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Strategic Management Report on Bharti Airtel

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Contents:

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Executive Summary:
Bharti Airtel limited is a leading global telecommunications company with operations in 19 countries across Asia and Africa. The company offers mobile voice & data services, fixed line, high speed broadband, IPTV, DTH, turnkey telecom solutions for enterprises and national & international long distance services to carriers. It has 200 million customers across its operations. It has been a pioneer in the telecom outsourcing in 2004 when it handed over management of its IT and network to IBM and Ericsson respectively, to focus on core marketing activities. It is known for being the first mobile phone company in the world to outsource all of its business operations except marketing, sales and finance. This strategic decision helped Airtel to be the cost leader. With reducing ARPU and pressures on margin, strategically formed a Joint Venture with Vodafone & Idea to form Indus Towers which has helped the company to leverage upon the passive infrastructure reducing the cost and acting as a revenue center. In 2010, Bharti Airtel was finally able to enter Africa after aborting negotiations twice for merger with MTN since 2008 .It acquired Zain Africa International BV (Zain Africa) and thereby the entire African operations of Zain, excluding the operations in Sudan and Morocco and thereby became the 5th largest mobile operator in the world. The acquisition was the largest by an Indian company, second only to the USD 12 billion takeover of Corus by Tata Steel in 2007.With this acquisition, Airtel has an unparalleled footprint in one of the fastest developing regions in the world. This is a broad based study in order to understand the strategic decisions that Bharti Airtel has undertaken to have a competitive advantage over the other players. Through this we have been able to understand how the managed services has helped Bharti Airtel to work on its core competency, cut costs and be more operationally efficient. The Bharti Zain acquisition has also been studied and we have tried to answer few questions like what was the strategy behind the 2nd largest acquisition of India, whether the transaction was too expensive for Bharti Airtel, what attracted Bharti Airtel to takeover Zain Africa, what will be Bharti Airtels strategy for Zain Africa and the African continent, will it be able to repeat its Indian success in Africa and what will be the impact of this deal on the equation between Bharti Airtel and MTN.

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Introduction:
Bharti Enterprises is one of Indias leading business groups with interests in telecom, agri business, financial services, retail and manufacturing. Bharti Airtel, a group company, is one of Asias leading providers of telecommunications services with operations in India and Sri Lanka, spanning mobile services, telemedia services and enterprise services. Bharti Airtel has always been at the forefront with its world-class services built on leading edge technologies. In the area of financial services, Bharti has been offer life insurance, general insurance and asset management. Bharti Retail, a wholly owned subsidiary of Bharti Enterprises operates multiple format consumer friendly stores, while Bharti Walmart is a B2B joint venture with Walmart, for wholesale cash and carry and back operations. Other businesses in the group are Beetel for communication and media devices, and FieldFresh Foods Private Limited, a joint venture with Del Monte Pacific Limited to offer fresh fruits and vegetables, and processed food in India as well as international markets.

Bharti Airtel:
Airtel is Indias largest integrated and the first private telecom services provider with a footprint in all the 23 telecom circles. Bharti Airtel since its inception has been at the forefront of technology and has steered sector in the country with its world class products and services.

The Company.Bharti Airtel- An Integrated Telco

Wireless Service Enterprise Service Telemedia Service Passive Infrastructure Services Infratel DTH

2G

carriers

Fixed Line

Pay per View/HD

3G

Corporate

Broadband

Indus

Interactive

Rural Market

IPTV

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The Growth Story So Far:

Fully Integrated telecom player offering end to end solutions and entering new geographies
1996 Single Circle Operator <25k USD 17 MN USD 2.5 mn USD 1.4 mn USD 16 mn Company Profile Customers Revenue EBITDA Cash Profit Market Capitalization 2011 Largest integrated private telecom operator 221 mn USD 13 bn USD 4 bn USD 4 bn USD 30 bn

Continuing on the journey of Value Creation

Financial & Positioning Key Financial metrics
FY 11(in Mn) Customers Revenue EBITDA Cash Profit Net Income EBITDA Margin(%) ROCE(%) 220.9 $13,319 $4,472 $3,983 $1,354 $35 $11 Amongst the largest providers of Passive Infrastructure(by Towers) 5th Largest Mobile telecom operator in the world Largest private Integrated telecom compnay in India 3rd Largest in-Country wireless operator in the world

