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IBSCampuses

BSTR/384

IBS Center for Management Research

Bharti Airtel Ltd.: Going Global

This case was written by Rishi Dwesar, under the direction ofDebapratim P urkayastha, IBS Center for Management Research. It was prepared from generalized experience of the authors, and is intended to be used

as a basis for class discussion rather than to illustrate either effective or ineffective handling of a management situation.

Licens e to us e for IBS Campuses (PGPM)

Sem-IV, Class of 2012-2014

2011, IBS Center for Management Research. All rights reserved.

To order copies, call +91-08417-236667/68 or write to IBS Center for Management Research (ICMR), IFHE Campus, Donthanapally, Sankarapally Road, Hyderabad 501 504, Andhra Pradesh, India or email:

[email protected]

www.icmrindia.org

BSTR/384

Bharti Airtel Ltd.: Going Global

We are not going with a static mind that okay, we need to copy India. (The) objective is to build a strategy that is appropriate for each country of

Africa.[1]

- Manoj Kolhi, CEO (International), Bharti Airtel Ltd., in June 2010.

FORAY INTO AFRICA

In June 2010, leading Indian mobile telecom company Bharti Airtel Ltd. (BAL) concluded a deal with Zain Group [2] (Zain) to buy its businesses in fifteen

African countries. Zain, Africas second largest mobile telecom service provider, had operations in seventeen African countries, apart from six Middle Eastern

countries.[3]The deal, valued at US$10.7 billion, was considered one of the biggest acquisitions in the emerging markets. With this, BALs subscriber base rose

by 42 million to reach 185 million, which made it the worlds fifth largest mobile telecom operator.[4]

BAL, which had earned a name for itself globally with its low cost model and strategic innovations, was actively looking to globalize itself since 2007. In the

years 2008 and 2009, it was in advanced stages of negotiation to complete a deal with the MTN Group (MTN), Africas largest telecom company, but the deal

fell through both times. MTN had a presence in more than twenty African countries. [5]

Many analysts felt that BAL had settled for the second best, and called the deal a forced marriage. They said that the deal with Zain was nowhere asattractive as the one contemplated with MTN, especially at a price tag of US$10.7 billion. The reasons for this, they said, were declining profits and the low

contributions of the fifteen acquired businesses to the groups revenues. Zains African assets accounted for about 58% of its total subscriber base (71.8 million),

but they made up only a fraction of its net profits.[6]Though BAL was able to acquire a global footprint and a much larger customer base through this deal,

industry experts believed it would be difficult for it to leverage on the business model and strategies which had kept it afloat and ahead of the competition in

India. Africa represented diverse cultures with many of the countries having minimal infrastructural resources. Further, BAL had to function in fifteen different

countries, each of which came with its own different regulatory requirements and geopolitical risks. Jaydeep Ghosh, Executive Director of KPMG[7], said,


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Bharti has replicated the low-cost model through outsourcing in India, but depending upon different geographies (in Africa), it will not be easy.[8]

However, Sunil Bharti Mittal (Mittal), Chairman and Managing Director of BAL, exuded confidence about the deal, saying, we are excited at the growth

opportunities in Africa and believe that the strength of our brand and the historical Indian connect with Africa, coupled with our unique business model, will allow

us to unlock the potential of these emerging markets. [9] In the past, Airtels management, under Mittals leadership, had successfully implemented many

unconventional and innovative business models and strategies. For example, in the year 2001, BAL introduced the Minutes to Factory Model that went contrary

to the industry standard and then the Subscriber-Led Model.[10] However, analysts believed that it would not be easy for BAL to overcome the various

problems in the African markets and that it would take time. It was yet to be seen how BAL would put things into place and find synergies in the years to come.

According to K. Raman, practice head of infocomm, media, and education at the Tata Strategic Management Group,[11]this deal would test [Bhartis] ability

to integrate multiple operations across various countries and derive synergies. [12]

COMPANY OVERVIEW

From its humble beginnings in 1976 as a bicycle part manufacturing business, the Bharti Group had transformed itself into a successful business conglomerate

with businesses such as telecom, retail, financial services, and food. BAL was its flagship business. The companys entry into the telecom industry happened in

1985 when Mittal started manufacturing telecom equipment under the brand name Beetel and created Bharti Telecom Limited (BTL). In the same year, BTL

started manufacturing touch button phones under technical collaboration with Siemens AG, a German engineering conglomerate. [13] In 1991, when the

Government of India (GOI) was considering calling for bids for licenses to operate a mobile phone network for the first time, Mittal decided to foray into the

mobile telecom business.[14]

Bharti won its first mobile-phone network license for Delhi[15]under the brand name Airtel and started its operations in early 1995. A separate company Bharti

Tele-Ventures (BTV) was created which looked after the mobile telecom business of the group. In the initial years, BTV had to face tough times as the cost of

setting up the network turned out to be much higher than anticipated. However, BTV not only managed to get past these difficulties but soon entered other

telecom circles by securing licenses and by going in for acquisitions. It acquired JT Mobile (Andhra Pradesh and Karnataka), Skycell (Tamil Nadu), and Spice

Cell (West Bengal). BTV also launched long distance calling and Internet services in the year 2001. In 2002, it went in for an Initial Public Offer (IPO), through

a 100% book building process, listing itself on the Bombay Stock Exchange (BSE)[16]and the National Stock Exchange (NSE).[17]The funds raised helped

BTV to expand its presence to other parts of India. In 2004, BTV was renamed as Bharti Airtel Ltd as a strategy to bring all its services under the Airtel

brand. By the end of 2006, BAL was operating in all the 23 telecom circles present in India.[18] It also provided broadband Internet, IPTV, and fixed linetelephone services across 89 cities. In 2008, BAL introduced its Direct to Home (DTH)[19]television services under the Airtel Digital TV brand. BAL had

structured its company into four strategic units Mobile, Telemedia, Enterprise, and Digital TV.

By the end of March 2010, BAL had more than 130 million mobile subscribers in India. It reported revenues of US$7.9 million and a net profit of US$2.1 million

approximately, which had increased by 4.7% and 21.7% respectively from the previous year (Refer to Exhibit I and II for BALs Balance Sheet and Profit &

Loss Account respectively). As the flagship company of the Bharti Group, BAL contributed a majority of the revenues.

EMERGING AS THE MARKET LEADER

By the end of 2001, BAL had 1 million subscribers but was at strategic inflection point. Though the market reflected huge potential with the number of

subscribers almost doubling each year, competition had intensified with the entry of big Indian and foreign players. BAL had been focusing only on the premium

segment of customers but it realized that it could not afford to ignore other segments any longer. BAL had been using the time proven subscriber-led model, but

this was not enough to tap the Indian market as a whole. As the costs of setting up telecom technology and network infrastructure were very high, telecom

companies targeted a few rich consumers under this model and tried to generate the maximum average revenue per user (ARPU) from them. However, India

was different from the West, where this model had originated and had proved successful. India had fewer high-income people, which made it difficult for the

companies to cover their operating costs and earn profits. The countrys poor infrastructure like roads and electricity supply added to the costs of setting up

infrastructure and made the margins unattractive. Further, with per minute charges ranging between Rs. [20]8 and 16, very few subscribers were able to use the

mobile services.

In 2001, BAL came up with the Minute Factory model, which revolutionized the way telecom companies operated. [21]It focused on reducing costs by turning

fixed cost into variable costs by outsourcing various critical business processes. This included activities like network planning, Information Technology (IT)

related services, customer support, and back-end support. As BAL had only a limited corpus to expand its network, outsourcing of these activities enabled it to

manage other key activities like customer acquisition and brand building more efficiently (Refer to Table I).

Table I

Difference of Model

Basis Subscriber Led Model Minutes to Factory Model

Aim Courting high yielding subscribers Producing maximum minutes

Focus Relative cost of subscribers Relative cost of capacity (Technology)

Objective Maximizing per subscriber profit Maximizing per minute profitability

Approach Based on Marketing perspective-

Making brand and services more

captivating

Based on Production perspective-

Produce and sell minutes at cheaper prices

to attract and retain customers

Environment -Smaller Markets

-Fewer competitors

-Competition on differential scale

-Presence of basic infrastructure

-Large Markets

-Fragmented competitive structure

-Higher relative cost of technology

-Lack of infrastructural facilities

Performance -Subscriber market share

-Average revenue per user

Cost per Subscriber

-Average revenue, cost and profit per

minute

-Average utilization and airtime capacity

created

Adapted from Minutes vs. Subscribers St rateg ic Perspecti ves for Wireless Telco Operating Models, IBM Business Consul ting

BAL invested a limited amount to set up a network, which handled a threshold level of calls initially. It continuously collected usage statistics from each of the

radios in a network and when usage level went up in a certain part of the network, it asked its partners to increase the capacity. Partnership with equipment and

tower companies allowed it to add even small network capacities rapidly and in an economic manner.


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This system enabled BAL to expand its network quickly across all key markets with lower capital expenditure. As the cost of running a business was shared

among partners, BAL was able to target millions of pre-paid customers, which would have been unmanageable under the subscriber-led model. Also, as

network capacities were installed as per usage, BAL was able to keep its network utilization high at all times. Contrary to the subscriber-led model, where

companies benefited from increasing ARPU, BAL benefited from increasing average minutes per user (AMPU). This enabled it to grow its subscriber base

rapidly (Refer to Exhibit III for number of subscribers from 1997 to 2010 and corresponding percentage increase).

