Orange explores purchase of some Bharti Airtel Africa assets, where Indian firm made $4.5bn in 2014

Orange completing plans to create a new "Orange Africa" entity. Africa and the Middle East are core to firm's strategy.

ORANGE SA has explored various acquisitions in Africa including assets owned by Bharti Airtel Ltd., as the French company seeks to bolster its business in the region, according to people familiar with the matter.

France’s largest phone company has held on-and-off again discussions with potential partners as it moves ahead with a plan to group its emerging-market operations into a single unit, the people said. No deal is imminent and there are no formal negotiations underway, the people said, asking not to be identified because the deliberations are private.

Orange is considering a variety of options including takeovers, partnerships and an initial public offering of its African unit, the people said. It has also looked at certain African assets owned by Millicom International Cellular SA, one of the people said.

The Paris-based company plans to complete the creation of “Orange Africa,” a new entity that will combine those operations, in the first half of the year. This could pave the way for deals, the people said.

Under Chief Executive Officer Stephane Richard, the company has sold assets in countries such as Switzerland and sought to grow in emerging markets. Africa and the Middle East, which include some 100 million subscribers in countries from Egypt to Mali, are core to Orange’s strategy, Richard has said.

Merger option?

As European markets saturate, phone-service revenue in Africa and the Middle East is rising as consumers increasingly use smartphones for communications, the Internet and day-to-day business like banking.

One idea that’s been discussed would be merging Orange and Bharti assets in the region, with the French company retaining control of the combined entity, two of the people said. The price and quality of some of the assets remain contentious and Orange is less interested in Bharti’s English-speaking African countries, another person said.

Millicom of Sweden is open to the idea of selling some of its African assets, one of the people said, though they may be less attractive to Orange, another person said. Vodacom Group Ltd., another major player in the region, isn’t currently planning to dispose of any businesses, another person said.

Orange has said it’s weighing options for its phone assets in Africa and the Middle East—anything from an initial public offering to potential alliances with other operators. Spokesmen for Orange and Millicom declined to comment. Bharti “strongly deny these rumors which are completely baseless,” according to an e-mailed statement.

Africa revenue

Africa and the Middle-East made up about 750 million euros of sales during the third quarter at Orange, or about 8% of the group’s total. Countries like Egypt and Ivory Coast had more than 5 percent growth during the period. Orange is scheduled to announce fourth-quarter earnings February 17.

Bharti’s revenue from its Africa operations was about $4.5 billion in 2014, according to the New Delhi-based company’s financial statements.

Paris-based Orange is among a small group of telecommunications operators that have sought to tap explosive economic growth in sub-Saharan Africa. Vodafone Group Plc operates in Mozambique and Tanzania through Vodacom, while Johannesburg-based MTN Group Ltd. owns carriers in Nigeria and Uganda as well as its home country.

“We’re interested in building a sustainable, longterm African business with the right opportunities,” Millicom’s interim CEO Tim Pennington said in an interview this week. “If the right deals came along, provided we could effectively reinvest our capital, then we would look at all opportunities.”

—With assistance from Christopher Spillane in Johannesburg, Jonathan Browning in Hong Kong, Dinesh Nair in London, Adam Ewing in Stockholm, Bianca Vázquez Toness in New Delhi and George Smith Alexander in Mumbai.

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