15 Jun 2009

French groups France Telecom and Vivendi rumoured to be expanding further into emerging markets

French telecoms companies are in the news today following expansion rumours in emerging markets.
France Telecom/Orange Group has been present in Africa for a long time, and expanding recently across West Africa and further, with the acquisition of a controlling stake in Kenya's Telkom, launching the country's first triple-play operation. Until now, it seems that its emerging market strategy was strictly focused on Africa, but there are now reports that it is looking at Asia too. According to my colleagues at telecoms.com, France Telecom is reportedly in talks to take a 25% stake in Indian operator Aircel for up to US$2 billion. France Telecom should buy the stake from Malaysian investor Maxis which holds a 74% shareholding in the operator. Aircel is currently a regional operator in India (operating in 13 circles), but it is planning a nationwide launch in the coming years. India's mobile market has been suffering from a slow regulatory process, but the sheer size of its population, combined with a fast-growing middle class, makes it a prime market for operators looking at high growth opportunities.
Back to Africa, the rumour that Zain group was to sell its African operations to "a French company" raised eyebrows last week, and I wasn't the only one thinking of France Telecom as the potential buyer. However, another operator has also been looking at opportunities in Africa: Vivendi. The group was one the stars of the 1999-2000 telecoms boom, and suffered one of the most spectacular descents when the bubble burst. Since then, it's been slowly rebuilding its position, and has already invested successfully in Africa, with a 53% share in Moroccan operator Maroc Telecom, which has investments in Mauritania (Mauritel), Burkina Faso (Onatel) and Gabon (Gabon Telecom). Now Nigerian paper Business Day claims that Vivendi is the group in talks with Zain to acquire its African operations.
The move would bring a new major player to the African market, but it also raised the question of the direction of Zain's strategy in Africa. Zain's objective has been for the past two years to become a global player by 2011. Africa was one of the cornerstones of this strategy, and all operations across the continent were re-branded as Zain in a expensive campaign in 2008. Zain representatives are not commenting on the rumours, other than mentioning that the group is looking at strategic partnerships for its expansion.
The rumours should be a big discussion point at this week's West & Central Africa Com event in Nigeria, were Zain Nigeria's CEO Bayo Ligali is scheduled to give a keynote presentation. If his company is taken over by another group, he would probably not relish the thought of going through yet another rebranding exercise - it would be the 3rd in almost as many years.