In 2005, BAL introduced Future Factory Center of Innovation, a Research and Development (R&D) set-up in Bangalore[22]which employed a dedicated

team for the development of innovative and path-breaking applications.[23] These applications were focused on mobile entertainment, multimedia, and 3rd

generation (3G) applications. BAL introduced customer-friendly applications like Airtel Live and Ring Back Tones (Hello Tunes) for the first time in India.

During the same year, under the initiative Wireless Business Solutions (WBS), it introduced Blackberry applications, E-mail, Sales force Automation, and

enterprise applications. Analysts felt that these innovations revolutionized the way people used their mobile phones. Through such Value Added Services (VAS),

BAL was able to increase the ARPU from high-end customer segments while it continued to gain on increased minutes of usage (MOU) from the low-end

consumers.

By the end of 2005, the subscriber growth rate was reaching saturation in the urban markets. A number of big players such as the state-owned Bharat Sanchar

Nigam Ltd (BSNL),[24]Hutchison Essar Ltd (Hutch),[25]Idea Cellular Ltd (Idea)[26], and Reliance Communications Ltd (Reliance)[27]were competing in the

market. Analysts felt that this virtually created a red ocean with increased competitive rivalry, where most of the players were competing for the same set of

consumers. The Herfindahl index[28]value for the Indian mobile telecom market stood at less than 0.17[29]in the year 2005, with ten players present in the

market (Refer to Exhibit IV for telecom operators in India and their subscriber base). This is a very very competitive market theres blood-letting in the

marketplace, that will remain,[30]quipped Mittal.

Soon BAL started expanding into the rural areas where mobile penetration was still low. However, poor infrastructure like road connectivity, electricity supply,

etc., increased the operating costs of setting up and maintaining networks in these regions, leaving hardly any room for profits. Then in 2006, BAL and Reliance

decided to share passive radio tower units (network) and other infrastructure under the project Mobile Operators Shared Tower (MOST).[31]This was a major

breakthrough in Indian Telecom history and served to further change the landscape of Indian Telecom, analysts said. Through such alliances, telecom companies

were able to share the fixed and variable costs involved in setting up and running network infrastructure such as base antenna, site rentals, power backup,

security, and maintenance. This made it possible for them to reach rural subscribers at lower prices. Mittal, said, We fundamentally believe of the next 75-80

million subscribers we will have, about two-third will come from rural India. [32]It was expected that by the end of 2010, rural telecom markets alone would

contribute about US$9.8 billion to the Indian telecom industry.

In December 2007, BAL, Vodafone Essar (Vodafone)[33], and Idea together created a separate company, Indus Towers, which provided network expansion

and sharing passive network across the country. Though these companies were fierce competitors at the front end, they worked together at the back end, to

their mutual benefit. These strategic innovations helped BAL tap the large number of customers present at the bottom of the pyramid. Within two years (2007 to

2009), BAL was able to grow its customer base from 55 million to approximately 119 million.

BAL had managed to establish itself as the market leader in India, analysts said. Its strategy and business model attracted the admiration of many industry

experts. For instance, in 2008, Craig Ehrlich, Chairman, GSM Association[34], said about Mittal, His brave and ambitious strategies will continue to resonate

across the country, our industry, and the business community globally, becoming a benchmark for emerging markets worldwide.[35]

COMPETITION

The competition in the Indian telecom market was increasing by the year. In 2007, Vodafone entered India by acquiring Hutch, while players such as Reliance

that operated through the CDMA[36]technology, were allowed to offer mobile telecom services using both GSM and CDMA Technology. Vodafone was keen

on making the most of opportunities in emerging markets like India as growth in its home market was becoming saturated. It decided to invest US$2 billion on

expanding its services in circles and rural areas where Hutch was not present.[37]In March 2008, Virgin Mobile[38]entered the Indian telecom market under a

joint venture with Tata Teleservices[39](TTSL) and introduced CDMA telecom services specially targeted at Indian youth. [40]The tariff plans introduced by

Virgin Mobile were cheaper by 25-30% than the prevailing rates in India. Virgin Mobile also introduced an innovative package in which customers were paid 10

paise for every incoming call they received.[41]This led to price wars in the industry, bringing down the margins of all the players.

Soon NTT DoCoMo (DoCoMo),[42] Japans largest mobile operator, also joined the league of telecom players in India by acquiring a 26% stake in TTSL.

DoCoMo was known for its VAS and technical expertise and introduced pan-India mobile services under the Tata DoCoMo Brand. Taking the competition to

the next level, in December 2009, Telenor[43] and Unitech[44] formed a joint venture and launched GSM services under the Uninor Brand.[45] Uninor

introduced services in seven circles and soon expanded into 22 circles, offering call rates as low as 29 paise per minute for local calls and 49 paise for STD calls

under the talkmore@29p and callmore@29p subscription plans. In March 2010, the Videocon Group (Videocon) [46] also launched mobile services in

Chennai. Though there were 12 players present in the market, Venugopal Dhoot, chairman, Videocon, believed that there was still opportunities to be tapped in

the market. He said, Although it may seem like the market is flooded with new players, the truth is that the teledensity of India is still only 46%. So there is a

large untapped market that we plan to target with our attractive plans.[47]With the entry of Videocon, there were 13 players in the Indian telecom market, with

market shares ranging from 25.5% to less than 1%. Despite aggressive competition, BAL continued to retain its market leadership position, but the growth rate

in terms of number of subscribers was slower since 2007.

With competition intensifying, the ARPU in India, already one of the lowest in the world, was expected to drop further, analysts felt. In 2005, BAL had an

ARPU of Rs.438 and this declined to less than Rs.350 by the end of June 2008. [48]Telecom analysts pointed out that most of the players were offering a slew

of reduced tariff schemes to attract customers and that this had led to price wars. BALs decline in ARPU was partly attributed to the low-priced lifetime

recharge[49]scheme launched by the company in July 2007.[50]BALs management was finding it difficult to keep up with both subscriber numbers and the

ARPU, analysts felt. Sanjay Kapoor, president of mobile services at BAL, said, We need to do away with absolutely low-priced tariffs. In certain places we

were rolling out postpaid plans which are costlier to serve [than prepaid], and very few customers were taking them. [51]To arrest the slide in the ARPU, BAL

introduced a program of tariff rationalization in October 2007. However, it was still unable to retain its ARPU at higher levels. By the end of 2009, BALs

ARPU had declined to Rs.230.[52]

GLOBALIZATION INITIATIVES

BAL felt that its extensive experience in India, coupled with its unique business model, would help it tap the opportunity provided by other developing and

emerging markets and create value for its customers. It made its first international foray in October 1997, entering Seychelles though its subsidiary, Telecom

Seychelles Ltd.[53] In 2007, Airtel partnered with Vodafone and started providing telecom services in the twin-country Channel Islands[54] through its

subsidiaries Jersey Airtel Ltd. and Guernsey Airtel Ltd.[55]However, as each of these three were small island countries with populations of less than 1 million

and mobile penetration of around 100%, they provided BAL with only a limited international footprint. In early 2008, BAL entered the neighboring country of Sri

Lanka and signed a US$200 million investment agreement with the Board of Investment (BOI) of that country. Sri Lanka, with a population of more than 21

million people had mobile penetration of around 30 percent and this was growing rapidly, with approximately 2 million mobile users being added every year. In

January 2009, BAL also entered Bangladesh by acquiring a 70% stake in Warid Telecom (Warid). [56]Warid had about 2.7 million of the around 51 million

mobile subscribers in Bangladesh.[57]

With the growth of mobile communication tapering in India, especially in the urban regions, BAL began eying bigger international markets.[58] In December


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2006, BALs bids for mobile licenses in Bhutan and Saudi Arabia, proved unsuccessful. In another such attempt, in June 2007, BAL tried to buy a majority stake

in Telkom Kenya[59]but lost out to its competitor Vodafone.[60]In May 2008, BAL initiated talks with Africas largest telecom operator MTN for a possible

deal between the two companies. MTN had a presence in 24 African and Middle East countries with more than 68 million subscribers. [61]Analysts saw MTN

as a good fit for BAL as both the companies were equal-sized entities, having a market cap of US$ 35 billion and US$ 42 billion respectively. Madhudusan

Gupta, senior telecom analyst at Gartner[62], said, This would give the combined entity a footprint in one of the least penetrated mobile markets.[63] Airtel

considered buying a controlling stake (51%) in MTN. But MTN was ready only to either sell the complete stake or to create an equally merged entity. The

prevailing Foreign Direct Investment (FDI) rules in India, where the foreign holding in a telecom company could not exceed 74%, however, posed regulatory

hurdles to the deal. BAL opted out of the deal as MTN allegedly went back on an in-principle merger agreement and proposed that BAL become a subsidiary of

MTN instead.[64]Refusing to go ahead with such a deal, Mittal stated, Bhartis vision of transforming itself from a home grown Indian Company to a true

Indian multinational telecom giant, symbolizing the pride of India, would have been severely compromised and this was unacceptable to Bharti.[65]

In May 2009, BAL and MTN renewed discussions for a potential transaction. This time, it was agreed that both the firms would pay cash and stock for stakes in

each other, with a deal valued at about US $24 billion. This deal structure required approval from the government of South Africa, which insisted on dual listingof company (DLC)[66]so that it could be listed in that country as well. [67]BAL was forced to opt out of the deal as DLCs were not allowed under the Indian

Companies Act, 1956.[68]

ACQUISITION OF ZAIN

On February 15, 2010, BAL decided to enter into an exclusive discussion with Zain, Africas second largest telecom company, which operated in 17 African

and five Middle Eastern countries, in anticipation of a potential deal. On March 20, 2010, BAL finalized to acquire Zain Africa for US$10.7 billion. The deal

followed Zains failed negotiations with companies such as Vivendi[69], Reliance Communication, BSNL, MTNL[70], Millicom,[71]Etisalat,[72]etc.[73] The

deal with Vivendi fell through as the two companies differed on the valuation of Zains African assets. An ongoing legal dispute between Econet Wireless

(Econet)[74]and Zain in Nigeria, one of Zains key markets, also held Vivendi back from going ahead with the deal.

