Bharti Airtel

Company Overview
Bharti Airtel is India's largest telecommunications company by subscriber base, which stood at 96.6
million at the end of 2009, and total revenues, which were Rs. ! billion."lobally, #harti $irtel is the rd
largest in%country mobile operator by subscriber base, behind &hina 'obile and &hina (nicom. In India,
the company has a 2).6* share of the wireless services mar+et, followed by ,!.!* for Reliance
&ommunications and ,!.)* for -odafone .ssar. #harti $irtel is one of India's fastest growing companies,
going from ! million customers in 200) to 96.6 million customers in 2009. #harti $irtel is India's
largest telecom company by subscriber base. It offers "/' services in all of India's 2 telecom circles. In
'arch 20,0, #harti ac0uired the ma1ority of 2ain3s $frican assets for 49 billion .5his deal dramatically
increased the #harti3s global reach, ma+ing it the 6orld3s fifth largest wireless company. 5he deal
increased the number of countries the company operates in to ,7 and e8panding the company3s customer
base to around ,70 million.
Merger with Zain
About Zain
Zain, formerly MTC,was the first mobile telecommunications company in the Middle East when it started
its operations in Kuwait back in 198!"ts subsidiaries include#$Mobile telecommunications company
limited%MTC& '()*,*ebanon,and 'udanese Mobile Telephone%Zain& Co!*T+,'udan!"t is a public
company en,a,ed,to,ether with its subsidiaries,in the pro-ision of mobile telecommunication and data
ser-ices,includin, operation,purchase,deli-ery,installation,mana,ement and maintenance of mobile
telephones and payin, systems in Kuwait and .1 other countries in the Middle east / 0orth (frica!Zain
(frica is wholly owned subsidiary of Zain,incorporated in 0etherlands and held the (frican operations of
Zain!
Reasons for merger:-
Competition in "ndia!%1 operator each of .. circles&!
Cut call rates from )s!11!82 pm to !23 pm!
4u,e decrease in Average Revenue Per User(ARPU) from )s!322 to )s!153 today! "n last fi-e
yrs telecom dencity in "ndia is almost56!897 / e8pected 827 in .213!
Need for the deal:-
'aturatioin in the "ndia Market
9ntapped (frican Market a,ainst this
4eated competition at home
(ll time low tariff rates dri-in, subscriber ,rowth thus low income earnin, subscribers
Cost of settin, up network is hi,h in "ndia
:ressure on the mar,ins with costs ,oin, up
*on, time ambitions for the (frican market$MT0 ac;uisition talks failed twice
<harti (irtel to become 3
th
lar,est telecom company in the world
182 million customers and 18 countries
Advantage Point:-
A)Zain from Bharti Airtel.
<harti may brin, in tariff schemes for a low ():9 but hi,h -olume market!Zain can also benefit
from <harti=s efficiency in mana,in, network operations!
B)Bharti Airtel from Zain.
<harti can understand (frican market better! "t can learn a lot from Zain e8pertise in
data ser-ice such as > and 5> connections!
Transaction Details of Bharti Airtel-Zain
Acquirer Bharti Airtel Limited
Seller Mobile Telecommunication Company KSC
Target Zain Africa International BV
Acquisition Bharti Airtel Ltd indirectly acquired 1! of Zain Africa International BV and it"
bu"ine"" operation" in Africa from Zain under a pri#ately ne$otiated a$reement%
Moe of
Acquisition
Security&Share' Sale
Consieration (S) 1%* billion
Moe of
payment
All ca"h deal Bharti Airtel to pay+
a'(S) ,%- billion .ithin three month" from the date of clo"in$%
b'(S) * million after one year from the date of clo"in$%
c'(S) 1%* billion a""urmed a" debt on the boo/" of Zain%
!uning "everage Buy-out
a'Bharti Airtel to borro. (S) *%0 billion from a con"ortium of ban/" led by
Standard Chartered Ban/ and Barclay" Ban/%
b'Bharti Airtel to a#ail of a rupee load of (S) 1 billion equi#alent form SBI 1roup%
S#OT Analysis
SWOT analysis 9alternately SLOT analysis: is a strategic planning method used to evaluate
the Strengths, Wea+nesses;<imitations, Opportunities, and Threats involved in a pro1ect or in
a business venture.
Strengths$-
2o"t acqui"ition3 Bharti Airtel .ill become 4fth lar$e"t "er#ice pro#ider in
term" of the number of "ub"criber"%
The deal .ould $i#e Bharti 56 million "ub"criber" in 10 African
countrie"3.hich ha#e a combined e"timated annual re#enue of 7-%8 billion%
Bharti3 lar$e"t telecom player in India3 can replicate the "ucce"" of India in
Africa%
Strate$ic Alliance .ith other "ta/e holder"3 includin$ 9:KIA3Sin$Tel ; S:9<
=>ICSS:9%
#ea%ness$-
Bharti ha" paid a hea#y price for the deal%
Zain Africa ha" made a net lo"" of (S) 116 million in the nine month" to
September 6?%Se#en of Zain@" African unit" are lo""Ama/in$3 includin$ it"
hi$he"t re#enue earner3 the 9i$erian arm3 Zain 9i$eria%
The deal i" hi$hly #olatile and carrie" hu$e commercial ri"/ for Bharti Airtel
The loan .ould be a dra$ on Bharti Airtel@" earnin$" .ith no immediate
return" eBpected from the lo""Ama/in$ tar$et%
Opportunities$-
Telecom penetration in African countrie" #arie" from -* per cent to 80 per
cent% There are fe. mar/et" .ith penetration le"" than 5 percent%
The African mar/et i" homolo$ou" to Indian mar/et in term of it" "tructural
"imilaritie"%
Monthly A>2( on the Continent a#era$e" (S) *%03 .hich i" hi$her than
India@" A>2( of (S) 0
Africa i" too $ood an opportunity for Bharti Aritel to eBperiment the model tht
it ha" ma"tered in India3 particularly it" rural "trate$y%
Threat$-
Zain Africa i" in trouble and 4nancial paraly"i" i" loomin$ o#er it" head
Bharti Airtel .ill ha#e to put in a lot if eCort to ali$n the #aried culture"3 .ith
10 countrie" to tac/le it de4nitely .ill be a ni$htmare%
BhartiAZain .ill be $ettin$ a tou$h 4$ht .ith ri#al li/e MT9 and China Mobile
There are $reater political and economic" ri"/" in Africa%
Mo"t of the countrie" are political un"table and operation are "till lo""
ma/in$%
Conclusion
Bharti Airtel cro"" border acqui"ition of Zain Africa operation" ha"
made it one of the $lobal player" in the telecom indu"try%
Cro""Aborder acqui"ition .a" al"o the bet" "trate$y for Bharti
Airtel to counter the hyper competition in India% It al"o pro#ide" it
the much needed di#er"i4cation in re#enue"%
The fundin$ of the deal i" "trate$ically done throu$h an
"everage Buy-out&"BO' pro#idin$ Bharti Airtel the le#y to
con"olidate it" operation" in rural India and in the -$ ; 5$ "pace%
Thou$h the potential i" hu$e the road ahead i" not ea"y3 Bharti .ill
ha#e apply Turn Aroun Strategy to con#ert Zani@" current lo""
ma/in$ operation" into pro4t ma/in$ and to $ro. the rate of 66 to 60!
to Du"tify the #aluation behind the deal% 1i#en the cultural diCerence"3
challen$in$ macro and bu"ine"" en#ironment the turnaround thi" .ill
not be ea"y for the Bharti Airtel mana$ement%