Airtel in Africa

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AbstractOurs case study is about Bharti Airtel Ltd in African country.

(BAL), the market leader in the Indian telecommunicationindustry and its globalization strategy. BAL's telecom model wasconsidered as the new model for telecom and effective foremerging markets like India, according to experts. More and moreplayers were eyeing the fast-growing Indian mobile market which

was experiencing high growth, BAL put its sight on foreign shores.

The acquisition of Zain Group's telecom business in fifteen Africancounties in 2010 gave it a footprint in the African continent. Whileconcerns regarding whether BAL had overpaid for the dealremained, industry observers were keenly observing to see whetherthe company could replicate its successful telecom model in these

developing and emerging markets. Africa posed an intriguingenvironment with different cultures, political forces and socio-economic environment. After completing the deal, BAL was in theprocess of giving shape to its strategy for the African markets.

Keyword: Airtel, Africa, India, Bharti, Telecom Market.


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history

On 14, February 2010 a statement issued by Zain Ghana, said "the Board of

Directors of Kuwait's Zain Group, after its meeting on February 14, 2010,issued a resolution to accept a proposal received from Bharti Airtel Limited(Bharti) to enter into exclusive discussions until 25 March 2010, regardingthe sale of its African unit, Zain Africa BV." The offer was for $10.7 billion.The deal would provide Bharti access to 15 more countries in the region,

adding around 40.1 million subscribers to its already 125 million-plus userbase. The combined revenue of the two entities would be around $12 billion.

The deal ran into hurdles after the government of Gabon had come outagainst the deal, but later approved the sale. The government of CongoRepublic had also said Bharti-Zain deal broke law. There was also a dispute

about minority ownership of Zain's operations in Nigeria, the biggestmarket in the deal. Minority shareholder Econet was seeking to overturn a2006 deal by Zain - then called Celtel - in which it bought a majority stakein Nigerian mobile operator Vee Networks Ltd, now Zain Nigeria. On 8,

June 2010, Bharti said the Nigeria ownership dispute had been settled.


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verview

Bharti Airtel Limited, together with its subsidiaries,

provides telecommunication services in India, southAsia, and Africa. Its Mobile Services segment offers GSMmobile services; and post-paid, pre-paid, roaming,Internet, and value added services. The companys

Enterprise Services segment provides data, voice, andmanaged and long distance telecommunication servicesfor BFSI, IT, ITeS, manufacturing and distribution,media, education, telecom, government and PSUs, and

retail industries. The company was formerly known asBharti Tele-Ventures Limited and changed its name toBharti Airtel Limited in April 2006. Bharti Airtel Limited

was founded in 1995 and is based in New Delhi, India.


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INTRODUCTION

Airtel acquired control of Skycell Communications, in Chennai. In

2001, the company acquired control of Spice Cell in Calcutta.Bharti Enterprises went public in 2002, and the company waslisted on Mumbai Stock Exchange and National Stock Exchange of

India. In 2003, the cellular phone operations were rebrandedunder the single Airtel brand. In 2004, Bharti acquired control of

Hexacom and entered Rajasthan. In 2005, Bharti extended itsnetwork to Andaman and Nicobar.In 2009, Airtel launched its first international mobile network inSri Lanka. In 2010, Airtel began operating in Bangladesh and 16

African countries.

Today, Airtel is the largest cellular service provider in India andfifth largest in the worldThey are one of worlds leading providers of telecommunicationservices with presence in all the 22 licensed jurisdictions (also

known as Telecom Circles) in India, and operations in Srilanka,

Bangladesh and in Africa.


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The rapid growth of the African telecom industry overthe past few years, has remarkably transformed

communication infrastructure on the continent. Just a

decade ago, Africa telecom industry accounted for only2% of the World phone lines. Fast forward to the 21stcentury and the continent is almost unrecognizable.

Mobile phones are ubiquitous and if current trends are

anything to go by, 2010 is the year in witch the continents nascent but burgeoning mobile telecom industry

receives a massive technological upgrade.


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Telecom Market Spotlight : Africa

Like that of the Middle East, with witch it is oftencoupled by analysts, Africa telecom environment

has become hugely active in recent years. Thisactivity has been largely triggered by the rapid takeup of mobile services in many African countries. A

rapid growth in mobile subscribers has led to aflurry of interest in the acquisition of African

mobile assets by various operators, both fromwithin and without Africa, as they perceive theregion to be one of last remaining big potential

telecom markets.


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Dependence on 2G

However, like the middle East, much of the currenttelecom interest still lies in 2G and 3G mobile. In

terms of impact in developing mass-markettelecom in the region, 2G has had more effect thanany other technology. This market spotlight

consequently concentrates on this current aspect

of mobile. And it is important to understand howmassively dominant mobile is in African markets

typically, it accounts for about 70 percent to 80percent-plus of telecom revenues.


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Market Rankings

The apparently anomalous appearance ofNigeria of second place is due to the largenumber of subscribers there nearly 63

million. This is the largest in Africa, despitea relativity low penetration rate of 43percent and it is the result of Nigeria havingby far the largest population in Africa and

having experienced a huge surge in thenumber of mobile subscribers recently.