As per BALs deal with Zain, Zain Africa was to become a wholly-owned subsidiary of BAL. The deal gave BAL ownership of Zains assets in fifteen African

countries (Refer to Exhibit V for Zains Footprints). It was decided that in the all-cash deal, BAL would pay US$ 9 billion to Zain and assume US$1.7 billion of

Zains outstanding debts. However, before the deal could be closed, BAL required approvals from the governments of the fifteen African countries. Also, there

was apprehension that Zains ongoing dispute with Econet could create problems in the acquisition of Zains Nigerian business.However, BAL closed the deal on June 8, 2010, after completing the required formalities and paid Zain US$7.87 billion in cash. But the transfer of license in

Gabon posed regulatory hurdles and was expected to be completed in the coming days. To indemnify itself against such risks, BAL held back US$ 1.1 billion,

which was to be paid partly after the successful transfer of the license and partly one year after completion of the deal. [75]Though the litigation with Econet

was still pending, BAL was allowed to operate in Nigeria. Manoj Kohli (Kohli), CEO International at BAL, said, Our lawyers have advised us there is no risk at

all (in Nigeria). However, at the same time (Zain)... have given us full indemnity in case there is some risk which will arise in future. [76]

The fifteen countries added 42 million subscribers to BALs prevailing subscriber base of about 142 million subscribers, bringing it close to 185 million. This saw

BAL entering the league of the worlds top five mobile network operators, just behind China Mobile, Vodafone, Telefnica, and Amrica Mvil, from its earlier

11th rank (Refer to Exhibit VI for top ten telecom network operators).

However, many analysts felt that BAL had paid too much for the deal, and that the assets were not worth US$ 10.7 billion. [77]An equity analyst from Warburg

Pincus[78] said, Bharti is paying a 15 per cent premium despite Zains ARPUs of less than $1 in its African operations and lower revenues in 2009 as

compared to 2008.[79]Many others believed that BAL had paid at least a 20% premium on these assets. Such claims gained ground as Vivendi had opted out

of the deal when Zain proposed a valuation floor of US$10 billion. Similarly, BSNL had valued Zains African business at about US$6 billion, almost six months

before this deal took place. Many analysts felt that BAL had wanted to prove its prowess after failing to acquire MTN, and so had been willing to pay a

premium for this deal. Taina Erajuuri, a fund manager at Fim Asset Management[80], said, The deal with MTN would have been a much better fit (since) they

are a better company. [81]Within a day of the deal being announced, BALs stocks fell by almost 9.22% (Refer to Exhibit VII for BAL and Zain Stock

Prices).[82]

Concerns about the deal were sparked by the fact that Zains African business had been flagging in many key markets and it was struggling to deliver value to

its shareholders. Unlike MTN, which was market leader in 20 of the 21 countries in which it operated, Zain was market leader only in 10 of the 15 African

countries (Refer to Exhibit VIII for Market Position, Market Share and other key statistics of Zain in various Countries). Further, though the fifteen African

countries included 58% of Zains total customers, they contributed only 38 percent to Zains total revenues of US$8,857 million for 2009. For the same year,

these fifteen countries together had accumulated a net loss of US$115 million, whereas the seven other countries earned a profit of US$497 million (Refer to

Exhibit IX for country specific revenue, net profit and ARPU). Also, most of the African countries like Tanzania, Uganda, Ghana, and Madagascar had a very

low ARPU when compared with the other seven countries (Refer to Exhibit II and VIII for Number of Customers, Revenue and Profit/Loss, ARPU for the

year 2009). Also on the balance sheet side, BAL was paying about 10 to 11 times of Zains EBITDA (Earnings before Interest, Taxes, Depreciation, and

Amortization) which was considered pretty high (Refer to Exhibit X and Exhibit XI for Zains Balance Sheet and Statement of Income Respectively). The

market capitalization of BAL too was about 7 to 7.5 times of its EBITDA. This made the deal over expensive, according to analysts.

Notwithstanding such claims, Mittal considered this deal an ideal one. He said, in the long run, we are looking for a growth story in this. And therefore its

not a cause of worry.[83]Many others industry observers too felt that Mittal, who had always led in the ruthlessly competitive Indian telecom market, was the

best person for turning around Zains business. BAL had been cash positive for the previous two years and had at least US$1.5 billion surplus on its balance

sheet which made it underleveraged, they pointed out.[84]However, BAL was supposed to pay a license auction of about US$2.7 billion for 3G[85] telecom

services in India. Thus, BAL required additional funds to the tune of US$9 billion. BAL arranged part of the debt from Standard Chartered Plc,[86]Barclays

Plc[87], and State Bank of India (SBI)[88]at interest rates ranging between 2% and 3%. This increased concern among investors as BALs debt ratio was

expected to increase at least to 1.1 from the earlier 0.4. Standard & Poor downgraded its long-term debt rating because of increased debt. [89]Though there

were concerns about the pricing, many analysts felt this premium was justified because very few assets of this scale and scope were available in such emerging

markets. Though BAL was the market leader in India and had an experienced management, Africa posed many challenges unlike India.

CHALLENGES IN AFRICA

The African sub-continent posed numerous challenges to BAL. There were significant cultural, language, and regulatory differences among the fifteen countries.

Mittal in an interview, said, The biggest challenges are posed by having to deal with 15 countries, 15 governments, 15 regulatory regimes, and their different

currencies.[90]According to analysts, many of these countries had unstable governments and there was a high rate of corruption. [91]Further, with the majority

of consumers having very little purchasing power, BAL could leverage on these markets only by decreasing prices and increasing the number of subscribers.Out of the 15 countries, 12 had per capita Gross Domestic Product (GDP) of less than US$1000, reflecting the poor economic conditions prevailing in them.

Further, there were sharp fluctuations in the local currencies. The fall in Zains revenue from US$3,067 million in the first nine months of 2008 to US$2,697

million in the same period of 2009 was attributed largely to currency fluctuations. [92] If there was further depreciation in the local currency in future, BALs

planned expenditure would have increased, they said.

Another challenge for BAL was to provide adequate network coverage in the subcontinent. Unlike India, the population in these countries was sparsely

distributed with a low level of urbanization that ranged between 20 and 60%. Nigeria, the most populous country in the region, had only 162 people per square


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kilometer, which was approximately half that in India. This necessitated the installation of additional towers and radios, which required substantial capital

expenditure on the part of BAL over the next one to two years. Also, due to the irregular or absence of power supply in many of the regions, these towers

required that diesel gensets be running throughout the year, and this further increased costs. Dobek Pater of Africa Analysis, [93]said, cost of base stations

(in Africa is) almost three times compared with Europe The cost of a single base station (tower, radios, power backup) can go as high as $180,000 to

$200,000. In Europe, the same thing would cost $50,000 to $60,000.[94]There were fears that the poor law and order situation in the continent could lead to the

vandalism of network infrastructure, which would further increase the operation overhead.

Moreover, BAL had to face burgeoning competition from already established players such as MTN, Vodacom[95], and Safricom Ltd[96]. MTN and BAL

shared five of the fifteen markets, including the largest market, Nigeria, with MTN being market leader. The companies had learned a lot about each other

during the two failed rounds of negotiations by sharing important documents containing key strategic details including the arrangements and costs of installing and

maintaining the towers, vendor contracts, supplier pricing, employee compensation, tariffs, etc. This could make the competition with MTN severe, as MTN had

the advantage of home ground, analysts felt. Tania Erajuuri, analyst at Fim Asset Management, said, MTNs $3.2 billion cash hoard and its experience in sub-

Saharan Africa, portray MTN as a company Mittal may have been better off having on his side. [97]

Industry experts believed that there were various reasons which made it difficult for BAL to incisively replicate its Indian low-cost model in Africa. In India,

there were two or three large operators who outsourced their operations to the same vendor, which generated synergies of scale with the network being shared.

However, most of the African markets had one large player followed by three to four smaller ones. Also, there was a lack of scale for all the players in each of

the markets. This meant that the cost of running the operations through outsourcing was not too different from doing it in-house. Further, in Africa, BAL lacked

the in-country scale, as there were many small countries. This would have pushed up the cost of retail stores, call centers, marketing, and advertising.

