26 Mar 2009

Zain on its way to global domination

When Chris Gabriel (CEO of Africa at Zain Group) announced at AfricaCom last November that the group was ‘shopping’ and expected to confirm 3 or 4 deals in 2009, it sounded quite bullish, if in line with his presentation’s very enthusiastic tone. After all, one of the main topics discussed at the event was the likely impact of the global economic downturn on Africa’s markets, not to mention that on that same stage the year before, another group CEO (Nizar Dalloul of Comium) had said he expected to announce 2 deals in the following month – which didn’t happen.
But Zain is an unstoppable group, and they already had an announcement to make in the first quarter of this year, with a stake in Morocco’s Wana. I first heard this company’s story at North Africa Com in 2007, when their CEO gave a presentation in which he described their move from being an ISP to providing mobile CDMA services. Since then, they have acquired a GSM licence and are set to really shake Morocco’s market, one of the region’s most promising thanks to good economic and competitive conditions. Wana has been noticed for its ability to stay at the forefront of technology innovation, enabling them to provide attractive and affordable services to consumers that are increasingly technology-savvy. This model, combined with Zain’s buying power, is probably a great recipe for success. It also gives Zain its first presence in North Africa, a more developed market than the rest of Africa, where other Middle-Eastern investors (Etisalat and Qtel) have already established a strong presence.
Following this interesting first move of the year, Zain is now announcing a renewed interest in India’s booming market. Opportunities to invest are becoming rarer, and competition is already fierce, but the size of the potential market still means it is on the right side of the growth curve. Zain is said to be looking at two privately-owned operators who have yet to make their mark. India is one of the world’s most attractive markets, but also a difficult one for operators, considering the slowness of the regulatory decision process. We’ll see at our forthcoming event India & South Asia Com if Zain’s announcement is creating interest in the market.
If a deal was to be confirmed, this would be the group’s first step outside its original Middle East and Africa presence, towards its strategy of becoming a global operator. It is said to be looking at other parts of Asia as well. Going further East, there are some interesting markets with great potential in South East Asia: Vietnam, Laos and Cambodia for instance are experiencing great growth; regulatory changes are helping the sector’s development, and other international groups are showing interest. A possible future move then?
But Zain is not the only Middle-Eastern operator group looking at entering other markets. It is a noticeable trend, which has come up a lot in some of my colleagues’ conversations with local observers. The general feeling is that Zain is cleverly selective over its investments, going for strong growth markets where competition is still within reasonable levels. On the other hand, other groups are said to be spending over-the-odds for ‘trophy’ acquisitions, their main strategy being seemingly to place their logos in as many markets as they can regardless of the foreseeable returns. This will be a main focus at the Dubai event in the Com World Series to take place at the end of the year. Hopefully by then we’ll have a better idea of how investment is evolving in the region and more generally in emerging markets.

1 comment:

  1. I recently came accross your blog and have been reading along. I thought I would leave my first comment. I dont know what to say except that I have enjoyed reading. Nice blog. I will keep visiting this blog very often.


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