Thursday, December 3, 2009

Bharti must look beyond India, despite MTN debacle

BOSTON, USA: In a new assessment of Bharti Airtel, Strategy Analytics argues that India’s number one mobile operator has no choice but to continue to look for acquisitions in emerging markets, despite its second failure to complete a deal with African operator MTN. Operators like Zain and Orascom, with presence in the Middle East and Africa, could be potential targets.

Even though the Indian market is huge, with almost half a billion subscribers generating $29 billion in revenue, Bharti faces serious challenges to the double digit growth it has enjoyed in recent years. “Originally it competed with only four or five operators in each telecom circle,” says Rahul Gupta, Manager of Strategy Analytics Emerging Markets Communications Strategies (EMCS). “Now, Bharti has twice that many in each circle, and the competition has driven service prices down to some of the lowest levels in the world.”

The bulk of India’s subscriber growth will come from rural areas, where revenue per user is low and customer acquisition and network build-out costs are high. “Even if they are hugely successful in rural expansion and in rolling out 3G in the cities after next year’s auction, it is hard to see that a purely domestic Bharti will be particularly profitable,” says Tom Elliott, Director of EMCS. “They need to keep working on their international strategy.”

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