Bharti Airtel Ltd.: Going Global
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Case Code: BSTR384 Case Length: 25 Pages Period: 2007-2010 Pub Date: 2011 Teaching Note: Not Available |
Price: Rs.600 Organization: Bharti Airtel Ltd. Industry: Telecom Countries: Global; Africa; Middle East; Asia Themes: Globalization, International Management, Merger and Acquisition |
Abstract Case Intro 1 Case Intro 2 Excerpts
"We are not going with a static mind that 'okay, we need to copy India'.... (The) objective is to build a strategy that is appropriate for each country of Africa."
- Manoj Kolhi, CEO (International), Bharti Airtel Ltd., in June 2010.
Foray into Africa
In June 2010, leading Indian mobile telecom company Bharti Airtel Ltd. (BAL) concluded a deal with Zain Group (Zain) to buy its businesses in fifteen African countries. Zain, Africa's second largest mobile telecom service provider, had operations in seventeen African countries, apart from six Middle Eastern countries3. The deal, valued at US$10.7 billion, was considered one of the biggest acquisitions in the emerging markets. With this, BAL's subscriber base rose by 42 million to reach 185 million, which made it the world's fifth largest mobile telecom operator.
BAL, which had earned a name for itself globally with its low cost model and strategic innovations, was actively looking to globalize itself since 2007.
In the years 2008 and 2009, it was in advanced stages of negotiation to complete a deal with the MTN Group (MTN), Africa's largest telecom company, but the deal fell through both times. MTN had a presence in more than twenty African countries.
Many analysts felt that BAL had settled for the second best, and called the deal a ‘forced marriage'. They said that the deal with Zain was nowhere as attractive as the one contemplated with MTN, especially at a price tag of US$10.7 billion. The reasons for this, they said, were declining profits and the low contributions of the fifteen acquired businesses to the group's revenues. Zain's African assets accounted for about 58% of its total subscriber base (71.8 million), but they made up only a fraction of its net profits6. Though BAL was able to acquire a global footprint and a much larger customer base through this deal, industry experts believed it would be difficult for it to leverage on the business model and strategies which had kept it afloat and ahead of the competition in India.
Africa represented diverse cultures with many of the countries having minimal infrastructural resources. Further, BAL had to function in fifteen different countries, each of which came with its own different regulatory requirements and geopolitical risks. Jaydeep Ghosh, Executive Director of KPMG 7, said, "Bharti has replicated the low-cost model through outsourcing in India, but depending upon different geographies (in Africa), it will not be easy."...
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