“At least three quarters if not four quarters of earnings per share dilution pressure will be there,” said Jagannadham Thunuguntla, chief strategist at SMC Capitals Ltd. in New Delhi. “Even for Bharti’s balance sheet, $8.5 billion is a substantial loan.” SMC rates Bharti “hold.”

1. Bharti Arranges Zain Financing; Debt May Damp Earnings (Update1)
By Jay Shankar and Madelene Pearson
March 22 (Bloomberg) -- Bharti Airtel Ltd. moved a step closer to its proposed $9 billion acquisition
of Zain’s African assets after it arranged funding for 90 percent of the bid, a level of debt that may
drag on earnings for the next year.
“At least three quarters if not four quarters of earnings per share dilution pressure will be there,” said
Jagannadham Thunuguntla, chief strategist at SMC Capitals Ltd. in New Delhi. “Even for
Bharti’s balance sheet, $8.5 billion is a substantial loan.” SMC rates Bharti “hold.”
Bharti will get $7.5 billion in overseas loans from a group of banks led by Standard Chartered Plc and
Barclays Plc, India’s biggest wireless company said yesterday, a day after its board gave approval for
a formal offer this week. The carrier will also get a rupee loan equivalent to as much as $1 billion from
the State Bank of India, which would partly cover transaction costs, the New-Delhi-based company
said.
Bharti’s board on March 20 approved the planned purchase of the African wireless assets of Zain,
Kuwait’s biggest phone company, according to two people with knowledge of the negotiations. The
carriers have until March 25 to reach an agreement that would give India’s largest mobile-phone
operator 42 million new subscribers in 15 African countries.
Bharti rose 1.6 percent to 316.95 rupees as of 9:03 a.m. in Mumbai trading, the best performer
today on the benchmark Sensitive Index which dropped 0.9 percent. The stock was the second-
worst performer of 87 companies on the Bloomberg World Telecommunications Index in the six
months ended March 19.
Financing
The phone operator was seeking a six-year $8.5 billion loan with an average life of 4.75 years, two
people with direct knowledge of the matter said last week. Bharti may pay interest of 2 percentage
points more than the London interbank offered rate, the people, who declined to be identified, said.
Senjam Raj Sekhar, a Bharti spokesman, declined comment on the interest rate offered on the
financing announced yesterday.
The other banks participating in the financing led by Standard Chartered and Barclays include State
Bank of India, Australia & New Zealand Banking Group Ltd., Bank of America Merrill Lynch, BNP

2. Paribas SA, Credit Agricole CIB, DBS Group Holdings Ltd., HSBC Holdings Plc, Bank of Tokyo-
Mitsubishi UFJ Ltd. and Sumitomo Mitsui Banking Corp., Bharti said.
Global Investment House KSCC is acting as regional financial adviser on the deal, Bharti said.
The banks’ financing paves the way for early completion of the deal once Zain agrees to the offer,
Thunuguntla said.
The Indian phone company, which is also assuming debt of 1.7 billion at Zain’s African operations,
could see earnings per share drop as much as 23 percent in the year ending March 2011 if it goes
through with the transaction, Morgan Stanley analyst Vinay Jaising wrote in a note to clients on Feb.
16.
Zain Climbs
Zain climbed as much as 2.9 percent yesterday to the highest level in five months in Kuwait trading
on speculation of Bharti’s formal bid before closing 1.5 percent higher at 1,380 fils. The stock has
gained 35 percent this year, outperforming a 5.7 percent advance by the benchmark Kuwait Stock
Exchange Unweighted Index.
“Due diligence” for the proposed acquisition of its African assets by Bharti is proceeding “smoothly and
as planned,” Zain said in an e-mail statement yesterday. Zain’s board will meet on March 24 to
discuss the latest developments, it said.
Competition at Home
Bharti has sought overseas businesses as competition at home has reduced call rates for many of its
122 million Indian subscribers to as little as half a U.S. cent a minute. This is Bharti’s third attempt to
enter Africa, after being thwarted twice in efforts to merge with South Africa’s MTN Group Ltd.
The Indian carrier in January reported profit growth slowed for the 10th straight quarter after it cut
call charges to fend off rivals in the world’s second-largest wireless market by users. Net income
increased 2.3 percent to 22.1 billion rupees ($486 million) for the three months ended Dec. 31 as
sales rose 1.5 percent to 97.7 billion rupees.
The Indian carrier won’t “materially lose value” on the deal, G.V. Giri, an analyst at IIFL Capital Ltd.
in Mumbai, said March 20. Bharti may overpay by as much as $1 billion to $1.5 billion and should be
able to recover that through cost cutting, he said. Giri maintained his “buy” rating on the stock.
Zain may be asked to provide Bharti legal protection from a dispute in Nigeria, one of the people said
March 20, declining to be identified because the discussions aren’t public. The board didn’t specifically
ask for the protection, and was satisfied with the proposals that Bharti management made with
regards to Nigeria, the second person said.
Econet Wireless Holdings Ltd., based in a suburb of Johannesburg, is disputing control of Zain’s unit in
Nigeria.

3. The Nigerian operations are the single-largest revenue producer for Mobile Telecommunications Co.,
known as Zain, and have been described by Bharti Chairman Sunil Mittal as the most important piece
of its planned purchase.
“The experience of Indian companies when they’ve done foreign acquisitions has not been that great”
Thunuguntla said. “The investor community is slightly skeptical about these big ticket foreign
acquisitions, with a lot of transactions having left a bad taste in the mouth. So let’s see how it goes.”