Monday, February 15, 2010

Bharti Finally (?) Goes Global

Update: Looks like I hit publish a tad quickly. News media is now reporting that Bharti and Zain have entered a period of exclusive talks. I believe unlike the MTN saga, this is likely to work out in favor of Bharti. Will update once details are reported.

Bharti has finally managed to break its international growth jinx. While the company already has a cursory presence in some markets, however, all the while, it has been lacking a truly global name tag due to its absence in the emerging markets of Africa. No more. In news coming out, Bharti has managed to snap up the African operations of Zain, giving it immediate access to over 40 Mn subscribers and the potential market of many more millions. Penetration levels in several of the markets that Zain operates are below the 20-25% mark, indicating their strong growth potential.

Bharti has been trying to break into the African markets ever since its twice-botched attempts at acquiring MTN. However, it has been out of luck thus far. It also helped significantly that Zain is currently undergoing a management change at the top.

International growth is increasingly an imperative for Indian telecom operators. Operators such as Bharti ,who have pioneered a low-cost high-volume model, now want to take their model global. Their Indian ops are more or less going on auto-cruise mode, and African markets in particular can offer Indian telcos significant experience in mobile financial transactions. With the Indian Government likely to firm up regulations around mobile transaction soon, Bharti can do with all the help in order to build a strong mobile banking model. Moreover, scale helps in driving down capex given the increased bargaining power that the company now has with equipment vendors.

It will be quite interesting to see how Reliance Communications, the other large home-grown telco now reacts. RCom has made multiple acquisitions in the enterprise communications space, but this move will likely force it to identify newer markets much faster. The company has been speculated to have been in the market for these very assets of Zain. As for Bharti, the deal offers it the first big opportunity of becoming a large global telco. It will be very interesting to see how fast Bharti can transfer the learnings from the Indian market and pick up skills from the African operations.
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