Indian telecom company Bharti Airtel has launched a bid to buy the assets of Kuwaiti telecom Zain's cellular in Africa. The deal is to be around $10.7 billion and it offers a great opportunity to the telecom operator to enter the African continent.

The agreement for exclusive negotiations with Zain is to continue until 25 March for the deal. The deal does not include Zain's operations in other countries on the continent, Morocco and Sudan, according to Bharti. The deal is subject to regulatory approvals and clearances.

Bharti has earlier tried to enter into a $24 billion deal with the MTN Group of South Africa but could not complete the deal because of regulatory hurdles.

The board has approved the sale of assets to Bharti according to some sources. Its African operations account for about nearly 62 percent of the total 64.7 million subscribers. However, it contributes only 15 percent of group net profit.

The sale of assets would be a back step for the Kuwaiti company which has invested more than $12 billion in Africa since 2005. The company has become well known across various African nations and is helping the Gulf nation to diversify from oil business.

Some of the African assets have turned into a burden for the company. Zain decided to pull back from an expansion spree last year and rejected an offer from France's Vivendi for its African assets.

Some believe that it will be very difficult for Bharti to earn money from Zain's Africa operations and some even say that it is not a value acquisition. African markets on the other hand are natural choice for expansion as it suits Bharti's experience of operating in India.

The African market too has low incomes and tariffs and a heavily rural population. The level of Mobile Phone penetration in the many African countries is well below 40%.

Bharti's subscriber base is around 119 million, which is around 23 percent of the Indian telecom market. India has become the fastest growing mobile market in the world but the margins are very thin here due to increased competition in the segment.

A new price war has emerged between the operators to offers calls rates which are among the cheapest in the world. Analysts believe that telecom operators need to expand in the international markets by looking at opportunities in other markets.

Bharti has the eight biggest market capitalization in the market at about $25 billion. The company has been looking for opportunities to expand into the emerging markets as it is estimated that in about three to four years its Indian operations will be saturated.

In an earlier deal Bharti has signed an agreement to buy 70 percent of Bangladesh's Warid Telecom for an initial investment of $300 million.

Bharti has formed a new business unit with Manoj Kohli as its head to focus on international operations. The unit will look for more opportunities in emerging markets where Bharti can replicate its low-price, high-volume model.

Bharti is well positioned financially to be able to raise debts from the market with its cash generating capacity. The company total debt amounted to 19.31 billion rupees at the end of December. The cash balance of the company stood at 5.04 billion rupees and it debt equity ratio was 0.05.