Positioning in the World & India

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Managed Services:
Defining Managed Services:
A managed Service is the practice of transferring day-to-day related management responsibility as a strategic method for improved effective and efficient operations. Ericsson, in their site explains the concept and scope of managed services as Managed Service offering, consisting of four segments; Operations, Field Maintenance, Operational readiness and Shared solutions. All the service segments are flexible in terms of scope and set up and can be adapted to fit the customers needs. Thus typically a managed service is a contract wherein the service provider takes over the traditional network operations from the Operator. Managed Services functions typically include: Plan and Design: Planning, optimization & development. These functions can be applied to areas such as the actual network, end-user applications and services, and business support systems. Build: Technology integration and implementation of networks, services and business support systems. Operate: Day-to-day operations such as operation and maintenance of networks, services and business support systems, field services, customer problem management including helpdesk, and service and resource fulfillment Service Level Agreements or SLAs are defined to control and implement the contract between the two parties. The measurements are defined in the KPIs or the Key Performance Indicators. There are different business models for managed services: Larger operators tend to outsource individual tasks necessary for running the network while many smaller market participants do not even bother to set up their own infrastructure at all, and they entrust the entire operation and maintenance of their network from the outset, to an external partner. The scope of Managed Services contracts depend on the operators strategy and on its organizational and business needs. A way of modularizing the Managed Services concept, based on the parameters of scope and reward, is illustrated in Fig below .However, in practice; the agreements may vary in scope and may not fit into standardized, distinct modules as in the model below.

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Fig: Managed Services structured from a scope and reward perspective(Source: Official website of Ericsson www.ericsson.com) Network outsourcing arrangements can take a variety of forms. The prominent ones are: Managed Services(MS)
Out-tasking Out-tasking of specific tasks, mostly field maintenance Other out-tasking includes program management, capacity management, and NOC operations Outsourcing of network operations and maintenance Most common types are: Operate and maintain Build, operate, and maintain or build, operate, and transfer Often includes headcount transfer Specific type of MO contract where vendor does not charge for CapEx or equipment Vendor paid on a variable usage or capacity basis (e.g., per Erlang) Usually involves asset transfer Hosted and remotely managed solutions Includes VAS Applications (e.g., SMS/MMS). Could include content aggregation and management Integration of applications from third parties Often involves gain share arrangements

Managed Operations

Managed capacity

Application Management & Hosting

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Key Drivers:
Improved Bottom Line

Financial Pressure Operational Efficiencies

Consolidation New Services-fast Partner Relations Increased competition/ Price pressure

Operators business is changing

Managed Services

Network performance Economies of Scale Processes, tools, methods

Convergence

Bottom Line benefits of Outsourcing:

Strategic/ Business model Financial People & Technology

Refocus on customer operations and new services Streamline operations and structure

Competenc e Need

Opex Reduction Capex Reduction Operationalizing Capex

Faster time to market for new services Improved ability to manage rollouts of new technologies Address ability to recruit and retain technical talent Leverage best practices

Risks & Rewards

Potential Gains Potential Risks

Reduces Costs Increases flexibility and time to market Access to specific competencies and leading-edge techniques Reduces new technology lead time Reduces asset intensity Generates short term cash through divestments and free investments to focus on other missions

Loss of strategic control Dependency created with large suppliers Reduced capability to monitor supplier performance and manage network migrations Implementation costs and workload Network performance and quality of service issues

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Outsourcing Framework for Telecom Operators:
Below we have defined a framework which divides all the functions associated with a telecom service provider and based on the type of activities involved, we have put all those activities in one of the quadrants. This framework will help to decide what needs to be outsourced and how.
Technology Shifts Increased Complexity

Core
Engage

Context
Disengage Network Operations VAS Services IT Services Customer Support Service Activation Billing & Fraud Management

Mission Critical
Control

Marketing Sales Product Design Human Resources Strategy Finance Brand Management Regulatory Management Marketing Communications

Support
Entrust

Facilities Management Security Canteen Documentation Centre

The companies cannot outsource the core that is mission critical. So, no operator can outsource its customers to any other company. Similarly, the development of employees cannot outsourced as it is the employees that define culture of the company and they bring in the customers. Strategy and Finance functions should always be kept close to the heart as they certainly help a company differentiate itself from others. Anything in the top right quadrant (context and mission critical) is difficult to outsource but can be outsourced as they do not differentiate the business from competitors. Network operations were probably core when the mobile services were being rolled out but now it is no longer a differentiator and hence can be outsourced. If operator continues to insource network operations, it is likely to waste scarce resources and attention in an activity that does not give us any advantage. This may result in missing the opportunities due to lack of focus. The outsourcing of non-core activities also helps us unlock the companys value.

