Africa resembles Indian economic growth potential according to Indian billionaire Sunil Bharti Mittal
In Africa, Bharti Airtel Ltd. appears determined to wade into a market loaded with poverty, promise and major legal tussles—just like home in India.
Bharti, headed by Indian billionaire Sunil Bharti Mittal, has seized on a potential $9 billion deal with Kuwait’s Zain, or Mobile Telecommunications Co., that, if completed, would catapult the company into the ranks of major telecom operators in Africa. Combined with operations in India, Bharti would have significant footholds in two continental markets. The deal would include the assumption of $1.7 billion in debt.
Bharti isn’t the only telecom operator eager for a piece of Africa. On Tuesday, a consortium involving China Unicom (Hong Kong) Ltd. bid $2.5 billion for the former state telecoms monopoly in Nigeria, according to the National Council on Privatization. The government privatization body said that the China Unicom-led consortium outbid four other contenders by more than $1.5 billion for Nigerian Telecommunications Ltd., or NITEL…
Bharti’s bid also comes at a time when new undersea cables are reaching Africa, connecting the continent to the rest of the world.
“Zain’s operations in Africa will always be attractive because of their footprint there,” says Badii Kechiche, a senior analyst in London at Pyramid Research.
The talks mark the third attempt by Bharti’s Mr. Mittal to gain a foothold in Africa, the world’s poorest continent but with a population of about one billion and home to several fast-moving economies.
For global telecom companies, Africa offers strong growth potential. Cellphone penetration rates remain among the lowest anywhere. Zain has close to 42 million customers in the 15 countries the deal will include, with most markets having shown double-digit subscriber growth in recent years. There’s room to grow: Cellphone penetration in these markets averages less than 40%, according to data from industry researchers Onda Analytics.
For Bharti, coming to Africa may seem like a coming home. Like Africa, India boasts high subscriber growth rates and large rural populations with little fixed-line infrastructure. There are common aspirations for owning a mobile phone, both as a tool for business and as a means to contact far-flung family members. And with growth has come aggressive competition.
Nigeria perhaps best highlights the potential pitfalls Bharti may face in entering the African market. With a population of nearly 150 million people and over 70 million GSM subscribers, Nigeria is Africa’s largest mobile market…
In another sizable market, Kenya, Zain has similarly hit competitive headwinds. In the third quarter of 2009, Zain’s market share was static at 17%.