Further, the majority of the customers had dual-SIM based phones[98] and used the services of multiple telecom operators at the same time. As network

coverage was poor and tariffs varied from player to player at different times, customers benefited from such procedures. With no penalty for switching and easy

swapping of operators, 95% of the customers opted for pre-paid services, pushing up the monthly churn rate from four to six percent. According to Green

Girafee[99], the African mobile industry lost close to US$11.4 billion per year because of such procedures. [100]Analysts felt that this posed a threat to BAL

from the competition at all times and also acted as a challenge to its aim of achieving customer loyalty. Another cause of concern for BAL came from the high

termination charges[101]prevailing in the African mobile telecom industry. While India had termination charges of around Rs.0.20/ minute, they were Rs.3.50-

4.00/minute in most of the African countries. Rajiv Sawhney, CEO of the Essar Telecom Business Group[102], said, The single largest problem in most

countries there is the high termination charge. Unless that comes down, other statistics like usage will remain the same.[103]

EMBARKING ON THE AFRICAN SAFARI

Soon after the deal, Mittal delegated responsibilities to senior managers in top positions in BAL in India and also got new people on board. The entire

international operations were being headed by Kohli, who was promoted as CEO (International) in January 2010. BAL hired Jayant Khosla, who was serving as

Chief Executive at Essar Telecom, to head the business in the seven African nations. and Sunil Colaso to look after distribution and marketing from Warid

Telecom.[104]BAL decided to base its African headquarters in Nairobi, Kenya.[105]Within a month of the acquisition, BAL was ready with its team to run the

operations. It appointed about 25 officials from India and 45 from Zain in Kuwait and planned to bring in some more people. On June 21, 2010, BAL organized a

leadership conclave at Kampala (Uganda). This was attended by 130 senior African leaders [106]and enabled BAL to acquaint various government officials

with its plans and seek their co-operation. Kohli also visited all the country specific headquarters and became acquainted with Zains employees. There were

more than 6500 people belonging to 42 different nations working at Zain.[107]

BALs primary strategy was to achieve economies of scale by penetrating deeper into new markets and to increase its subscriber base. Analysts felt that its

minutes to factory model could substantially decrease the overheads, enabling it to operate at lower costs. By cutting prices and increasing traffic, BAL could

bargain and engage with vendors at reduced prices. The increased efficiency and traffic would help it to reduce the operational costs and to pass on the benefits

to customers, they said. Further, there was ample scope for increasing mobile phone usage in both explored and unexplored markets. As compared to India,where on an average, subscribers minutes of use stood at 446 minutes per month, African customers only used 115 minutes (Refer to Exhibit XII for

comparison of key parameters between BAL and Zain). BALs target was to make mobile telecom extremely affordable so that even the lower segments of the

market would contribute to its revenue and profits. [108]BAL said it looked forward to spreading its network to smaller towns and rural areas where mobile

telecommunications were not available.

BAL planned to increase the number of its base stations. In Africa, it had only 10,800 base stations for about 36 million active consumers as compared to

108,000 base stations for about 141 million active consumers across South Asia.[109]To increase the number of base stations for enhancing network quality and

expanding into new regions, BAL had earmarked on a capital expenditure of US$800 million by 2011. BAL was also looking to increase its revenue by

introducing many new and innovative services in the market. In partnership with IBM[110], BAL decided to introduce music and video content on the mobile

phones. BAL was also planning to roll out 3G services across the fifteen countries and had a license ready for 5 countries. Analysts expected these strategies to

increase the ARPU and allow it to cater to various consumer segments. Soon after the deal, the majority of BALs strategic partners and vendors started

expanding their operations to Africa. Some of these were companies like Microqual, which manufactured mobile network apparatus, and One97 and Tyro, which

provided VAS.[111]Further, to successfully implement its low cost outsourcing model, BAL invited bids to manage its IT-related services in Africa worth over

US$ 1 billion which subsequently went to IBM.[112]To provide complete network coverage in Africa, BAL decided to create a separate tower company in

each of the fifteen countries.[113]In this way, it looked forward to sharing its passive network infrastructure. We cover [450,000] villages in India and we havemade that market very viable. We would have a similar strategy for Africa as well, [114]said, Kohli.

BAL planned to introduce customer-friendly schemes, which would allow customers to talk more at lower prices. It started reducing its call rates just a month

after taking possession of the African business. BAL reduced its tariff in countries such as Ghana, Kenya, Sierra Leone, etc. For instance, in Kenya, it reduced

call rates by 50% to US$0.037, the lowest in all the African countries. BAL also roped in Ogilvi Africa[115] to launch the Airtel brand in all the fifteen

countries.[116]It was expected that Bharti would rebrand Zain to Airtel by the end of October 2010. To target all segments of customers and keep the ARPU

high, BAL also decided to launch 3G services by early 2011.

While some analysts opined that the new markets would pose several challenges to BAL, the company remained confident, We have obviously got into the deal

with our eyes open We are also very happy that the Indian business model, that is the talk of the world, is now going global,[117]said Mittal. However, the

company indicated that it was entering each African country with an open mind and not with a deliberate objective of replicating in these countries the strategy

that had made it the market leader in India. While its competitors in the new markets were also gearing up to give BAL a tough fight, analysts were closely

watching to see whether the management of this emerging market champion would be able to put its stamp on these new markets.

Exhibit I

Bharti Consolidated Balance Sheet 2007 to 2009(For the Year Ending December 31)

(In thousand US$) 2010 2009 2008

SOURCES OF FUNDS

Shareholder's Funds


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Share Capital 421,948 421,831 421,757

Share Application Money Pending Allotment - 65 274

Employee Stock Options Outstanding 41,353 25,761 12,534

Reserves and Surplus 7,700,516 5,695,446 4,063,545

Loan Funds

Secured Loans 8,762 11,496 11,650

Unsecured Loans 1,110,999 1,702,648 1,448,426

Deferred Tax Liability (Net) 723 - -

Total 9,284,301 7,857,247 5,972,379

APPLICATION OF FUNDS

Fixed Ass ets

Gross Block 9,825,006 8,281,489 6,247,923

Less: Accumulated Depreciation / Amortisation 3,597,236 2,722,965 2,018,890

Net Block 6,227,770 5,558,524 4,229,033

Capital Work in Progress (including Capital Advances) 354,386 570,371 611,351

6,582,156 6,128,895 4,840,384

Investments 3,505,182 2,617,280 2,433,967

Deffered Tax Asset (Net) - 72,691 -

Current Assets, Loans and Advances

Inventory 6,054 13,811 12,636

Sundry Debtors 467,773 566,678 616,990

Cash and Bank Balances 181,498 500,356 111,764

Other Current Assets 14,750 26,603 22,162

Loans and Advances 1,379,943 986,999 627,529

2,050,018 2,094,447 1,391,081

Less: Current Liabilities and Provisions

Current Liabilities 2,706,665 2,915,107 2,646,460Provisions 146,390 140,978 46,639

2,853,055 3,056,085 2,693,099

Net Current Assets (803,037) (961,638) (1,302,018)

Misce llaneous Expenditure (To the extent not written off or

adjusted) - 19 45

Total 9,284,301 7,857,247 5,972,379

Note : All the values have been converted to US$ tak ing 1US$ = 45 Indian Rupees

Compiled from BALs annual reports.

Exhibit II

Bharti Profit & Loss Account 2008 to 2010(For the Year Ending March 31)

(In thousand US$) 2010 2009 2008

INCOME

Service Revenue 7,908,027 7,555,461 5,703,278

Sale of Goods 5,204 3,270 8,613

7,913,231 7,558,731 5,711,891

EXPENDITURE

Access Charges 985,708 1,156,314 897,452

Network Operating 1,654,827 1,405,976 733,439

Cost of Goods Sold 4,516 2,757 7,522

Personnel 319,363 318,587 296,486

Sales and Marketing 534,424 483,644 396,646

Administrative and Other 497,811 463,896 431,767

Total Expenditure 3,996,648 3,831,174 276,422


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Profit before Licence Fee, Other Income,Finance

Expense (Net), Depreciation, Amortisation, Charity and

Donation and Taxation 3,916,583 3,727,557 2,948,580

Licence fee & Spectrum charges (revenue share) 834,416 796,039 574,182

Profit before Other Income, Finance Expense (Net),

Depreciation, Amortisation, Charity and Donation and

Taxation 3,082,168 2,931,518 2,374,397

Other Income 19,940 31,275 52,413

Finance Expense (net) (190,144) 391,996 107,491

Depreciation 864,462 712,508 703,685

Amortisation 46,187 39,737 59,127

Charity and Donation 3,992 4,877 7,054

Profit before Tax 2,377,611 1,813,675 1,549,454

MAT credit (230,797) (31,029) (5,373)

Tax Expense

- Current Tax 440,292 203,858 196,341

- Deferred Tax (73,414) (87,979) (37,386)

-Fringe Benefit Tax - 7,972 8,273

Profit after Tax 2,094,701 1,720,853 1,387,598

Note : All the values have been converted to US$ tak ing 1US$ = 45 Indian Rupees

Compiled from BALs annual reports.

