India’s BSNL eyes stake in Essar

By Gauri Mishra,

Economic Times India

India’s state-owned telecom service provider BSNL plans to pick up a 10-15 per cent stake in Essar Group’s Kenyan subsidiary as it looks to gain a foothold in Africa, one of the fastest-growing telecom markets in the world. The Essar Group, with interests in telecom, shipping, steel, power and oil, holds 80 per cent in Essar Telecom Kenya, while the remaining 20 per cent is held by local shareholders. A BSNL official confirmed that talks are on between the two companies.

"Valuations are being discussed. We are doing the due diligence," the official told ET NOW, requesting anonymity. The Essar Group declined to comment on the development. An equity stake in the Kenyan venture will be of a strategic nature for BSNL and the Essar Group as both companies are eyeing a larger slice of the African telecom market. The deal could allow the two companies to leverage each other’s strengths and build a larger presence in the region.

For BSNL, which has been scouting for an acquisition in Africa for several months now, the deal will provide a foothold in the region. BSNL has already got its board’s permission for getting new licences abroad.

It is also looking at markets such as Tunisia and Nigeria. Earlier this year, the government had allowed BSNL to pursue telecom opportunities in Africa. Essar, which is currently present only in the Kenyan market, has signed a preliminary agreement with UAE-based Dhabi group for a possible investment in the latter’s telecom businesses. Analysts say that all the three countries have a 70 per cent growth potential over the next four to five years.

According to an Ernst & Young report, Africa’s mobile phone market grew twice as fast as Asia between 2002 and 2007. With penetration rates of less than 45 per cent, there’s a huge scope for expansion.

BSNL is India’s oldest telecom service provider and has a customer base of 90 million as of June 2008.

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