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IT services should also be outsourced as the companies do not have enough resources and cannot focus on development of cutting edge IT systems. Similarly, there could be other companies that can manage the VAS and customer support services better. One companys context can be core of some other company. It is always better to outsource the context functions to a company that treat them as core. This would ensure that the value keeps generating within the system. Functions that are support or non-mission critical and context can easily be outsourced. The challenge here is to ensure day-to-day quality and period quality checks should give the desired results. For the context and yet mission critical quadrant, we need to have a very robust outsourcing strategy as the key challenge is keeping the control. The partner selection needs to be very carefully thought decision and the relationship should be governed by strong service level agreements (SLAs). Keeping this framework in mind, we will see how Bharti Airtel was able to outsource most of its activities and unlock the maximum value.

The Airtel Story:

In the global telecommunications market, its hard to imagine a more fertile environment for explosive growth than India. With a large, young and tech-savvy population, an economy whose growth rate is second only to China and telephone penetration was just seven percent in 2007, India stands as a textbook example of how demand for communications services could be explosive if the conditions are right. A few years ago, when forecasters predicted a fourfold increase in subscribers in three yearsto 200 millionit seemed impossible. Since then, however, market growth has outstripped the unlikely forecast, and no operator has been better poised to capitalize on this opportunity than Bharti Airtel . This has been possible due to the innovative business model that Airtel adopted way back in 2004 and which redefined the way telecom business works. It all started in March 2004, when Bharti signed a deal with IBM for a 10-year partnership arrangement for an On demand business transformation with payments based on a predetermined percentage of Bhartis revenues. In July 2004, Bharti signed the last of three successive deals with its telecom vendors arranging for the transfer of the buildup and management of its telecom network to vendors Ericsson, Nokia, and Siemens. It attracted the attention of telecom operators worldwide with its reverse outsourcingthe story of an Indian company outsourcing its telecom and IT network to the West. Bharti Airtels big challenge was the need to make the major investments in IT & Network infrastructure required to service its rapidly growing base of subscribers. As a capital expenditure, these investments are typically offset by the future service revenues that they enable. However, in addition to the inherent

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risks of a large fixed investment, Bharti Airtel faced an added financial risk from a steady decline in India's average revenue per user (ARPU) for mobile telecom services, the result of governmentmandated pricing changes that createdat roughly eight dollars a monthone of the lowest ARPUs of the region. Thus, while Bharti Airtel realized that it was absolutely essential to invest in its future growth; factors unique to the Indian market substantially increased the risks of making these capital investments. To address these unique opportunities and challenges, Bharti Airtel established a far-reaching outsourcing relationship with IBM, Nokia, Siemens & Ericsson that substantially mitigates its investment risks by giving them full control and ownership of Bharti Airtels IT & Network infrastructure and associated processes. By substituting predictable operating expenses for risky, upfront capital investments, this strategy fundamentally transforms the financial underpinnings of its business model. An equally important aim of this strategy is to enable Bharti Airtel to focus its energies on growing, serving and retaining its customer baseand thus fully capitalize on Indias astounding growth surge. By adopting an outsourcing strategy, it transformed itself into a lean marketing and supply chain management firm. It helped it to becoming a low capital-intensive and low-cost provider in the Indian cell phone industry.

Business Challenge:
Bharti Airtel needed to maximize its future flexibility and growth potential by adopting a business-driven framework for integration, allowing it to implement and deliver new services rapidly. With competition intensifying in the Indian telecom services market, Bharti Airtel needed to find a way to focus on developing new services that could set it apart from the competition and strengthen its customer relationships. At that point of time, Customer Base was growing 100 % per year due to which it had to keep 30 % excess capacity to meet the growing demand.