Exhibit III

Bhartis Subscriber Base in India and Corresponding Growth Rate (1997 to 2010)

Source: Cellular Operators Associtaion o f India ( http://www.coai.com/statistics.php)

Exhibit IV

Mobile Telecom Players in India and their Subscriber Base (2005-2010)

Company 2005 2006 2007 2008 2009 2010*

Bharti 16,327,150 31,974,038 55,162,944 85,650,733 118,864,031 141,251,288

Vodafone (Hutch)^ 11,413,277 23,306,165 39,864,881 60,933,152 91,401,959 113,774,409

IDEA 6,473,962 12,442,450 21,054,027 38,012,845 57,611,872 72,735,921

BSNL 14,298,890 23,618,551 32,712,240 41,361,734 57,223,482 70,357,652

Tata Teleservices 5,689,920 13,677,210 20,348,400 28,988,020 47,289,450 70,234,455

Aircel 2,282,044 4,512,690 9,428,086 16,075,809 31,023,997 44,906,679

Reliance Telecom 1,664,700 3,640,810 6,001,978 10,353,841 15,757,690 16,311,206

Uninor 1,208,130 9,093,962

MTNL 1,526,422 2,424,533 2,954,880 3,899,861 4,565,260 4,989,546

Videocon 3,664,899

BPL 2,889,698 1,056,282 1,239,466 1,947,667 2,649,730 2,968,111


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(Loop Mobile)^^

Stel 141,411 1,519,498

Etisalat 43,709

Spice 1,627,081 2,449,664 3,800,633

Total 64,193,144 119,102,393 192,567,535 287,223,662 427,737,012 551,851,335

Notes: * For 2010, Data is till August 31, 2010. ^ Hutch was acquired by Vodafone in the year 2007.

^^BPL changed its name to Loop Mobile, following the expiry of its brand-use agreement in 2009.

Source: Cellular Operators Associtaion of India ( www.coai.com/statistics.php)

Exhibit V

Zains Foot Print (Pre-Acquisition)

Source: Zain Annual Report, 2008- 2009

Exhibit VI

Top 10 Mobile Network Operators in the World

Rank Company Main Markets Total subscribers* (in millions)

1 China Mobile China 564.35

2 Vodafone United Kingdom 427.99

3 Telefnica Spain 278.00

4 Amrica Mvil Mexico 215.06

5 Bharti Airtel India 186.00

6 Telenor Norway 184.00

7 Orange France 182.008 T-Mobile Germany 150.90

9 Telia Sonera Sweden 143.9 0

10 China Unicom China 156.96

*Approximate Values as on June 31, 2010.

Compiled from various sources.

Exhibit VII

BAL Stock Prices from October 2005 to September 2010 (In Rs.)


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Zain Stock Prices from October 2005 to September 2010 (In Kuwait Dinar)

Source: BALs Stock Price taken from www.nseindia.com, Zains Stock Price Taken from www.kse.com.kw

Exhibit VIII

Zains Country Wise Statistics (As on December 31, 2009)

Sl. No. Country Year of

Launch

Market

Position

Population (in

'000)

Market

Share (% )

Mobile Penetration

(%)

Per Capita

Income

(US$)

Population

Density (Per

Square Km)

African Countries

1 Burkina Faso 2001 1 15881 51 19.1 517 46

2 Chad 2000 1 11558 65 16.1 596 7

3 Republic of the Congo 1999 1 3971 51 69.8 163 8.7

4 Democratic Republic of the Congo 2000 1 67983 45 11.7 2,361 24

5 Gabon 2000 1 1380 62 109.4 7,500 4.6

6 Ghana 2007 4 24655 9 57.8 655 85

7 Kenya 2004 2 40141 14 37.2 759 53

8 Madagascar 2005 1 21034 40 18.6 461 28

9 Malawi 1999 1 14856 72 16.2 326 90

10 Niger 2001 1 15539 67 14.9 352 8.4

11 Nigeria 2006 2 156618 24 39.3 1,092 141

12 Sierra Leone 2000 1 6125 46 20 341 78

13 Tanzania 2001 1 43036 39 29.3 494 39

14 Uganda 1995 2 33531 35 16.4 481 105

15 Zambia 1998 1 12511 69 35.6 986 13

Other Countries

1 Bahrain 2003 2 1130 49 119.6 280 26,900

2 Iraq 2003 1 30419 53 63.9 169,235 4,540

3 Jordan 2003 1 6362 44 89.1 34,495 3,829

4 KSA 2008 3 28962 18 100.4 830,000 14,540

5 Kuwait 1983 1 3480 49 107.8 6,880 43,200

6 Lebanon 2004 1 4206 56 55.7 4,036 8,157
http://www.kse.com.kw/http://www.nseindia.com/


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7 Sudan* 2006 1 40797 60 34.7 967,500 1,293

Notes: *Sudan though being part of Africa has been included in other countries as it was not part of the deal.

Estimated Population as on December, 2009

Per Capita GDP is at nominal values as per 2009 estimates by world bank.

Compiled from Zains Annual Report for the year 2008 -09; World Bank Website.

Exhibit IX

Zains Customer Base, Revenue, Net Profit/Loss and ARPU

(As on December 31, 2009)

Sl. No. Country Customers ('000) Revenue (Million US$) Net Profit/ Loss (Million

US$)

ARPU*

1 Burkina Faso 1,544 125.70 16.10 $8.141

2 Chad 1,209 153.80 13.80 12.721

3 Republic of the Congo 1,414 256.40 12.40 18.133

4 Democratic Republic of Congo 3,567 321.60 (7.00) 9.016

5 Gabon 936 133.40 19.90 14.252

6 Ghana 1,283 56.70 (79.90) 4.419

7 Kenya 2,092 153.90 (46.60) 7.357

8 Madagascar 1,569 77.00 (19.70) 4.908

9 Malawi 1,735 157.30 26.40 9.066

10 Niger 1,549 208.10 39.10 13.434

11 Nigeria 14,777 1,306.50 (125.40) 8.841

12 Sierra Leone 564 44.30 (19.70) 7.855

13 Tanzania 4,910 272.30 6.80 5.546

14 Uganda 1,925 99.80 (5.10) 5.184

15 Zambia 3,076 300.10 53.70 9.756

Total (African Countries) 42,150 3,667 -115 8.700

1 Bahrain 662 260.70 74.10 39.381

2 Iraq 10,296 1,342.40 288.30 13.038

3 Jordan 2,493 480.20 133.90 19.262

4 KSA 5,232 800.90 (826.30) 15.308

5 Kuwait 1,838 1,221.10 456.40 66.4366 Lebanon 1,313 90.10 19.10 6.862

7 Sudan* 8,493 994.30 351.50 11.707

Total (Other Countries) 30,327 5,190 497 17.112

Total (All Countries) 72,477 8,857 382 12.220

*Sudan though being part of Africa has been included in other countries as it was not part of the deal.

Source: Compiled from Zains Annual Report for the year 2008-09

Exhibit X

Zain Consolidated Balance Sheet 2007 to 2009(For the Year Ending December 31)

(In thousand US$) 2009 2008 2007

ASSETS

Current assets

Cash and bank balances 930,923 1,281,780 910,324

Trade and other receivables 1,412,662 1,238,052 858,105

Loan to an associate - 277,606 -

Inventories 113,429 106,017 76,819

Investment securities at fair value through profit or loss 26,007 58,105 80,146

2,483,021 2,961,561 1,925,289

Non-current ass ets - - -

Deferred tax assets 467,070 309,425 225,519

Investment securities available for sale 343,143 337,645 625,324

Investments in associates 577,599 753,969 904,669

Interest in a jointly controlled entity 153,530 - -

Loans to an associate 494,760 - 595,383

Property and equipment 7,497,449 7,061,986 5,211,157


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Intangible assets 7,823,878 7,785,446 5,704,721

Other financial assets 8,847 8,286 23,868

17,366,275 16,256,787 13,290,641

Total Assets 19,849,296 19,218,317 15,216,035

LIABILITIES AND EQUITY

Current liabili ties

Trade and other payables 3,275,066 3,380,456 1,943,864

Due to banks 1,869,240 805,359 1,581,000

Due to controlling interest holder - - 64,491

5,144,307 4,185,815 3,589,355

Non-current l iabili ties

Due to banks 5,630,641 5,821,561 5,336,279

Deferred tax liabilities 134,857 105,516 110,672

Other non-current liabilities 303,714 739,122 88,070

6,069,213 6,666,199 5,535,021

EQUITY

Attributable to Parent Companys s hareholders

Share capital 1,492,282 1,488,641 659,923

Share premium 5,892,352 5,891,192 2,175,836

Treasury shares (1,978,516) (1,978,516) (54,272)

Legal reserve 515,641 445,254 329,962

Voluntary reserve 219,829 219,829 219,829

Foreign currency translation reserve (73,777) (340,390) (90,641)

Treasury shares reserve 6,854 6,854 -

Equity issue transaction cost of associate (6,321) (6,084) -

Investment fair valuation reserve (26,895) (32,059) 235,902

Share based compensation reserve 63,976 71,063 42,585

Hedge reserve (171,770) (210,390) -

Retained earnings 2,068,443 2,177,749 1,992,815

8,002,098 7,733,143 5,511,941

Non-controlling interes ts 633,714 633,160 579,718

Total equity 8,635,812 8,366,303 6,091,659

Total Liabilities and Equity 19,849,331 19,218,317 15,216,035

Note : All the values have been converted to US$ tak ing 1US$ = 0.287 Kuwai ti Dina r (KD) as on December 31, 2009.

Compiled from Zains Annual Report of the respective years.

