Bharti Airtel’s imminent victory in its bid for Zain’s African assets is being watched closely by analysts and mobile operators, waiting to see if Bharti’s low-cost model will affect the businesses of incumbent operators like MTN and Globacom.
Bharti’s Chairman, Sunil Bharti Mittal is now close to fulfilling his long-term objective of entering Africa’s telecoms market by acquiring Zain’s assets in 15 African countries. Previously the Indian firm spent almost two years and millions of dollars in a failed bid for MTN. Now the Zain acquisition will see Bharti and MTN competing in four countries, including Nigeria, the largest mobile subscriber market on the continent.
According to South Africa’s Businss Day, MTN is planning a R6bn investment in Nigeria, targeting an additional 6 million users in 2010, bringing it subscriber base to 36,8 million. MTN claims not to be concerned about Bharti’s arrival, with CEO Phuthuma Nhleko saying Bharti would have been better positioned if they had partnered with MTN. “They are now venturing into the forest on their own”, he said.
“Bharti comes from an environment that is close to Africa in terms of socioeconomic makeup; it may be more able to positively compete with MTN than Zain”, comments Dobek Pater, a telecoms analyst at Africa Analysis, adding that so far, Zain hadn’t posed any threat to MTN.
Bharti is expected to replicate its low-cost model in African markets, which could pose a major challenge for MTN.
Bharti’s tariffs are materially lower than African markets. Against Nigeria, their average per-minute tariffs are 10 times lower. However, Bharti will inherit a market significantly smaller than India, which poses challenges in replicating its low-cost model.
Zain has about 44,3-million subscribers in Africa. By comparison, MTN has 46,5-million in the four countries where it competes with Zain.