Airtels Strategic Solution:

Bharti realized that network is not the core of the company and needs to focus on customers by providing them a reliable, affordable and best in class service experience. To be able to do this, it needed more resources and was unsure of the result due to lack of expertise in this area. Bharti was in no position to manage the network better than Ericsson or Nokia or Siemens. It was even facing competitive pressures from CDMA players and need to have a single minded focus on cost reduction. So they embarked on the outsourcing journey with the following motivations in mind:

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Value Proposition- Motivators for Win-Win Model

Market Trends

Financial Trends

Focused Product & Service Innovation Faster Time to market Enhanced focus on Customer Experience

Translation of Capex to Growth based Opex Predictable TCO Cost Efficiency & Capital Productivity

Operational Trends

Technological Trends

Customer Experience:
Affordable Price Ease of Use Best Connectivity Best Service Experience Relaibility & Security

Focus on Core competencies Access to Best Practices, Global Resource Pool Optimized Cost of operations

Guaranteed Quality of Service Sync with Technology Cycles

Scalability through Synergies

A Model to Provide Value Proposition to Customer, Operator and Supplier

Keeping the Outsourcing Framework in mind, Bharti Airtel identified five areas that it considered fundamental to its success: Customer Management People Motivation Financial Management Regulatory Management Brand Management Airtel began to outsource all other functions in an effort to change the company from a capital- and people-intensive business to a leaner organization. This included outsourcing the network, information technology (IT) services, retail stores & call centers.

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Airtel successfully negotiated with outsourcing partners on a new compensation structure based on revenue sharing, as opposed to the traditional system of up-front payments followed by annual maintenance payments. In effect, this allowed the company to convert much of the capital expenditures necessary to run a telecom company into operating expenditures. As per-minute pricing went down, Airtel reduced the amount of related fixed costs, allowing it to remain highly profitable as prices decreased.

Strategic Choice -Outsourcing

Operator Focus on Customer Experience and Product Innovation Maximum Leverage on Expertise of Outsourced Partner

Implementation:
Airtel had a number of overarching principles that defined its approach: Ensure that any agreement is a well thought-out arrangement Institute constant planning & review Adhere to transition management Create a win-win situation for Airtel and the outsourcing partner Ensure that there is skin in the game on the part of all players Ensure that the outsourcing contract motivates the partner to come up with new products/services Implement outstanding contract governance Ensure trust, transparency, and involvement of the partner at all stages of the process Define clear processes for escalation management

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Using these criteria, Airtel developed a unique approach to outsourcing various functional areas, such as IT Services, Network Deployment & since then it has outsourced Customer Care, VAS, Passive Infrastructure and Distribution. Bharti Airtel entered into a comprehensive 10-year agreement with IBM and later on with Nokia, Siemens & Ericsson to transform its processes and take on the management of its IT & Network infrastructure. Its new platform provides a standardized framework for Bharti Airtel to integrate its channels and customer-facing processesenabling a more seamless customer experience, higher customer satisfaction and more profitable growth.

Business Benefits:
Ability to process 1.5 million new customers per month Improved cross-selling and targeting and a more seamless, efficient total customer experience through end-to-end integration of customer-facing processes Optimization of business processes and infrastructure through flexible, standardized integration framework Outsourcing of technology enables Bharti Airtel to focus resources on growing the business Flexible pricing model enables Bharti Airtel to avoid major increases in capital expenditures. Partnership with IBM helped Airtel to get a robust IT platform to handle scale and a lot of value from IBM expertise in expanding its business capabilities across the board. For example,a very comprehensive business intelligence and data warehousing capability was introduced help the business understand market segmentation and customer usage pattern. World class customer experience by leveraging the expertise of players like Ericsson & others. Capex & Opex reduction Model Performance

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Managed Services- Opportunities (Shift in the Value Chain)

From Managing Infrastructure to Managing Value Creation

The various Outsourcing deals that Airtel has with different partners are: Outsourcing Deals
Network Outsourcing & Maintenance

