Professional Documents
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MGM Project Airtel
MGM Project Airtel
Competition in India
Operation Strategy
Airtel is credited with pioneering the business strategy of outsourcing all of its business
operations except marketing, sales and finance and building the 'minutes factory' model of low
cost and high volumes. Airtel's equipment is provided and maintained by Ericsson, Huawei, and
Nokia Networks whereas IT support is provided by IBM. The transmission towers are
maintained by subsidiaries and joint venture companies of Bharti including Bharti Infratel and
Indus Towers in India.
Globalization Initiatives
Airtel operates in 18 countries across South Asia and Africa, and in the Channel Islands.
Bangladesh
Bharti Airtel Ltd takeover 70% of stake in Bangladesh’s Warid Telecom International Ltd from its
holdings company, the Dhabi Group, in Jan 2010. Airtel entered the Bangladesh market when the
population was 160 M and penetration was 32 %. Penetration being low, this is the right market
for Bharti Airtel to grow its brand. Dhabi group is an investor, by and large, and focus is on the
financial side, on the banking side, on insurance. Dhabi group was going from an operator to
Investor mode.
Robi Axiata and Airtel Bangladesh merged in Q1 2016. The combined entity was called Robi, to
serve about 40 million subscribers combined by both networks. Axiata Group owns 68.3% share,
while Bharti Group owns 25%. The remaining shares is owned by NTT Docomo.
Sri Lanka
Airtel Lanka Limited is a subsidiary of Bharti Airtel Limited. Airtel commenced commercial
operations of services on January 2009. Bharti Airtel's entry into the Sri Lankan telecom sector,
as the fifth player in the mobile phones market, is well timed because the island's telecom sector
is growing exponentially and contributing to the overall growth of the economy significantly.Airtel
has over 2.9 million active subscribers as of September 2018
Acquisition of Zain
Background of Acquisition:
Inorder to compete with larger, global telecommunications such as UK-based Vodafone
group and Norway-based Telenor ASA, Airtel wanted a global presence. Sunil Bharti Mittal,
Chairman of Airtel was excited at the growth opportunities in Africa and believe strength of
Airtel brand, unique business model and historic Indian connect with Africa will catalyst the
growth of company in the emerging market. Earlier, it had tried twice and failed both times
to buy MTN Group, a South Africa-based telecom firm which has a presence in 22
countries across Africa and the Middle East. After the MTN deal fell apart for the
second time, Mittal turned his attention to Zain, the second largest telecom in Africa.
BAL done with acquisition of Zain at a value of US$10.7 billion to buy Zain’s
business in 15 African countries This was one of the biggest acquisitions in emerging
markets and made Airtel fifth largest mobile telecom operator in the world. Out of the
$10.7 billion enterprise value of Zain, Airtel will be paying $8.3 billion upfront and $700 million
after a year. It would also take over approximately $1.7 billion of Zain's debts as on December
31, 2009. Airtel has raised debt from a consortium of foreign banks and State Bank of India with
the lead-arranger and lead-advisor Standard Chartered Bank committing the highest amount $1.3
billion, followed by Barclays at $900 million
Acquisition of MTN
Challenges in Africa
Bharti wants to export its high volume/low cost business model to Africa, where
operators currently use a fixed cost/high tariffs approach. To succeed, Bharti has
many challenges to overcome, including closing the network and distribution gaps,
and attracting and retaining the best local talent. Uneven income distribution in
African markets makes it more difficult to use a one-size-fits-all approach.
There are other things going for Africa (and the company’s business in that continent)
as well. In Africa, subscriber acquisitions are still clean, unlike in India, where you
have active and inactive subscribers as well as multiple SIM users, among others.
Even the regulatory environment is simpler, ensuring that the regulatory uncertainty
that is plaguing the sector in India will not affect business there as it does here.
There are challenges, though. The fourth quarter for Airtel Africa also saw a nine-day
strike that led to a 2% drop in minutes growth. And Econet, which holds a 5% stake in
Airtel Nigeria, has disputed Airtel’s stake purchase in Zain Nigeria in 2010. Its says
its right of first refusal over the stake was denied, in a dispute that had been ongoing
since 2003, when the same assets were first sold to Vee Networks, and then later to
Zain.
Airtel is now also training its eyes on a territory that has suddenly become profitable –
Africa. With the players placed the way they are and the race for telecom supremacy
ever intensifying, we start a new series a day after Star Wars Day, May the 4th. This is
Telecom Wars – Episode One, A New Hope for Airtel in Africa.
Net loss, before exceptional items, for the India business in the three months ended
March 31, 2018, stood at Rs 652.30 crore, compared with a net profit of Rs 770.80
crore a year earlier, Sunil Mittal-led telco said in a statement on Tuesday. This is in
contrast with the profits it is seeing in Africa now – just this quarter alone, the Africa
operations posted a profit of 698.7 crores, sparing the company some blushes.
Ironically enough, when Airtel started its Africa operations, it was widely considered
a poor move. In response to a question on the one business decision that he regrets the
most, Sunil Mittal himself said Africa may have been a poor decision. “We all must
have made lots of mistakes. Lots of decision when I look back, I wish they were better
thought through. If you pin me down to one, I would say in 2010 our decision to go to
Africa was a bit rushed and that has taken 6-7-8 years and a lot of resources and my
personal time to fix that.” Look how things have changed in 2018. Like the saying
goes, there is always money in the banana stand. And well, as it turns out, in Africa.
Africa operations, projected to be healthy in the near future, have therefore assumed
an unexpectedly important role in Airtel’s coffers now. The listing on the LSE could
also help Bharti Airtel deleverage its balance sheet, analysts have observed. Useful
next three years, Africa revenues will grow by 3% CAGR (Compound Annual
Growth Rate) led by lower access charges – which is a fee paid by a subscriber to a
carrier to get on their network – and tight cost controls. Africa’s balance sheet was
helped by Airtel selling assets worth $3.25 billion over the past three years. Airtel sold
10,540 towers and sold its Burkina Faso and Sierra Leone operations.
Framework
Conclusion