Emirates Telecommunications Corporation (Etisalat), the UAE’s largest phone company by market value, is reported to be considering the sale of its 65% stake in Zanzibar Telecom (Zantel), Tanzania’s fourth largest wireless provider and its largest Internet provider.

Sources close to Bloomberg noted that Deutsche Bank AG is working with Etisalat on the sale of its stake in Zantel – an action that has already attracted interest from the Vodacom Group and also been highlighted as being of potential interest to Millicom International Cellular.

Around 60% of people in Tanzania have wireless access, and an acquisition of Zantel at this junction would grant a potential buyer access to a growing market for mobile data.

However, the provider has struggled against larger rivals Vodacom and Bharti Airtel, and its subscriber base fell to 1.81 million users during 2013, down from 3.08 million a year earlier, representing a 41% decline from 11% to 7% of overall market share, according to the industry regulator.

While Zantel booked sales of close to $85m last year (0.8% of Etisalat’s revenue according to Reuters), it was revealed in a bond prospectus in May that the unit was in a default for the non-payment of a $96m bank facility.

A formal demand had been issued that the entire balance, interest and late fees be paid, and the entity had been placed under the threat of enforcement action from an unnamed lender.

The bond prospectus, released ahead of Etisalat’s purchase of a controlling stake in Maroc Telecom, also omits Zantel from a list of foreign subsidiaries that last year made a “positive contribution” to the parent’s operating profit, implying that the Tanzanian operator was loss-making.

An Etisalat presentation for its first-quarter results noted that a SIM card registration programme in Tanzania had “negatively impacted” Zantel’s subscriber base, while Vodacom and Airtel gained custom over the same period.

Facts and figures

Etisalat bought a 34% stake in Zantel in 1999, before upping its holding to 65% in 2010, leaving Zanzibar’s government owning 18% and Meeco International Company owning 17%.

Vodacom, Tanzania’s largest wireless carrier with 10.6 million subscribers, is 65%-owned by the UK’s Vodafone Group, and is also South Africa’s largest wireless carrier by subscribers, while the Luxembourg-based Millicom provides phone services in Africa and Latin America.

The leading carrier is followed first by Bharti Airtel’s 9.2 million subscribers, and then by Tigo (Millicom’s operating unit) with 6.6 million, though Tigo’s recent launch of a mobile wallet service offering their customers interest on their mobile balance paid directly to either their primary accounts or a third party could represent a game-changer in the market.