Bharti did not say how much interest it was paying for the loans, but banking sources have said the company was getting around 200 basis points over Libor, lower than initial talks of more than 300 basis points.

"The acquisition seems to be on the right track," said Harit Shah, a sector analyst with Karvy Broking.

"But at this level, I won't be comfortable buying this stock. It has risen so much in the last one month. The deal will certainly be EPS dilutive."

At the close the Bharti stock was up 16 percent since Feb. 16, when it had fallen to its lowest close in more than a year.

The share was the second-worst performer in the 30-stock BSE index in 2009 and was among the only two stocks to have given negative returns even as the benchmark jumped 81 percent.

Yahya Kamshad, broker at Kuwait-based Watani Financial Brokerage Co., said Zain's stock was at a resistance point.

"The effect (of the deal) has been positive, but is is not totally reacting to it. It should hit a record high," Khamsad said.

TALKS DEADLINE LOOMS

Bharti's talks with Zain mark the third time the Indian firm has tried to get its hands on a meaningful African business after two failed bids for South Africa's MTN.

It has been hunting for emerging market assets as its home turf becomes fiercely competitive and call charges plummet in the world's fastest growing mobile market.

Bharti and Zain also look to have cleared a potential stumbling block over ownership of Zain's assets in Nigeria, that is 65 percent owned by the Kuwaiti firm.

A source told Reuters last week Bharti might put part of the purchase price in an escrow account to protect it from potential problems such as that in Nigeria. The unit is a crown jewel, without which Bharti would not close the deal.

In Kuwait, Zain said its due diligence process was on schedule and that work on final deal documents could take place after its board meeting on Wednesday.

The source also told Reuters last week Bharti was aiming to meet the March 25 deadline, though there was a chance of one or two days slippage in the actual deal being announced.

(Reporting by Sumeet Chatterjee and Devidutta Tripathy in Mumbai; Diana Elias in Kuwait; Editing by Ranjit Gangadharan and Hans Peters)

(For more business news on Reuters Money visit www.reutersmoney.in)

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