Exhibit XI

Zain Consolidated Statement of Income 2007 to 2009

(For the Year Ending December 31)

(In thousand US$) 2009 2008 2007

Revenue 8,134,639 7,028,351 5,885,158

Cost of sales (2,245,063) (2,003,937) 1,337,565)

Gross profit 5,889,575 5,024,414 4,547,593

- - -

Distribution, marketing and operating expenses (1,819,414) (1,640,235) (1,619,842)

General and administrative expenses (782,260) (738,979) (501,309)

Depreciation and amortization (1,396,818) (1,064,432) (828,288)

Impairment losses goodwill (80,225) (222,007) -

Provision for impairment trade and other receivables (38,505) (23,004) (13,446)

Operating profit 1,772,354 1,335,793 1,584,709

Interest income 46,919 110,488 92,242

Investment income (28,863) (2,102) 75,568

Share of loss of associates (214,544) (72,488) (11,000)


12/16



Share of loss of jointly controlled entity 14,839) - -

Fair value gain on the previously held equity interest in a subsidiary - 534,782 -

Other income 40,933 75,333 21,375

Finance cost (563,895) (449,130) (433,635)

Loss from currency revaluation (133,937) (130,144) 46,119

Board of Directors remuneration (112) (112) (98)

Contribution to Kuwait Foundation for Advancement of Sciences (6,379) (10,449) (10,432)

National Labour Support Tax and Zakat (18,091) (20,621) (19,112)

Profit for the year before income tax 879,547 1,371,351 1,345,737Income tax expense of subsidiaries (138,351) (188,491) (143,288)

Profit for the year 741,196 1,182,860 1,202,319

Note : All the values have been converted to US$ tak ing 1US$ = 0.287 Kuwai ti Dina r (KD) as on December 31, 2009.

Source: Compiled from Zains Annual Report for the year 2008-09

Exhibit XII

Comparison of Key Parameters betwee n Zain and BAL

Subscriber Base 42 million 142 million

ARPU US$7 (Rs. 328) US$4.8 (Rs. 220)

InvestmentUS$10.7 billion (NA)

Average Minutes Used Per Month

(Per User)

115 446

Average Growth Rate (Last 3 Years) 23.5% 21.6%

Mobile Penetration 30% 50%

Annual Operating Expense Per Cell

Site

US$3500 (Rs. 1,60,000) US$1200 (Rs. 56,000)

Population* 1 Billion 1.35 Billion

*Population of Africa includes all African Countries.

Source: Compiled from various sources.

References and Suggested Readings:

1. David Pringle, Can Airtel Become Africa's Most Loved Brand?www.mobilebusinessbriefing.com, September 22, 2010.

2. Katya B Naidu , Bharti's Vendors Expand Presence in Africa ,Business Standard, September 2, 2010

3. Rashmi K Pratap, One Minute at a Time,Outlook Business, August 21, 2010.

4. Jevans Nyabiage, Bharti Airtel Appoints Ogilvy Africa to Oversee Zain Rebranding,www.nation.co.ke, June 22, 2010.

5. Joji Thomas, Bharti Poaches Essars Seasoned Africa-Based Officials,The Economic Times, June 16, 2010.

6. Joji Thomas, Bharti to Replicate its India Model, Form Separate Tower Cos in Africa,The Economic Times, June 10, 2010.

7. Devidutta Tripathy, Bharti Keeps Open Mind over Africa Strategy,www.ibtimes.com, June 9, 2010.

8. S&P Lowers Rating on Bharti to BB+, Stock Up, The Economic Times, June 9, 2010.

9. Shalini Singh & Vikas Singh, Bharti Seals Zain Deal, Now World No.5,The Times of India, June 9, 2010.

10. Bharti Airtel Completes Zain Acquisition,The Hindu, June 8, 2010.

11. Devidutta Tripathy and Eman Goma, Bharti Closes $9 bln Zain Africa Deal,www.in.reuters.com, June 8, 2010.

12. Nikhil Pahwa, Airtel in Africa: Pre-rebranding Focus, CAPEX, Partners, Interconnect, Competition,www.medianama.com, July 16, 2010.

13. To Trim Operational Cost, Bharti Looks to Share Infra in Africa,The Economic Times, July 14, 2010.

14. Okuttah Mark, Bharti Airtel Head Office Plan Lands Coveted Lease,www.businessdailyafrica.com, July 12, 2010.

15. African Gold Rush May Wane for Vodafone, Bharti,www.allafrica.com, July 7, 2010.

16. Anup Shah, Conflicts in Africa-Introduction, www.globalissues.org, May 12, 2010.

17. Rohin Dharmakumar, Shishir Prasad, Bhartis Minutes Factory Moves to Africa, Forbes India, April 30, 2010.

18. Joji Thomas, Infy, Wipro, TCS, IBM in Race to Manage Bharti-Zains IT Network,The Economic Times, April 23, 2010.

19. Bharti Closes on Zain,www.thisisafricaonline.com, March 31, 2010. 20. Bharti Inks $10.7 bn Zain Deal to Become 5th Largest,Business Standard, March 31, 2010.

21. Mehul Srivastava and Nicky Smith, Bharti Agrees to Buy Zain Africa Assets for $9 Billion, www.busniessweek.com, March 30, 2010.

22. Bhaskar Hazarika and Sanjeev Sharma, Zain Deal Brings New Challenges for Bharti,www.mydigitalfc.com, March 25, 2010.

23. Videocon Starts Mobile Services,The Times of India, March 25, 2010.


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24. Mehul Srivastava and Nicky Smith, Billionaire Mittals Zain Deal Pits MTN against Former Suitor,www.businessweek.com, March 24, 2010.

25. Sunil Mittals Bid for Zain Spooks Investors,The Economic Times, March 3, 2010.

26. African Venture: Promises and Pitfalls of Bhartis Deal with Zain,India Knowledge@Wharton, February 25, 2010.

27. Sunil Jain, Is Zain a Gain or a Pain? Business Standard, February 22, 2010.

28. M. Rajendran, The Big B uy,www.businessworld.in, February 20, 2010.

29. Shereen Bhan, Mittal Says Zain a Be tter Fit than MTN,www.livemint.com, February 19, 2010.

30. Mehul Srivastava, Mittals Credibility Tested in Bharti Bid for Zain Africa,Business Week, February 18, 2010.

31. Preethi J, Airtel in Talks to Acquire Zain Africa,www.medianama.com, February 16, 2010.

32. Bharti Stock Tanks on Zain Takeover Worries,Business Standard, February 16, 2010.

33. Bharti Airtel Q3 Profit Up 2% as Competition Hots Up, Business Line, January 22, 2010.

34. Joji Thomas Philip, Bharti Acquires 70% Stake in Warid Telecom, The Economic Times, January 12, 2010.

35. BSNL Looks to Hold Direct Talks with Zain for Controlling Stake, The Economic Times, November 7, 2009

36. Millicom Eyes Zain Africa Assets,www.in.retures.com, November 4, 2009

37. No Calling up MTN Again, Says Bharti Airtel, Business Line, October 6, 2009.

38. Bharti Airtel-MTN $ 24 Billion Deal Called Off,The Economic Times, October 1, 2009.

39. Devidutta Tripathy and Narayanan Somasundaram, Bharti May Chase Zain, Millicom after Mtn Disconnect,www.in.reuters.com, October 1,

2009.

40. Prabhakar Sinha, Dual Listing to Hit Bharti-MTN,The Times of India,September 16, 2009.

41. Nick Wood, Reliance Eyes Zain Africa Operations,www.totaltele.com, August 18, 2009

42. Thomas K. Thomas,Bharti-MTN Deal: Pointer to the Future,Business Line , May 29, 2009.

43. Madhav A Chanchani, Bharti-MTN Saga: Timeline,www.vccircle.com, May 26, 2009.

44. Virgin Mobile Enters India Through Pact With Tata Tele ,Business Line, March 2, 2009

45. Sandeep Joshi, Uninor Launches GSM Services across Seve n Circles ,The Hindu, December 4, 2008.

46. Bharti Airtel to Invest $2.5 bn on Expansion, The Financial Express, July 24, 2008.

47. Airtel to Launch Lanka Services this Year: CEO, www.dnaindia.com, May 18, 2008.

48. Prabhakar Sinha, Bharti's MTN Chase Hits Hurdle,The Times of India, May 17, 2008.

49. Pankaj Mishra & Baiju Kalesh, Merger Offer for MTN by this Weekend,www.livemint.com, May 15, 2008.

50. Thomas K. Thomas,Bharti Airtel-MTN Deal Hinges on Pricing, Business Line, May 8, 2008.

51. Bharti: No Bid for MTN, www.fin24.com, May 2, 2008.

52. Virgin Mobile Tariff Cheaper by 25-30%: Morgan Stanley,The Economic Times, April 15, 2008.

53. Indias Most Innovative Companies ,Business Today, March 31, 2008

54. Sunil Bharti Mittal Awarded Global Telecom Sectors Highest Honour,www.bharti.com, February 13, 2008.

55. Iain Morris, Bharti Profits Soar on Subscriber Boom,www.telecomengine.com, October 31, 2007.

56. K.Venkatasubramanian,Bharti Airtel: Mobile Additions Ring In Growth,Business Line, July 27, 2007. 57. Vodafone Dials into Booming Indian Mobile Phone Market, The Sydney Morning Herald, February 13, 2007.

