3rd question: Did Airtel’s strategy of similar configuration of value chain in Africa

succeed? Justify your answer.

The main competitive strategy that Bharti Airtel uses is low cost leadership.

Benefits of the acquisition of Zain Africa:

 Increase in the customer base: Acquiring Zain had benefitted Airtel by adding 42
million to its subscribers’ base and a whole new market with attractive market growth.
 World-Wide presence and achievement in telecommunication sector and expand its
business operations.
 Opportunity of becoming a market leader by providing quality services through low-
cost leadership.
 Bharti Airtel became one of the top -5 mobile network operators.
 Increase in the brand image of the Airtel.
 Fulfil its vision and global strategy of having global footprint.
 Objectives of transformational projects and diversification (financial services).

Problems in the acquisition of Zain Africa:

 Amount spent on Bharti Airtel’s acquisition of Zain Africa seems to be expensive.

 Complexities in managing the operations by Airtel.
 Cultural shock and affects the morale of the existing employees.
 But it has been challenging to carry out operations in these countries due to poor
infrastructure and political instability as it is totally different from India, where India
is one country and one government whereas here it is 15 different countries with
different governments.

Through this we can analyse that there are more benefits than problems (which are
manageable with proper care) acquisition is successful in the long run.

But the goals are different so similar configuration cannot be used here.

Africa was chosen for the following reasons:

 Attractively growing market (increase at 20% every year).

 Low penetration.
 ARPU (average revenue per user) was better than India.
 Low tariff (10 cent a minute).
  Less competition when compared to India.
 Compete with larger and global Telcos.

Zain was chosen for the following reasons:

 2nd largest in Africa after MTN (operates in 17 countries in Africa).

 42 million subscribers.
 Low subscribing cost per subscriber when compared.

This M&A helped Bharti Airtel widens Bharti’s reach and to be a world-class multinational,
a global telecom company. And Zain operates in 17 countries and Airtel acquired 15 out of it
(excluding Sudan and Morocco).

Airtel had a core competency of operational excellence:

 Entire network management and intricacies related to call management.

 Involves efficient management of network instruments.
 Good services to the customers.

They want Technology (Nokia, Siemens and Erricsson), HR (additional technical experts), IT
(IBM) which did operations such as:

 Build-up, maintenance and servicing of telecom network equipment and core IT

infrastructure.
 Payment agreement based on the erlangs used excluding the unused capacity.
 Everything from computers to mainframes excluding telecom network specific
networks.
 Quality parameters are also taken care by SLAs.

This helps them attaining low-cost leadership through:

 Uncertainties in capital expenditures are kept low.

 Investment risk on vendor.
 Pay only for the capacity used by avoiding excess capacity wastage.
 Low HR cost as it is transferred by vendor companies.
 High-bargaining power as there is competition between service providers.

Outsourcing advantages: efficiency, cost reduction, responsiveness, market potential.

Disadvantages: overcapacity, dependency, responsibility.

Airtel’s concerns: suppliers become hard to replace, conflict of interest with suppliers, biased
share revenues (IBM).

With proper governing mechanism one can reap the most benefits of outsourcing by;
monitoring the vendors continuously, proper conflict resolution mechanism, defined reasons
for contract termination.

But this hadn’t worked out in Africa as:

 Airtel outsourced many operations in India for efficiency, but here it couldn’t do as it
its cost extended and no viability in exercises.
 No talented or skilled labour.
 Morale of the employees was affected the most. And many declined to work as a
result of its social and monetary conditions.
 The dispersing system in Africa didn’t match to that of India. In India there were a
little-wholesalers who balanced the (countless) sales but in Africa there was a forcing
plan of action in the scattering coordinating with only 4-5 players existing and they
decided the cost and sum (no. of affiliations) to be sold.
 The cost of exercises stood up to the point that they got negative profits (2%).
 They required to maintain a central system (lanes, control, air transport) which made
it difficult for undertakings in remote places making it more expensive.