French conglomerate Vivendi has called off its talks with Kuwait-based Zain, over the acquisition of the operator’s African assets.

The figure being touted for the firm’s African portfolio is between $10bn and $12bn, and Vivendi initially said the move would fit in with its strategy of seeking growth opportunities in emerging markets, although it appears the move would not have been in the nest interest of its shareholders.

Zain said that it has received expressions of interest from several parties including other operators to acquire the African assets.

The decision to sell the African assets has raised some eyebrows. Zain acquired African player Celtel in 2005 for $3.36bn, and has continued to invest and acquire in the region ever since – most recently exploring opportunities in Morocco in March 2009. It has also broken ground internationally by establishing a pan-regional network, the use of which incurs no roaming charges for end users. The African portfolio was central to that strategy.

Moreover, the firm paid out for a major rebrand last summer, that saw all of its African properties rebadged with the Zain colours, and it has always pitched its MEA empire building as the second step in a process that will ultimately see it expand across the globe.

Zain yesterday said that net income for the first half of 2009 was up 4.4 per cent to $533.5m, while revenues jump 24 per cent to $4bn.

But observers have noted that Zain may have little choice but to sell its African portfolio, or seek co-investors to take it forward. While it’s fearless spending created an aura of invincibility around the company, the financial reality is otherwise. Zain is routinely described as “highly leveraged” and, while analysts note that it has good cashflow, the firm looks unable to shoulder its debts any longer.

The first half results have not been broken down yet, but results for the three months to end March 2009 show that the Sub-Saharan African segment of the firm’s portfolio made a loss of $4.95m, down from a profit of $127m for the same quarter in 2008. The Middle Eastern properties (with the exception of Saudi Arabia) all turned profits, meanwhile, with the leaders Sudan (counted with the Middle Eastern portfolio by Zain, and not part of the Celtel acquisition) recording net income of $120m for the quarter, Kuwait US$116m and Iraq US$54m.