58. Kripa Raman, Too Stretched, By Far?Business Line, January 22, 2007;

59. Clay Chandler, Wireless Wonders: Indias Sunil Mittal,Fortune, January 17, 2007.

60.

Priyanka Pradhan, Reliance, Airtel to Share Infrastructure? www.tech2.in.com, September 22, 2006. 61. Airtel to Spend Rs 3800 Million in Karnataka by March 2006, www.indiantelivision.com, October 4, 2005.

62. Satinder Bindra, Chairman of the Bharti Group, Sunil Mittal TalkAsia Interview, www.cnn.com, February 19, 2005.

63. BALs Annual Reports.

64. Zains Annual Repo rt for the year 200 8-09

65. www.airtel.in/wps/wcm/connect/about+bharti+airtel/Bharti+Airtel/Investor+Relations/Results/Annual+Results/

66. www.airtel.sc/about-us

67. www.airtel-vodafone.com/aboutus/

68. www.airtel.in/wps/wcm/connect/21f17880435170898fd19fc68c4996a0/Transcript_14Jul10_Investor_call_on_Zain_Closure.pdf?

MOD=AJPERES&CACHEID=21f17880435170898fd19fc68c4996a0

69. www.coai.com/statistics.php

70. www.kse.com.kw

71. www.nseindia.com
http://www.businessworld.in/bw/storyContent/2010_02_20_The_Big_Buy.html


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[1] Devidutta Tripathy, Bharti Keeps Open Mind over Africa Strategy, www.ibtimes.com, June 9, 2010.

[2] Zain was Africas second largest telecom company and operated in 17 African and five Middle Eastern countries. It was founded in the year 1983 in

Kuwait as Mobile Telecommunications Company (MTC) and was rebranded as Zain in the year 2007.

[3] Bharti Airtel Completes Zain Acquisition, The Hindu, June 8, 2010.

[4] Mehul Srivastava and Nicky Smith, Bharti Agrees to Buy Zain Africa Assets for $9 Billion, www.busniessweek.com, March 30, 2010.

[5] No Calling up MTN Again, Says Bharti Airtel, Business Line, October 6, 2009.

[6] Bharti Closes on Zain, www.thisisafricaonline.com, March 31, 2010.

[7] KPMG is one of the largest professional services firms in the world and among the four biggest auditors.

[8] Bhaskar Hazarika and Sanjeev Sharma, Zain Deal Brings New Challenges for Bharti, www.mydigitalfc.com, March 25, 2010.[9] Bharti Inks $10.7 bn Zain Deal to Become 5th Largest, Business Standard, March 31, 2010.

[10] Rohin Dharmakumar and Shishir Prasad, Bhartis Minutes Factory Moves to Africa, Forbes India, April 30 2010.

[11] The Tata Strategic Management Group is a leading management consulting firm in India

[12] African Venture: Promises and Pitfalls of Bhartis Deal with Zain, India Knowledge@Wharton, February 25, 2010.

[13] Mehul Srivastava, Mittals Credibility Tested in Bharti Bid for Zain Africa, Business Week, February 18, 2010.

[14] Clay Chandler, Wireless Wonders: Indias Sunil Mittal, Fortune, January 17, 2007.

[15] Delhi is the largest metropolis by area and the second largest metropolis by population in India.

[16] The Bombay Stock Exchange is located at Dalal Street in Mumbai. It had 4,990 listed companies as of August 2010.

[17] The National Stock Exchange, located in Mumbai, is the largest stock exchange in terms of daily turnover and number of trades in India, for both equities

and derivative trading.

[18] Bharti Annual Report 2005-2006.

[19] DTH (acronym for Direct to Home) or satellite television is a television service delivered directly by the means of communications satellites.

[20] Rs. = Indian Rupee(s); Re.1= 100 paisa. In September 2010, US$1= Rs.45 (approximately).

[21] Rohin Dharmakumar, Shishir Prasad Bhartis Minutes Factory Moves to Africa, Forbes India, April 30 2010.

[22] Bangalore is the capital of the Indian state of Karnataka. It is also known as the Silicon Valley of India as it is one of the top IT exporters in India.

[23] Indias Most Innovative Companies, Business Today, March 31, 2008; Airtel to Spend Rs 3800 Million in Karnataka by March 2006,

www.indiantelivision.com, October 4, 2005.

[24] Bharat Sanchar Nigam Ltd is the sta te-owned telecom provider in India. As in August 2010, it was the largest land line telephone provider and third largest

mobile service provider in the country.

[25] Hutchison Essar was Indian mobile telecom and started operations in 1994. It was a joint venture between the Hutchison Whampoa Group of Hong Kong

and the Essar group of India. It was acquired by Vodafone in the year 2007.

[26] Idea Cellular is a leading telecom company in India and was started in 2000. It is owned by the Aditya Birla Group, a leading Indian conglomerate.

[27] Reliance Communications was founded in the year 2004 and is headquartered at Mumbai. It is one of the leading telecom network operators in India and

reported a net profit of US$1.8 billion in the financial year 2009-2010.

[28] The Herfindahl index is an indicator of the amount of competition among firms. It measures the size of firms (generally market share) in relation to

the industry. Increases in the index indicate a decrease in competition and vice versa. Its value can range between 0 and 1.

[29] The Herfindahl Index value is calculated by squaring and adding market share of the top 50 firms in a market. The value for the Indian mobile telecom

market was calculated using the market share of 10 mobile phone companies in India for the year 2005.

[30] Satinder Bindra, Chairman of the Bharti Group, Sunil Mittal TalkAsia Interview, www.cnn.com, February 19, 2005.

[31] Priyanka Pradhan, Reliance, Airtel to Share Infrastructure? www.tech2.in.com, September 22, 2006.

[32] Bharti: No Bid for MTN, www.fin24.com, May 2, 2008.

[33] Vodafone Essar is an Indian subsidiary of Vodafone. It has presence in all the 23 telecom circles in the country.

[34] The GSM Association (GSMA) is the global trade association representing over 700 GSM mobile phone operators across the world. GSM (acronym forGlobal System for Mobile Communications) is the most popular mobile telecommunications standard used in the world.

[35] Sunil Bharti Mittal Awarded Global Telecom Sectors Highest Honour, www.Bharti.com, February 13, 2008.

[36] CDMA (acronym for Code Division Multiple Access) is a mobile communication technology.

[37] Vodafone Dials into Booming Indian Mobile Phone Market, The Sydney Morning Herald, February 13, 2007.

[38] Virgin Mobile is a joint venture between Tata Teleservices and Virgin Group. The company uses Tatas CDMA and GSM network to provide services in

the country.

[39] Tata Teleservices Limited is a subsidiary of the Tata Group, an Indian conglomerate. It operates mobile telecommunication services under the brand name

Tata Indicom, Tata DocoMo and Virgin mobile using both CDMA and GSM technologies.

[40] Virgin Mobile Enters India Through Pact With Tata Tele, Business Line, March 2, 2009

[41] Virgin Mobile Tariff Cheaper by 25-30%: Morgan Stanley, The Economic Times, April 15 2008.

[42] NTT DoCoMo is a dominant Japanese mobile phone operator. It entered India under a strategic joint venture in 2008. It provides services in 19 telecomcircles in India using GSM technology.

[43] Telenor is a leading global telecommunications company based in Norway. As in June 2010, it had more than 184 million subscribers, making it the worlds

6th largest mobile operator.

[44] The Unitech Group is a leading real estate company in India.
http://www.fin24.com/http://www.tech2.in.com/http://www.cnn.com/http://www.indiantelivision.com/http://www.mydigitalfc.com/http://www.busniessweek.com/http://www.ibtimes.com/


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[45] Sandeep Joshi, Uninor Launches GSM Services across Seven Circles, The Hindu, December 4, 2008.

[46] The Videocon Group is an Indian consumer electronic and home appliance company. It has diversified into various businesses like telecommunications,

mobile phones, DTH services, oil and gas etc.

[47] Videocon Starts Mobile Services, The Times of India, March 25, 2010.

[48] Kripa Raman, Too Stretched, By Far? Business Line, January 22, 2007; Bharti Airtel to Invest $2.5 bn on Expansion, The Financial Express, July 24,

2008.

[49] Life time recharge was a promotion scheme in which customers were able to get free incoming calls till the period of validity of the license of the telecom

operator at a nominal one time payment. This differed from the usual schemes in which customers had to pay validity fees periodically to enjoy continued

services from the operator.

[50] K.Venkatasubramanian, Bharti Airtel: Mobile Additions Ring In Growth, Business Line, July 27, 2007.[51] Iain Morris, Bharti Profits Soar on Subscriber Boom, www.telecomengine.com, October 31, 2007.

[52] Bharti Airtel Q3 Profit Up 2% as Competition Hots Up, Business Line, January 22, 2010.

[53] www.airtel.sc/about-us

[54] The Channel Island comprises five main islands of Jersey, Guernsey, Alderney, Sark, Herm, and three other smaller islands located between Great Britain

and Northern France. The total population of all these islands was 158,000 in 2009, and was spread over an area of 194 square kilometers.

[55] www.airtel-vodafone.com/aboutus/

[56] Warid Telecom is a privately held telecommunications company headquartered in Abu Dhabi, UAE, and provides telecom services in Bangladesh, Congo,

Pakistan, and Uganda.