Vendors
Ericcsson Nokia Siemens Alcatel-Lucent Huawei

Features/Advantages
Prcing linked to capacity- US $ per erlang Payments linked to Assured Usage and network quality Network Service level agreements(SLAs) Quality Ease in network planning Scalability, sustainability and accountability Helps in optimization of Capex & Opex Focus on customer retention and increasing market share Pricing & payment as a % of revenue S 1 Outsourcing-to provide end to end IT including hardware, software & services SDP- to deliver Service Delivery Platform enabling delivery of content to end-user devices like mobiles, PCs etc SLAs for quality and deployment Scalability, sustainability and accountability Brand differentiation via faster time to market, greater innovation and service excellence. Eliminates complexity of managing fragmented services from multiple partners Rapid & cost effective deployment of next generation services Consistent Service Experience Better Risk Management Reduction in Capex on Infrastructure Spending Rationalization of network operational cost Helps in enhanced focus on service innovation Reduces operational risk Enhanced & consistent customer experience Common platform across the group Scalable business model to meet business needs

Information Technology

IBM

Value Added Services

Comviva

Passive Infrastructure

Indus Towers Bharti Infratel

Call Center Outsorcing

IBM Daksh Mphasis Hinduja TMT Tele Tech Nortel

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According to Capgemini TME Strategy Lab estimates,network outsourcing can help operators reduce their OPEX by around 15% and outsourcing of IT services can reduce IT expenditure by around 30%.

Maintaining Lean Operations Indian mobile operators have focused on maintaining a lean operating model to keep their costs low. In India, most mobile operators have only a few company owned outlets in each city for showcasing and selling their products and services. Nonetheless, operators have built large distribution chains spanning the length and breadth of India by leveraging a large number of third-party distribution outlets including small mom-and-pop retail stores to sell SIM-cards and recharges. For instance, Reliance, has only around 1,650 company owned and operated stores across 700 cities in India, but has over 300,000 retail outlets selling pre-paid recharges.17 Similarly, Bharti Airtel has around 1,000 companyowned shops and 1,500 franchise stores, but over 400,000 retail distribution outlets.18 This helps reduce CAPEX and OPEX, without compromising distribution reach. Encouraging On-net Traffic Through Vertical Integration and Attractive Tariff Plans Players such as Bharti Airtel and Reliance not only have large market shares but also have verticallyintegrated operations that allow them to carry long-distance traffic over their own national networks. Moreover, they also have equity stakes in under-sea cables that carry international traffic. As a result, larger operators do not have to pay carriage charges for long-distance calls. 1. Introduction 2. Telecom Market In India -2 pages 3. Managed Services Model( Cost Leadership)-4 pages What is managed Services Model 4. Minute Factory Model 5. Passive Infrastructure Strategy 6. Bharti Airtel Zain Acquisition 6 pages 7.

Pay as you grow Model Deploy capital in most effective means possible Reductiuon of head count Different drivers for different players Gives -core competency -predictability -commitments relative to KPIs -Qulaity customer experience

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Bharti Airtel Zain Acquisition:
The two parties involved in the transaction were Bharti Airtel & Zain . Zain Zain was established in 1983 in Kuwait as the region's first mobile operator. It is a public company engaged, together with its subsidiaries, in the provision of mobile telecommunication and data services, including operation, purchase, delivery, installation, management and maintenance of mobile telephones and paging systems in Kuwait and 21 other countries in the Middle East and North Africa. Its wholly owned subsidiaries include; Mobile Telecommunications Company Lebanon (MTC) SARL, Lebanon, and Sudanese Mobile Telephone (Zain) Company Limited, Sudan. Zain Africa Wholly owned subsidiary of Zain, incorporated in Netherlands and held the African operations of Zain. The company was originally named Celtel which was acquired by Zain in 2005 and renamed as Zain International BV. The same has been acquired by Bharti Airtel now through Bharti Airtel Netherlands BV. Transaction Details: Brief Snapshot
Acquirer Seller Target Acquisition Bharti Airtel Limited Mobile Telecommunications Company KSC Zain Africa International BV Bharti Airtel Limited indirectly acquired 100% of Zain Africa International BV and its business operations in Africa from Zain under a privately negotiated agreement. Security (Share) Sale USD 10.7 billion All cash deal Bharti Airtel to pay: a) USD 8.3 billion within three months from the date of closing; b) USD 700 million after one year from the date of closing; and c) USD 1.7 billion assumed as debt on the books of Zain. Leveraged Buy-out a) Bharti Airtel to borrow USD 7.5 billion from a consortium of banks led by Standard Chartered Bank and Barclays Bank. b) Bharti Airtel to avail of a rupee loan of USD 1 billion equivalent from SBI Group.