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Scenarios for African Market

This section of the report highlights the future scenariosand developments in the evolution of telecom sector

in Africa.

There are three main macroscopic trends in the telecommarket :

1. A focus improving the reach and profitability ofexisting network in developed countries like south

Africa, especially with the advent of inexpensivemobile data, and new methods of monetizing the

network trough whosale option, value-addedservices and better segmentation;


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2. Deployment of next-generation very high-speed broadband, and the building of

business models and services to supportthis investment, typically involving videoand/or state backing for nationality-

critical infrastructure projects;3. Continued steady rolloutof broadband in

Africa, balancing theoretical gains in social

and economic utility against the practicalconstraints of affordability, PC/devicepenetration and the need for substantialinvestment.


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Maturing products and business

modelsThe global telecom market is maturing

fast. Baseline penetration rates will

start to level off as saturationapproaches. Coupled with price erosionand increasing capacity demands, this

deceleration will pressuremargins,especialy in the recession.


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Convergence of fixed and mobile

technology and product offerings

The impact of mobile broadband, either

as a substitute or a complement to fixedbroadband. This will go hand-in-hand

with the advent of more powerful

personal devices such as Smartphoneand netbooks.


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Greater state intervention in deploying

and controlling broadband accessIncreasing intervention of African

government in areas, such as broadband

roll-out and strategy, outside the scope ofthe regulatory authorities, will help the

telecom companies. This will be conducted

either through subsidy and stimulusprogrammes, or broader initiatives relating

to national efforts on energy, health,education and the like.


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Strategies for African MarketThe split that emerged between the broadly more andless developed mobile markets presents operators with

different issues and challenges. The more developedmarkets, such as south Africa, Botswana, and those of

north Africa, are beginning to face a challengecommon to mature or maturing markets everywhere.

However as far as internal instability of the entirecontinent is concerned, these are the market best

suited for Airtel to begin their operations with.

l


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Conclusion

India is the fastest growing telecom market in the world. Themobile subscriber base of Bharti Airtel in India is growing at

a scorching pace of 3 million subscribers per month. Thecompany also has the largest number of active customers(92%) among all mobile telecom operators. The expectedbroadband revolution is set to boost the revenues of the

companys telemedia services arm, going further. ThoughBhartisARPUs have been declining, they are expected tostabilize at the present levels.

The price to book value stands at 3.0. The stock is an attractive

buy considering the growth prospects of the industry as wellas the company.


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references"Airtel Africa Reports Revenue of $924 Million in FY11".

http://www.telecomlead.com/inner-page-details.php?id=334&block=.

http://ibnlive.in.com/news/airtel-crosses-50-mn-customer-mark-in-africa/207356-11.htmlPTI, Jun 8, 2010, 03.39pm IST (2010-06-08). "Indiatimes.comTimesofindia.indiatimes.com. http://timesofindia.indiatimes.com/biz/india-

business/Bharti-completes-acquisition-of-Zains-Africa-biz-for-107bn/articleshow/6023848.cms. Retrieved 2010-08-23.

"BhartiAirtel to change brand name of Zain Africa by Oct, says head - SulekhaMoney". Money.sulekha.com. 2010-09-01. http://money.sulekha.com/bharti-airtel-to-change-brand-name-of-zain-africa-by-oct-says-head_news_12605.Retrieved 2010-11-21.

"Bharti Airtel to buy Telecom Seychelles for Rs 288 crore" Economic Times. 11 August 2010. http://economictimes.indiatimes.com/news/new

industry/telecom/Bharti-Airtel-to-buy-Telecom-Seychelles-for-Rs-288-crore/articleshow/6291986.cms. Retrieved 11 August 2010."Airtel to offer 2G, 3G services in Rwanda - The Times ofIndiaThe Times Of India.

http://timesofindia.indiatimes.com/business/india-business/Airtel-to-offer-2G-3G-services-in-Rwanda/articleshow/9916271.cms.

http://hillpost.in/2011/11/30/airtel-touches-50-million-customers-mark-in-

africa/36522/news-2/hp_news_network


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Daily IndependentRwanda: Airtel appoints country managerUSD10m plan for Airtel Seychelles; Bharti announces commitment to

SEAS cable: CommsUpdate : TeleGeography ResearchMC certifies Airtel Sierra LeoneAirtel Tanzania plans to expand network - Telecompaperhttp://www.itweb.co.za/index.php?option=com_content&view=article&id

=50964:Airtel-Zambia-rolls-out-3.75G-data-networkhttp://www.daily-mail.co.zm/index.php/business/2968-airtel-launches-3-

g-servicesAirtel launches 3G service in CongoOmbok, Eric (21 July 2011). "Bharti Airtel's Kenyan Unit to Start 3G

Services in September, Daily Says" Bloomberg.http://www.bloomberg.com/news/2011-07-21/bharti-airtel-s-kenyan-unit-to-start-3g-services-in-september-daily-says.html

Airtel net falls 31% on Africa operations, 3G payments - Home -livemint.com

Aim in Africa is affordability, not tariff war: BhartiOne Network Countries | Africa

Airtel Money launched in Kenya-->


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Airtel in Africa