According to sources, France’s Vivendi SA has made an offer to purchase Zain’s African division. In addition to Vivendi’s offer, Zain has also received offers from other major telecommunications firms.

Zain has asked UBS AG to consider a possible sale of its African division, which it values at about $10 billion, three people familiar with the plans said. UBS will oversee a review that may lead to a sale of all or part of the unit, said the people, who declined to be identified because the talks are private. Zain is yet to decide on a sale, which would exclude its Sudanese operations, the people said.

Based on Zain’s original investment of $3.4 billion, in 2005, Zain stands to make an investment return of close to 200% (an average annual return of about 50%), if Zain was to sell its African division for $10 billion.

Telecommunications companies are expanding in Africa to tap into growth in the region and make up for slowing demand in mature markets, such as Western Europe and North America. Vodafone Group PLC completed the purchase last year of a stake in Ghana’s state-owned phone company, Ghana Telecom.

“Global players are moving into Africa as it is seen as one of the largest untapped markets,” Brian Neilson, head of research for Johannesburg-based telecommunications consultant BMI-TechKnowledge, said in a telephone interview. “There are still probably 300 million unsigned subscribers in Africa. Half the market still lies ahead.”

Vivendi, which owns 53 percent of Maroc Telecom, has said it wants to expand the division in emerging markets. It ended talks to buy a stake in Dubai-based Oger Telecom Ltd. in 2007. Agnes Vetillart, a spokeswoman for Vivendi in Paris, declined to comment.

Zain is running a “strategic review to enhance shareholder value,” spokesman Ibrahim Adel said in a telephone interview today. “We have an ongoing relationship with UBS, and at all times they assist us in exercises.” He declined to comment on a possible sale of the division.

Zain, then known as Mobile Telecommunications Co., bought Celtel International for $3.4 billion in 2005 to expand into 13 African countries, including Kenya and Nigeria, the continent’s most populous nation. Zain is currently present in 17 African countries. All the African countries in which Zain operates are through Celtel, except for Morocco. The company has about 40.1 million subscribers in Africa, about 62 percent of its client base. More than half of its $7.4 billion of annual sales in 2008 came from Africa, according to data compiled by Bloomberg.

Zain shares climbed 3.5 percent to 1,180 fils at the close in Kuwait today, valuing the company at 5 billion dinars ($17 billion). The stock has gained 40 percent this year.

Vodafone, the world’s biggest mobile company, bought an additional 15 percent stake in Vodacom in November from Telkom South Africa Ltd. for 22.5 billion rand ($2.89 billion), raising its holding to 65 percent. The purchase valued Vodacom, which has 39.6 million customers in five African countries, at about $19.3 billion.

Bharti Airtel Ltd., India’s largest mobile-phone operator, and Johannesburg-based MTN Group Ltd. said in May they planned to merge, creating a company with annual sales of $20 billion and 200 million subscribers.

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Source(s):
Bloomberg