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Bharti Airtel Sees Africa Margin Boost, Confident Of Goals

08 June, 2011

Bharti Airtel, which last year bought mobile operations in 15 African countries, is on target to generate $5 billion in revenue from the continent and reach 100 million subscribers there by the end of March 2013, a top executive said.

Bharti paid $9 billion for most of Kuwait-based Zain’s African cellular operations, which generated about $2.9 billion in revenues in the year that ended March 31 and had 44.2 million subscribers. The loss-making operations have been a drag on Bharti’s consolidated earnings.

“Let me assure you the objective I have stated…100 million subscribers, $5 billion in revenue, $2 billion in EBITDA, we are definitely moving towards that steadily,” Manoj Kohli, Bharti Airtel’s chief executive for international operations, told Reuters in an interview on Wednesday.

“We are confident we’ll achieve it,” he said, a day after Bharti completed one year since the African acquisition that made it the world’s fifth-biggest mobile carrier by subscribers.

Bharti ventured into Africa at a time when growth in its home market was slowing and stiff competition was eroding the carriers’ profitability.

Margins in Africa have been under pressure due to the high costs of operations. Bharti had operating margins of 24 percent in its African operations for the year ended March, compared with 36.8 percent from its India and other south Asian operations.

Bharti has implemented its low-cost, high-volume Indian model in Africa including outsourcing of network, information technology and back office operations to reduce costs, and Kohli expected those moves to have positive impact on margins.

“One thing I can say confidently that our business model has now been implanted in Africa … you’ll see quarter after quarter a positive impact of the business model,” said Kohli, who moved to Nairobi last year to head Bharti’s Africa operations.

Turning profitable in Africa is “a very important objective”, Kohli said, although he declined to say when he expected Africa would start making profits.

Six of Bharti’s 16 African markets are currently making losses, while the debt cost for the acquisition has also weighed on the company’s earnings.

Kohli said Bharti had increased its revenue market share in all its 16 markets over the past year and that the firm’s focus would be more on larger markets including Nigeria, Democratic Republic of Congo, Zambia and Tanzania.

Bharti has cut call prices in 12 of its 16 markets to boost usage and is betting on growing minutes to generate higher network usage.

Kohli said the firm would continue to review call prices as network costs decline in coming quarters, but plans no major tariff change for now.Bharti may look at buying companies in Africa to expand beyond its 16 existing markets, but the priority is to improve operations in its existing markets first, Kohli said.

“Our objective is to first get these 16 markets into good health. Once the 16 markets are in good health, we’ll definitely look beyond 16,” he said.

“We have a long-term strategy and vision for Africa. We do not want to get into such hurry to try to do everything in one go.”


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Bharti Airtel Sees Africa Margin Boost, Confident Of Goals

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