Bloomberg News

France Telecom Said to Reach Deal to Buy Congo-China Telecom

October 20, 2011

(Adds African competition in seventh paragraph.)

Oct. 20 (Bloomberg) -- France Telecom SA is close to announcing the purchase of Congo-China Telecom, the Democratic Republic of Congo’s fourth-largest telecom operator, people with knowledge of the situation said.

The deal, which will expand an African mobile presence that already includes France Telecom operations in countries such as Kenya and Cameroon, may be announced as soon as today, said the people, who declined to be identified because the talks are private.

France Telecom will buy 51 percent of Congo-China from China’s ZTE Corp., these people said. The Congolese government approved a sale of its 49 percent stake in Congo-China to France Telecom earlier this month. The African country will get $78 million as part of that deal, Faustin Mpako, the chief of staff at the Portfolio Ministry, said at the time.

Paris-based France Telecom is among telecommunications operators pushing into African countries as revenue growth slows in some emerging markets because of rising mobile penetration. MTN Group Ltd., South Africa’s largest mobile provider, is bidding for Vodacom Congo SPRL, a rival Congolese operator, a person familiar with the situation said this week, and France Telecom has entered new markets including Iraq and Morocco in the last year.

Low Income

Still, entering Congo may present challenges. With more than 65 million people and mobile penetration of 17 percent, compared with rates well over 100 percent in some European countries, it’s one of Africa’s largest and poorest nations. While it has a land area about one-fourth the size of the U.S., roads are scarce and per capita income is about $300, according to the U.S. Central Intelligence Agency’s World Factbook.

France Telecom Chief Executive Officer Stephane Richard is reorienting the company toward African markets to compensate for stagnant revenue at home. Last year, he set a target of doubling emerging-market revenue by 2015, from about 3.3 billion euros ($4.5 billion) in 2009. To reduce its dependence on Europe, it has targeted units in Switzerland, Austria and Portugal for potential sale.

The list of potential high-growth markets for mobile operators in Africa is dwindling as companies including Vodafone Group Plc, India’s Bharti Airtel Ltd. and Millicom International Cellular SA continue a fierce fight with local rivals for subscribers.

To expand further, France Telecom executives have spoken of the potential of Ethiopia, a country of more than 80 million where a state telecom monopoly dominates the industry. It also may be interested in Algeria, where Orascom Telecom Holding SAE, founded by Egyptian billionaire Naguib Sawiris, is exiting after a tax dispute.

Lazard Ltd. advised ZTE on the Congo transaction.

--With assistance from Ed Lococo in Beijing. Editors: Elizabeth Wollman, Stephen West, David Risser

To contact the reporters on this story: Matthew Campbell in Paris at mcampbell39@bloomberg.net; Jacqueline Simmons in Paris at jackiem@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net


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