Reliance Comms in talks for Zain's Africa ops - sources

By Devidutta Tripathy and Narayanan Somasundaram

NEW DELHI/MUMBAI (Reuters) - Reliance Communications has started talks to buy Kuwaiti Zain's African operations, two banking sources said, underscoring a drive by Indian telecom companies to gain a foothold in Africa.

The assets could fetch a price of about $10 billion, according to media reports, despite the fact that seven out of Zain's 16 African operations made a first-quarter net loss, showing the value of the world's last under-penetrated market.

Mobile penetration is lower than 40 percent in half of Africa's countries, and a dozen have below 30 percent, offering a big opportunity for global mobile firms suffering from saturated markets and falling call tariffs.

Bharti Airtel, Reliance's larger rival in India, is in exclusive talks for a merger with South Africa's MTN Group to create the world's third largest wireless firm with more than 200 million users.

Reliance, India's No. 2 mobile operator, and Bharti had separately held talks with MTN last year but failed to seal a deal. Bharti revived merger talks in May.

"Reliance Communications has been looking at some emerging market assets since its deal with MTN fell through," said one banking source with knowledge of the talks.

"They are in the preliminary stages of evaluating the deal (with Zain)," he said on Tuesday, adding that Reliance had yet to appoint merchant bankers.

Another banking source also said the talks were underway.