Indian steel-to-outsourcing conglomerate Essar has cancelled deals to buy telecoms operators in Uganda and Congo and is putting its Kenyan operations, under the Yu brand, up for sale. It no longer views telecom as core or strategic, according to a report this morning 14 June in India’s Economic Times newspaper and in March agreed to sell its 33% stake in Vodafone Essar, India’s third-largest telecom operator (after Bharti Airtel and Reliance Communications), to UK’s Vodafone.
The arrival of India’s Bharti Airtel in Kenya, after it acquired Zain in mid 2010, had sparked a price war that fundamentally changed the attraction and investability of telecommunications in Kenya. Bharti operates in 19 countries in Africa and Asia and has 200 mn customers.
Essar had agreed in November 2009 with Warid, part of UAE’s diversified Dhabi group, that Essar would buy a majority stake in Warid Telecom’s operations in Uganda and Republic of Congo (“Congo Brazzaville”), with a reported enterprise value of $318 million. This deal fell through because required approvals were not received and the paper reported a statement from Essar on 14 June: “It was mutually decided between the partners – Essar and Warid Group – not to proceed with the deal closure as certain condition precedents pertaining to government clearance were not met.”
The assets are to be returned to Warid, and it is not clear how much they will pay Essar back.
The paper says Essar had bought the Kenyan telco for about $150 mn and invested a further $100 mn and is looking for a price of about $300 mn. Bharti had apparently said it is busy consolidating its Zain acquisition and other buyers are not interested. The paper said it was the third largest operator, competing with Safaricom, Orange which is part of France Telecom and Bharti Airtel.