Mode of Acquisition Consideration Mode of Payment

Funding

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Structure of the Acquisition:

Bharti Airtel

India -----------------------------------------------------------------------

Singapore

Singapore SPV

-----------------------------------------------------------------------

Netherlands

Bharti Airtel Netherlands BV

Zain Africa International BV

----------------------------------------------------------------------- -Africa Operations in 15 countries*

10

11

12

13

14

15

The fifteen jurisdictions are: 1) Burkina Faso, 2) Chad, 3) Republic of the Congo, 4) Democratic Republic of the Congo, 5) Gabon, 6) Ghana, 7) Kenya, 8) Malawi, 9) Madagascar, 10) Niger, 11) Nigeria, 12) Sierra Leone, 13) Tanzania, 14) Uganda and 15) Zambia.

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Motivations for the takeover: Expansion was necessary Bharti Airtel took out of the box decision to hand over every core function from IT to networks, to IBM in 2004. The idea was to remain and grow as a core telecom company which it did and did with elegance. But with time, despite becoming the largest telecom player in India, there was continuous drop in the margin of profit over the years. There was mounting competition in the Indian telecom market with 13 service providers battling out for a chunk of the revenue. The Indian telecom market has almost reached its saturation point with scope of expansion left only in the inner part of rural India. Being a core telecom company it could not diversify its portfolio into other business and geographic expansion into new markets was the only strategic alternative to escape slowing profit growth in India. It was indispensable for Bharti Airtel to reduce its dependence on the fast-saturating Indian wireless market. This realization is what compelled Bharti Airtel to establish its presence in Africa. Long-term benefits are alluring Zain Africa was a strategic investment for Bharti Airtel from a long-term perspective. Post-acquisition, Bharti Airtel become fifth largest service provider in terms of the number of subscribers. The size of Zain Africa's business diversifies Bharti Airtel's risk portfolio away from its concentration in South Asia. The combined businesses will be able to withstand global business shocks much better and will give it additional leverage in capital investments and with key vendors. Africa is where the next round of telecom growth is due. With the aim to enter into the continent and to widen their risk portfolio from India, it made sense for Bharti Airtel to invest into Africa. Zain's African business was considered a natural target for Bharti Airtel, which has thrived in an Indian market with low incomes and tariffs and a heavily rural population characteristics shared by African nations. The multigeography strategy will be a blessing in the long run. For Bharti Airtel, this is the start of being a truly global player. Key Challenges in Africa: The key challenges Bharti faces in improving margins at Zains African operations are: The need to invest incremental capex to drive scale and network coverage High tax and mobile termination rates in African countries limit Bhartis ability to cut tariffs and apply the minute factory model Operational risks from the process of integrating Zain and rebranding. Currency risk of operating in 15 countries, especially as African currencies have plunged against the dollar in recent times.

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Opportunities with Zain Africa: Network Sharing is gaining momentum Infrastructure sharing is a relatively new concept in Africa; however in some markets it has gained considerable momentum, particularly in Nigeria, Ghana and South Africa. At present it is restricted to the passive elements of operators base stations. So, tower sharing a good opportunity for operators in Africa to drive down costs, as many countries are experiencing saturation and hyper competition. M-commerce and M-banking a key growth opportunity There is a strong potential for mobile payments. In most markets the demand for mobile banking would be very strong due to the extremely low banking penetration and high demand to channel money from urban centers to the countryside (most of the initial flows) as well as international remittances. The potential is large for mobile operators as their nationwide coverage represents a convenient distribution channel for money transfers and more sophisticated financial services.

3G Services to drive growth in data offerings African players hold average spectrum of c15 MHz, much higher that what operators hold in India. Hence spectrum constraints are not an issue for Bharti in Africa. In fact, most operators, with technology and regulation permitted can easily offer 3G services. Moreover, compared to fixed broadband, 3G deployments have a greater scope in these markets as fixed broadband operators face a number of challenges including 1) limited availability, 2) poor condition, 3) difficult terrain, and 4) the lack of competition in market.

