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Debating the wisdom of Bharti’s acquisition of Zain’s African operations

In the end, it comes down to the Budget Telecom Network Model. The recent Bharti 10.7 billion USD offer for Zain has depressed share prices and generated a big debate. But it really boils down to this:

The trick for Bharti, which pioneered low-cost telecoms in India, will be to bring down Zain’s high cost base and win subscribers, say analysts — and to get subscribers to talk more using lower tariffs.

Bharti is famous for its so-called “minutes factory” business plan — the low-cost, high-volume model that has made it India’s leading mobile company.

Mittal said Bharti expects to be able to “substantially increase usage” and sign up more callers that would boost call traffic and improve margins.

Bharti’s strength is “bringing down costs of operations and prices”, said Romal Shetty, head of Indian telecom at global consultancy KPMG.

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