Essar enlists BNP Paribas to offload Kenyan unit

9 Aug 2012

Indian conglomerate the Essar group is reportedly planning to sell its controlling stake in Essar Telecom Kenya, which offers services under the ‘yu’ brand. According to Indian website My Digital Financial Chronicle, the company has appointed French global banking group BNP Paribas to find a buyer. A source familiar with the deal is quoted as saying: ‘We have appointed BNP Paribas for the sale of our controlling stake of around 72% in yu Mobile. We expect the valuation for the same to be several hundred million dollars’. While it has been widely reported that yu Mobile has been wholly-owned by Essar since it acquired the stakes of local partners Startnet (16%), Capital Africa (2%) and Crosslink (2%) in November 2010, all of which were affiliated to Kenyan businessman Jos Konzolo, the Indian website claims that the Pan African Infrastructure Development Fund (PAIDF) purchased a 28% stake in Essar Telecom Kenya for USD93.75 million in 2009.

For its part, yu Mobile has however, denied reports that its Indian parent is in the process of selling the business. The Nairobi-based cellco says there are no such intentions and that BNP Paribas has been retained merely to help it source capital to meet future investment needs. ‘We are evaluating an opportunity to raise capital and BNP Paribas has been appointed for the purpose,’ said yu Mobile country manager, Mr Madhur Taneja.

If the sale does go ahead, one likely suitor for the stake is Viettel Corporation, which is wholly owned by the Vietnamese government via the Ministry of Defence; last week the company earmarked the Kenyan wireless sector as its next target as it bids to grow its emergent mobile business in Africa. Elsewhere, pan-African giants MTN Group and Vodacom Group are likely to monitor the developments with interest. Although neither company has been inclined to enter the ultra-competitive Kenyan wireless market as a green-field operator, a takeover would make commercial sense. In March this year MTN admitted that it was targeting ‘bolt-on’ deals inside its ‘comfort zone’, while May saw Vodacom hint that it was keen to explore any deals in Africa in the USD100 million price range.

Kenya, Essar Telecom Kenya (yu)