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Airtel In Africa: Pre-rebranding Focus, CAPEX, Partners, Interconnect, Competition

Bharti Airtel yesterday held a conference call on its Zain plans, following a a leadership conclave in Kampala and a 15 country tour by CEO (International) Manoj Kohli. Kohli said he returned with a stronger conviction about the Africa opportunity than before the trip. You can listen to our the call by calling one of the numbers here (ask for a replay). Or you can read our picks from the call below:

– Focus Areas: Manoj Kohli, specified that three things need to be in place before rebranding: improved network coverage, excellent customer care, and products to go to market with. The strategy will be different for each country. The brand change is going to take place in October, but no date in October has been specified yet. Airtel will be investing heavily in improving its network. It appears that the network in Nigeria requires substantial investment, which explains the $600 million investment.

– CAPEX: Airtel tentatively plans are to spent around $800 Million upto March 2011, for the initial rollout. A tower company will be formed in each country in Africa, and the company has initiated discussions on collaborating in fibre optics sharing at a country level, so that expansion will be at a lower CAPEX . They’ve also discussed with some governments for utilizing a USO Fund for network rollout. Network utiliziation in some parts is not high, but in areas where it is high, Kohli said that Airtel is addressing the issue. He emphasised that network optimization needs to be done in Africa.

– Partners: “We’re finalizing our partners and business model -whether network, IT, BPO and shared services. Before we moved, our partners had already aligned their organization structure to focus on setting up base in Nairobi, to support Bharti. Our RFP’s are out.” The partnerships will be consistent across countries, and they’ll look at the whole biz, not just a country.

– Government Relationships: Airtel is pushing the same agenda with the governments – rural coverage, affordability, creating more employment, and important CSR relationships. Governments are happy to contribute towards higher teledensity. (ED: no comments on Tanzania). License fee is zero or close to zero. In some countries, there’s a USO Fund. This is not inclusive of corporate tax. However, tenure of licenses: tenure ranges from 15-20 years, and there’s no renewal for next 3-4 years. After that it is country by country.

– Telecom population coverage is 60%. Minutes of usage are 50-60 minutes, and in India it’s 450 minutes, so there’s scope for improvement. Airtel wants to bring minutes of use to at least 250. The net teledensity in the countries that Airtel is in is around 20%, if you remove multi-sims.

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– Multiple SIMs, Interconnect: Consumers tend to keep multiple SIMs because on-network and off-network tariffs are different in Africa. Tariffs are comparatively higher because Interconnect charges are extremely high which prevents off-net calls. Airtel intends to implement its minute factory, to cover network, IT and BPO, and lead to significant savings. They feel that interconnect has to be cost based and based on the most efficient operator. Airtel is talking to regulators to make interconnect cost based. There’s an opportunity to grow usage on-net and off net – both of which are low – and regulators are open to it.

– Competition: is reasonable, between 3-4 players, and in some case 5 players. Airtel wants to collaborate for network sharing. We’re leaders in 10 countries, number 2 in 4, and number 5 in Ghana. Big market leaders are also more prone to competitive action. Governments don’t appear to have plans to increase licensees: there’s no bar, but the avg is 20 Mhz of 2G and 10Mhz of 3G. There isn’t much spectrum left for new players, which limits future competition. Governments believe that unlimited competition is not a good idea. We don’t see competitive intensity going up.- Data and 3G usage is high, and the need for Internet is very high.

– People: Airtel has 3500 people, from more than 40 nationalities. The Airtel HQ will be in Nairobi, with 100 people, and will be fully operational in the month of July itself. We’re released an empowerment schedule, to senior leaders in each country. Transition and integration should be completed in under 180 days.

– Africa Market Scenario, Opportunity: Africa population is 1 billion today, and is expected to go up to 2 billion. Africa as a market will be bigger than India and China in terms of production and consumption, and the combined consumer spending will be $1.4 Trillion in 2020. Africa is urbanizing fast, which is important for telecom: at present, it’s urbanization is 40%, which is ahead of China and India. The size of the middle class (important target population for Telecom) is 400 million, and the youth population is around 25% of the world, with a median age is 17-18 years. The working population is large, bigger than China. In terms of economies, out of 30 economies, 27 are growing at more than 5% GDP. Democracy has been taking root, social transformation is taking place. Infrastructure is improving and more than 10% of GDP is spent on transportation and telecom. FII has grown substantially.

Zain was acquired with $1.9Bn of gross debt and $1.6 bn of net debt. Airtel expects a payout of $200 million per year, in terms of interest.

Airtel In Africa: Investment Targets; Tanzania Problem; Wants Infra Sharing,

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– Airtel Completes Zain Acquisition; Plans, Targets & Nigeria
– Airtel Closes In On Zain Acquisition: $8.3Bn Financing Oversubscribed
– Airtel-Zain: Payout Of $9 Billion Expected; $255.38 Per Customer
– Zain Sellout Timline; Zains Acquisitions

Written By

Founder @ MediaNama. TED Fellow. Asia21 Fellow @ Asia Society. Co-founder SaveTheInternet.in and Internet Freedom Foundation. Advisory board @ CyberBRICS

MediaNama’s mission is to help build a digital ecosystem which is open, fair, global and competitive.



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