Essar Telecom position unclear in Africa

16 June 2011 | Kavit Majithia


Indian-based Essar Telecom has failed to conclude a $318 million deal to acquire two telecoms operators in Congo and Uganda.

The group struck a deal in November 2009 to acquire Warid Telecom Uganda and Warid Congo SA, but the deal has fallen through after both groups declared “not to proceed with the deal closure as certain condition precedents pertaining to government clearance were not met”, according to a statement.

Local Indian media reports suggested today that the Essar Group was set to exit the African market completely as a result, and the company was looking for buyers for its 49% stake in Kenyan-based Econet Wireless which it acquired in 2008. The Economic Times claimed the failure to conclude expansion in east Africa meant there was a significant uncertainty over Essar’s core African business, and the company was seeking to divest its operations in the region for double what it originally paid.

At the time of going to press, Essar denied the claims, and released a statement to declare “it remained committed to the African market and is satisfied with its operations in Kenya”. In recent months, the Essar Group, which operates its domestic telecoms operation in partnership with Vodafone, has agreed to sell its 33% in the joint venture to Vodafone for approximately $5 billion.

In its other Kenyan operation, Essar has invested substantially in Essar Telecom Kenya and implemented a low pricing strategy to attract younger customers, but remains fourth in terms of market share with a mere 3%. If media reports prove correct, Essar’s exit out of the Kenyan telecoms market could end the Indian conglomerate’s operations in the telecoms sector altogether.