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Putting the MTN debacle firmly behind him, Sunil Mittal realises his dream of making Airtel a global brand
BHARTI Airtel said it will move swiftly and aggressively to expand its newly-acquired overseas domain on a day it announced the closure of its $9-billion purchase of the African operations of Kuwait's Zain Telecom.
India's largest cellphone company is aiming for a more than two-fold increase within three years in the number of users in Africa while it pursues the low-cost outsourced business model of operations that has served it so well at home.
"A billion people, 10 times the size of India, it poses truly amazing opportunities to grow within the 15 countries, and we're looking at more opportunities as we build and roll out in Africa," Bharti Airtel chairman Sunil Bharti Mittal told ET.
In March, Bharti agreed to buy Zain's African operations across 15 countries in what is India's second biggest overseas deal after Tata Steel's $13-billion purchase of Corus in 2007.
The completion of the deal gives Bharti Airtel a firm foothold in a market that it has long coveted: two previous attempts to enter Africa with MTN, the continent's largest phone firm, came to nought.
Cash from the African operations will pay for the about $9-billion loan that Bharti has taken to fund the deal, Mr Mittal said, and will cost the company less than $200 million a year in interest payments.
Bharti shares fell 3.7% to Rs 258.35 on the BSE on Tuesday.
Many analysts have said that Bharti is taking on too much debt for the Africa deal at a time when the profitability of its Indian operations is under stress.
Growth comes first
THE tariff war in the country and the huge sums Bharti must pay for 3G and wireless broadband spectrum are seen to be putting a strain on the company. But Mr Mittal said profitability can wait; growth comes first. "In our industry, if you stop growth, you will be profitable tomorrow. If I have to reach 100 million customers in Africa fast, it needs more investment in networks and then net profit will not be upcoming soon." The combined entity will be the world's fifth largest, with 180 million customers, 42 million of them in Africa. By 2012-13, it will generate earnings before interest, tax, depreciation and amortization of just under $5 billion with revenues of $12.5 billion, Mr Mittal said.
Manoj Kohli, the chief executive of Bharti's international unit, will head the African operations and be based in the new headquarters in Nairobi. He said Bharti will hive off Zain's towers and other infrastructure in Africa into a separate firm, part of an effort to share resources and reduce costs. Other phone companies, including main rival MTN, may get an offer to be part of the tower arm, similar to an agreement in India where the three leading GSM operators have all combined their telecoms infrastructure to form Indus Towers, the world's largest tower company. The Airtel brand will be rolled out in all 15 of its African operations by October. Bharti also runs mobile services in Sri Lanka, Bangladesh, Seychelles and Jersey Islands. Bharti has negotiated with regulators in all 15 African countries where Zain has operations and some disputes still remain. Econet Wireless Holdings, a minority shareholder in Nigeria, is disputing control of Zain's unit in Nigeria. But Mr Mittal said Bharti has reached a settlement with Broad Communications, which had filed a lawsuit against the Nigerian operations of Zain. Zain's chief executive officer Nabil bin Salama told a news conference in Kuwait that the company has received $7.9 billion in cash from Bharti Airtel, while an additional $400 million would be paid by the yearend upon certain milestones being achieved.
India's largest cellphone company is aiming for a more than two-fold increase within three years in the number of users in Africa while it pursues the low-cost outsourced business model of operations that has served it so well at home.
"A billion people, 10 times the size of India, it poses truly amazing opportunities to grow within the 15 countries, and we're looking at more opportunities as we build and roll out in Africa," Bharti Airtel chairman Sunil Bharti Mittal told ET.
In March, Bharti agreed to buy Zain's African operations across 15 countries in what is India's second biggest overseas deal after Tata Steel's $13-billion purchase of Corus in 2007.
The completion of the deal gives Bharti Airtel a firm foothold in a market that it has long coveted: two previous attempts to enter Africa with MTN, the continent's largest phone firm, came to nought.
Cash from the African operations will pay for the about $9-billion loan that Bharti has taken to fund the deal, Mr Mittal said, and will cost the company less than $200 million a year in interest payments.
Bharti shares fell 3.7% to Rs 258.35 on the BSE on Tuesday.
Many analysts have said that Bharti is taking on too much debt for the Africa deal at a time when the profitability of its Indian operations is under stress.
Growth comes first
THE tariff war in the country and the huge sums Bharti must pay for 3G and wireless broadband spectrum are seen to be putting a strain on the company. But Mr Mittal said profitability can wait; growth comes first. "In our industry, if you stop growth, you will be profitable tomorrow. If I have to reach 100 million customers in Africa fast, it needs more investment in networks and then net profit will not be upcoming soon." The combined entity will be the world's fifth largest, with 180 million customers, 42 million of them in Africa. By 2012-13, it will generate earnings before interest, tax, depreciation and amortization of just under $5 billion with revenues of $12.5 billion, Mr Mittal said.
Manoj Kohli, the chief executive of Bharti's international unit, will head the African operations and be based in the new headquarters in Nairobi. He said Bharti will hive off Zain's towers and other infrastructure in Africa into a separate firm, part of an effort to share resources and reduce costs. Other phone companies, including main rival MTN, may get an offer to be part of the tower arm, similar to an agreement in India where the three leading GSM operators have all combined their telecoms infrastructure to form Indus Towers, the world's largest tower company. The Airtel brand will be rolled out in all 15 of its African operations by October. Bharti also runs mobile services in Sri Lanka, Bangladesh, Seychelles and Jersey Islands. Bharti has negotiated with regulators in all 15 African countries where Zain has operations and some disputes still remain. Econet Wireless Holdings, a minority shareholder in Nigeria, is disputing control of Zain's unit in Nigeria. But Mr Mittal said Bharti has reached a settlement with Broad Communications, which had filed a lawsuit against the Nigerian operations of Zain. Zain's chief executive officer Nabil bin Salama told a news conference in Kuwait that the company has received $7.9 billion in cash from Bharti Airtel, while an additional $400 million would be paid by the yearend upon certain milestones being achieved.
GLOBAL AMBITIONS: Sunil Bharti Mittal with CEO (International), Bharti Airtel, Manoj Kohli (R) and deputy group CEO, Bharti Enterprises, Akhil Gupta
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