[57] Joji Thomas Philip, Bharti Acquires 70% Stake in Warid Telecom, The Economic Times, January 12, 2010.

[58] Thomas K. Thomas, Bharti-MTN Deal: Pointer to the Future, Business Line, May 29, 2009.

[59] Telkom Kenya is an integrated communication company headquartered in Nairobi. It provides both fixed and CDMA based wireless communicationservices, apart from Internet services. France telecom (Orange) holds a 51% stake in Telecom Kenya.

[60] Airtel to Launch Lanka Services this Year: CEO, www.dnaindia.com, May 18, 2008.

[61] Pankaj Mishra & Baiju Kalesh, Merger Offer for MTN by this Weekend, www.livemint.com, May 15, 2008.

[62] Gartner is an IT research and advisory firm.

[63] Thomas K. Thomas Bharti Airtel-MTN Deal Hinges on Pricing, Business Line, May 8, 2008.

[64] Prabhakar Sinha, Bharti's MTN Chase Hits Hurdle, The Times of India, May 17, 2008.

[65] Madhav A Chanchani, Bharti-MTN Saga: Timeline, www.vccircle.com, May 26, 2009.

[66] DLC (acronym for Dual Listed Company) is a corporate structure which allows companies to retain their separate legal identities and listings on stock

exchanges while entering into equalization agreements to collectively run operations and share profits or losses.

[67] Bharti Airtel-MTN $ 24 Billion Deal Called Off, The Economic Times, October 1, 2009.

[68] Prabhakar Sinha, Dual Listing to Hit Bharti-MTN, The Times of India, September 16, 2009.

[69] Vivendi is a Paris-based entertainment firm with businesses in media and telecommunications.

[70]MTNL (Mahanagar Telephone Nigam) is an Indian Government owned telecom company that provides fixed and mobile telecom services in two major

metropolitan cities in India.

[71] Milicom is a Luxemburg-based mobile telecom player that provides services in 14 different countries.

[72] Etisalat (Emirates Telecommunications Corporation) is a government-owned company based in Abu Dhabi. It operates in 18 counties and was 13th largest

telecom company as of December 2009 with more than 100 million subscribers.

[73] Millicom Eyes Zain Africa Assets, www.in.retures.com, November 4, 2009; Nick Wood, Reliance Eyes Zain Africa Operations, www.totaltele.com,

August 18, 2009; BSNL Looks to Hold Direct Talks with Zain for Controlling Stake, The Economic Times, November 7, 2009; Preethi J, Airtel in

Talks to Acquire Zain Africa, www.medianama.comFebruary 16, 2010.

[74] Econet Wireless is Zimbabwes leading mobile telecommunications company and had more than 73% of market share as in June 2010. It operates in

Botswana, Burundi, Kenya, Lesotho, and the UK.

[75] Devidutta Tripathy and Eman Goma, Bharti Closes $9 bln Zain Africa Deal, www.in.reuters.com, June 8, 2010.

[76] Devidutta Tripathy, Bharti Keeps Open Mind over Africa Strategy, www.ibtimes.com, June 9, 2010.

[77] Sunil Mittals Bid for Zain Spooks Investors, The Economic Times, March 3, 2010.

[78] Warburg Pincus LLC is an American private equity firm.

[79] M. Rajendran, The Big Buy, www.businessworld.in, February 20, 2010.

[80] Fim Asset Management is a Finnish investment services company.

[81] Shereen Bhan, Mittal Says Zain a Better Fit than MTN, www.livemint.com, February 19, 2010.

[82] Bharti Stock Tanks on Zain Takeover Worries, Business Standard, February 16, 2010.

[83] Sunil Mittals Bid for Zain Spooks Investors, The Economic Times, March 3, 2010.

[84] Devidutta Tripathy and Narayanan Somasundaram, Bharti May Chase Zain, Millicom after Mtn Disconnect, www.in.reuters.com, October 1, 2009.

[85] 3G or 3rd Generation is a standard for mobile phones and mobile telecommunications services internationally. This provides fast data transfer speeds used

in services like wide-area wireless voice telephone, mobile Internet access, video calls, mobile TV etc.

[86] Standard Chartered is a London-based banking and financial service company.

[87] Barclays Plc is a London-based leading banking and financial services having operations worldwide..

[88] State Bank of India is the largest state-owned banking and financial services company in India.
http://www.in.reuters.com/http://www.livemint.com/http://www.businessworld.in/http://www.businessworld.in/bw/storyContent/2010_02_20_The_Big_Buy.htmlhttp://www.ibtimes.com/http://www.in.reuters.com/http://www.medianama.com/http://www.totaltele.com/http://www.in.retures.com/http://www.vccircle.com/http://www.vccircle.com/500/news/bharti-mtn-saga-timelinehttp://www.livemint.com/http://www.dnaindia.com/http://www.telecomengine.com/


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[89] S&P Lowers Rating on Bharti to BB+, Stock Up, The Economic Times, 9 June, 2010.

[90] Shalini Singh & Vikas Singh, Bharti Seals Zain Deal, Now World No.5, The Times of India, June 9, 2010.

[91] Anup Shah, Conflicts in Africa-Introduction, www.globalissues.org, May 12, 2010.

[92] Sunil Jain, Is Zain a Gain or a Pain? Business Standard, February 22, 2010.

[93] Africa Analysis is a South Africa-based management research consultancy firm. It provides strategic insights into the telecom, IT, and media sector in the

African subcontinent.

[94] Rohin Dharmakumar, Shishir Prasad, Bhartis Minutes Factory Moves to Africa, Forbes India, April 30, 2010.

[95] Vodacom is a South Africa-based mobile telecommunication company. It provides GSM mobile services in the Democratic Republic of Congo, Lesotho,

Mozambique, South Africa, and Tanzania. As in July 2010, it had more than 35 million customers.

[96] Safricom Ltd is a leading Kenyan mobile network operator. It was formed in the year 1997 as a fully-owned subsidiary of Telkom Kenya. As in January

2010, it had around 12 million mobile subscribers and reported a net profit of more US$270 million.

[97] Mehul Srivastava and Nicky Smith, Billionaire Mittals Zain Deal Pits MTN against Former Suitor, www.businessweek.com, March 24, 2010.

[98] Dual-SIM (Subscriber Identity Module)-based phones allow to the use of two SIM cards at the same time, making it possible for the customer to use the

services of two telecom operators with one handset or mobile phone.

[99] Green Girafee is a South Africa-based telecom research and consultancy firm. It specializes in emerging telecom markets, prepaid services, and payment

applications.

[100]African Gold Rush May Wane for Vodafone, Bharti, www.allafrica.com, July 7, 2010.

[101]Termination charges or termination rate is the amount one telecommunications operator charges to another for terminating calls on its network. The

charges are levied by the host telecom provider when customer receives a call from an external telecom provider. The charges are usually based on per

minute or per second duration and vary from region to region.

[102]The Essar Group is a business conglomerate with business in Steel, Energy, Power, Communications, Shipping Ports & Logistics and Construction sectors.It is a public listed company founded in 1969 and is headquartered in Mumbai, India.

[103]Rashmi K Pratap, One Minute at a Time, Outlook Business, August 21, 2010.

[104]Joji Thomas, Bharti Poaches Essars Seasoned Africa-Based Officials, The Economic Times, June 16, 2010.

[105] www.airtel.in/.../Transcript_14Jul10_Investor_call_on_Zain_Closure.pdf?.

[106]Nikhil Pahwa Airtel In Africa: Pre-rebranding Focus, CAPEX, Partners, Interconnect, Competition, www.medianama.com, July 16, 2010.

[107]Transcript of Airtel Conference Call on Acquisition of Zains Mobile Operations, www.airtel.in

[108]Okuttah Mark, Bharti Airtel Head Office Plan Lands Coveted Lease, www.businessdailyafrica.com, July 12, 2010.

[109]David Pringle, Can Airtel Become Africa's Most Loved Brand? www.mobilebusinessbriefing.com, September 22, 2010.

[110]IBM is a world leading computer, technology, and IT consulting firm..

[111]Katya B Naidu , Bharti's Vendors Expand Presence in Africa , Business Standard, September 2, 2010.

[112]Joji Thomas, Infy, Wipro, TCS, IBM in Race to Manage Bharti-Zains IT network, The Economic Times, April 23, 2010.

[113]Joji Thomas, Bharti to Replicate its India Model, Form Separate Tower Cos in Africa, The Economic Times, June 10, 2010.

[114] To Trim Operational Cost, Bharti Looks to Share Infra in Africa, The Economic Times, July 14, 2010.

[115]Ogilvy Africa is an arm of Ogilvy & Mather, an international advertising, public relations, and marketing agency. It covers more than 42 countries in Africa

and is headquartered in Johannesburg, South Africa.

[116]Jevans Nyabiage, Bharti Airtel Appoints Ogilvy Africa to Oversee Zain Rebranding, www.nation.co.ke , June 22, 2010.

[117]African Venture: Promises and Pitfalls of Bhartis Deal with Zain, India Knowledge@Wharton, February 25, 2010.
http://www.nation.co.ke/http://www.mobilebusinessbriefing.com/http://www.businessdailyafrica.com/http://www.medianama.com/http://www.medianama.com/2010/07/223-airtel-in-africa/http://www.allafrica.com/http://www.businessweek.com/http://www.globalissues.org/

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