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Due to absence of cable access and the limited availability of ADSL in many markets, fixed broadband prices are very high in many African countries, and penetration is low. So, this provides a good potential for 3G services in African regions. The African market is also poised to witness strong growth in data on the back of the submarine cables landing. 3G mobile operators will be the largest beneficiaries as they have the largest networks to provide a mass market retail product.

Bharti Airtels strategy for Zain Africa & African Continent: Zain Africa was in trouble and financial paralysis was looming over its head which makes Bharti Airtels task to turn around the business of Zain Africa all the more difficult. Further, it will be a nightmare for Bharti Airtel to achieve this task in a totally foreign environment. Negating the misfits: The deal lacks geographical, cultural and commercial synergies. Therefore the first step to progress would be negating the misfits between the two giant enterprises. Despite, the deal having immense geographical synergy as Bharti Airtel is getting access into 15 African markets through one single transaction, the geographical disparity between India and Africa goes without saying. The terrain and the climate, though consequential only to a lesser extent, can pose critical problems for Bharti Airtel especially when it comes to infrastructure development. Further, tackling 15 regulatory regimes single handedly may not be easy at all. Bharti Airtel will have to put in a lot of effort to align the varied cultures; with 15 countries to tackle it definitely will be a nightmare. A major barrier for Bharti Airtel would be language which will be crucial to take the business and services to the masses. Further, the political instability in the continent and the lack of political support like in India will aggravate the situation for Bharti Airtel. It will be truly inspiring to see how Bharti Airtel will emerge a winner, overcoming the operational challenges varying from corruption and political instability to inadequate electricity and theft of equipment. Exploiting the untapped market: The key to revive the business of Zain Africa and restore profitability is replicating Bharti Airtels lowcost, outsourced model of operations in Africa. The growth of Zain would largely depend on how well Bharti Airtel would be able to exploit the largely untapped telecom market in Africa. Bharti Airtel has vast growth possibilities in the African market. Only one in two Africans owns a mobile phone and Zain has a strong presence in most countries.45 It has a 50-75% market share in seven countries and a 25-50% share in six, providing a strong platform for Bharti Airtel to build upon. Even

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though the company is running on losses now, Bharti Airtel can utilize the infrastructure and the facilities of Zain Africa to harness the potential of African markets. Monthly average revenue per user (ARPU) on the Continent averages USD 7.5, which is higher than Indias ARPU of USD 5.47 African customers use 100 minutes per month, versus 450 minutes per month in India. Minutes factory model : Bharti Airtels attempt will be to try and replicate their minute factory model which is the low-cost, high volume model in Africa. Bharti Airtel has already mastered the minute factory model and is an expert at it. The trick is to make its customers talk more by making the call rates cheap and concentrate on the rural population. Africa is too good an opportunity for Bharti Airtel to experiment the model that it has mastered in India, particularly its rural strategy. With a population of a billion spread out in 56 countries, Africas cell phone penetration is comparable to that of India 10 years back. The demand for mobile services is growing at a rate of 25% across these countries. The minute factory made Bharti Airtel, the market leader in India, the same should work in Africa as well but it is difficult to ascertain how elastic the African market would be to drops in tariff. Historically, the Indian market has shown high elasticity to drops in tariffs but if similar elasticity is not witnessed in Africa it would be difficult for Bharti Airtel to attain its projected goals. Also, Bharti Airtel will have to significantly expand the coverage and capacity to accommodate the burgeoning volume of minutes that Bharti Airtel is aiming at. Massive investments might be required to elevate the standard of infrastructure, equipment and employees of Zain Africa to suit Bharti Airtel. It is evident that Bharti Airtel has to invest not just money but a lot of time and efforts also to turn around the business of Zain Africa. Matchbox strategy : Indian mobile service providers including Bharti Airtel have adopted a matchbox strategy of distribution, which essentially means any shop that sells matches should also sell mobile SIM cards and top-up vouchers, helping build a vast dealer network. Such a vast distribution and advertising patterns is completely alien to Africa and if Bharti Airtel can recreate the strategy in Africa then it will add huge impetus to Bharti Airtels pursuit for success. Further, marketing the brand Bharti Airtel in Africa to establish it as a reliable, customer friendly brand is crucial.