International Business

Case Analysis – Bharathi Airtel in Africa

Group – 7
Section - A

Submitted to:
DR. R SUGANT

Submitted by:

18016 - LEON VARGHESE

18033 - ANJALI RAJIV MENON
18039 - HARSHITA J
18050 - YASHANK UTHAPPA K R
18061 - SKANDA NARASIMHA M A
 3. Did Airtel’s strategy of similar configuration of value chain in Africa succeed? Justify your
answer.
Value Chain of Bharti Airtel in Africa
Primary Activities
Inbound Logistics Operations Outbound Marketing and Service
Logistics Sales
In many African 120 mangers in New products Low mobile Innovation for
countries logistics the continent, 80 with benefits for tariffs. benefit for the
is a nightmare. expats from India, each customer customer.
45 from Zain’s segment. Easy mobile
No proper roads. headquarter. number Locally relevant
12.6 cents per portability. brand experience.
Materials Operating in 16 minute in Nigeria.
delivered via port African countries. Products for all Strong
take 15 -20 days. 1.2 cents per three screens. partnerships for
Outsourced the minute in Kenya. generating
In case of rainy company’s Airtel Money in superior value.
season it takes two network, IT and Sold services such ten African
months. customer service as recharge or top- markets.
Operations. ups through
Increased costs retailers.
and time.

Poor flight
connections.

Basic raw
materials had to
be imported which
lead to higher
costs.
Administrative, Finance Human Resource Product and Procurement
and Infrastructure Management Technology
Development
Bharathi’s balance Limited pool of skilled Bharti transferred a Lack of strong
sheet is very strong and talent in Africa. little over 5,000 manufacturing industry
take up additional debt. employees from its and basic raw
African who were Networks, materials like steel and
Streamlined and skilled were rare and IT and Call Centre cement had to be
integrated backend expensive. operations to its imported.
functions partners.
like accounting, quality Indian expats were told Encouraging suppliers
assurance on a common to transfer their Bharti had outsourced to set up operations in
platform across Africa. knowledge to the network Africa in order to create
Africans. management to a supply chain
Outsourced company’s Ericsson, Nokia, and ecosystem.
network. Develop local talent Huawei.
and people IT to IBM, Cost of constructing a
development as a and call centres to IBM, tower in Africa is high.
component of Tech Mahindra, and
performance appraisal. Spanco, who set up Access to electricity is
operations in each low and poor
Bharti also country to serve infrastructure in Africa.
implemented buddy customers in local
programs between languages.
India and Africa.
Bharati Airtel focused
Partnership with on understanding
business schools and customers and the
other institutions to market place.
set up academies to
train fresh graduates in High-volume, low-cost
IT and Networks and telecom business
managers. model.

Competitive
compensation and
bonus strategy.

Secondary Activities

Bharti Airtel began to look for new opportunities as growth was reducing in India and finally
decided to venture into Africa. Africa with its vast population of over a billion people with
low per capita incomes. Africa mirrored India’s demographics. Africa’s real mobile
penetration was 30% and growing rapidly and high mobile tariffs in Africa combined with
low monthly minutes of use per customer indicated that there was room to grow the market
not just by increasing mobile penetration but also by intensifying usage.
After the acquisition of Zain Bharti’s leaders discovered that employee morale at Zain was
low,
work cultures between the two continents differed vastly and market share revenues and
EBITDA were falling every month. Infrastructure was poor, hardware and software
equipment was obsolete, access to equipment supplies was limited, skilled technicians were
in short supply, and the cost of doing business was turning out to be much higher than they
had anticipated.

So, Bharti initiated multiple transformations in Africa, including outsourcing active and
passive managed services (networks) for all of its 16 countries; outsourcing its IT and call
centre support to BPO firms for the first time in Africa; revamping its distribution network;
integrating its brand, and implementing a host of human resource-related initiatives in its new
operations.

It has been over a year and a half since the acquisition, and Bharti is leading in revenue
market share in 9 of 16 countries. Despite the challenges, by early 2012, Airtel Africa was
showing early signs of a turnaround. The cost of operations is still higher Bharati expected,
elasticity of demand could fail to kick in and competition could intensify. But the business
metrics are showing early signs of a turnaround.

Africa is the biggest bet Bharti has taken in its lifetime. They arrived in Africa in June 2010
with the vision to replicate the India model and achieve rapid fire success. However, the
diversity and complexity of 17 African nations is more daunting. There has been good
progress but a significant amount of transformations remains ahead.

We can see from Exhibit 1 that Airtel is the market leader in 5 African countries. From
Exhibit 2 we can see that in 2010 the gross revenue has gone up from capital expenditure as
the company’s costs were staying constant, despite expanding its network and that EBITDA
margins had increased from approximately 19% at the end of 2010, to close to 27% by late
2011.

There are various Socio-economic factors that are similar and the African Business Unit is
growing steadily but certain areas like Inbound Logistics, human resource, procurement
needs to be developed by the governments of Africa and the company might face problems in
the short term but as the African economies are predicted to grow in the long run, so we can
conclude that Airtel’s strategy of similar configuration of value chain in Africa is growing
steadily but it may take some time to succeed.