5 billion USD for Zain, African foothold (finally) for Bharti, and budget telecom network model for African consumers?

Posted on February 17, 2010  /  1 Comments

One way business models and innovations travel is through mergers and acquisitions. We have been waiting to see more African consumers benefit from the low prices and greater connectivity afforded by the Budget Telecom Network Model. Finally it looks like a big Indian telecom operator has got a foothold in Africa, with the transfer of Zain equity in a number of African countries to Bharti Airtel.

Zain has fared badly in Africa along with other Middle Eastern operators perhaps because their home turf has been heavily regulated. Most acted as comfortable monopolists until only recently. Bharti on the other hand has a good deal of experience in wringing out profits in a poor country where competition is growing. Africa merely adds more diversity and the potential for political instability to the challenge. It helps, too, that Bharti brings expertise of running low-cost operations in markets where consumers have very low incomes. It does this by sharing infrastructure and outsourcing most operations such as IT and running networks, leaving the risk of expanding to meet the needs of subscribers to others while it concentrates on marketing and strategy. And Bharti’s size and clout should allow it to pay much less than Zain for network towers and the like in Africa.

Bharti’s ability to concentrate on its customers should yield rewards in Africa, where innovations to bring down costs to customers have already helped to boost profits of other firms. MTN, for example, pioneered dynamic tariffs that charge users to make calls according to how many other callers are using a network at a given time. And Zain’s own scheme of “borderless roaming” lets customers move between Kenya, Tanzania and Uganda and make calls without incurring disproportionate charges.

Innovation can travel the other way too. We hope that Bharti will import to South Asia the borderless roaming that Zain introduced to the world.

1 Comment

  1. Bharti has also acquired 70% of Warid Telecom, an underdog, in Bangladesh. It has sensitized the market and the players, infamous of not believing in mutual cooperation, are jointly sharpening the strategies. Grameenphone (SMP) and Orascom (number two) have decided to share their sites and passive infrastructure. Axiata (number three) has also accorded similar deal with Grameenphone. These moves will slash the operating and capital expenses of these providers. That’s the beauty of competition. It forces the market to be efficient and innovative. The consumers get benefited at the end of the day, if there is an effective regulation. The entry of Bharti in Bangladesh is a “litmus test” for BTRC. Let the show begin!