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Bharti Seeks To Streamline Operations

28 June, 2011

Bharti Airtel is looking to streamline its business as India’s largest telecoms group by subscribers integrates its recently acquired African operations and squares up to rivals in the domestic market.

The Delhi-based operator, which last year agreed a $10.7bn deal to acquire the African operations of Kuwait-based Zain, is understood to be looking to merge its core mobile, satellite,television,broadband and fixed-line businesses.

The group, led by Sunil Bharti Mittal, declined to elaborate on its plans but said that it had “always pioneered new business models that have set industry benchmarks, while creating consistent for our customers, employees and other stakeholders”. It added that any restructuring would have “minimal” impact on its staff.

The comments come after Bharti, which now has more than 220m customers across 19 countries making it the world’s fifth-largest telecoms operator by subscribers, last month reported a 33 per cent fall in net profits to $1.4bn for the year to March 31 on sales of $13.3bn. 

But analysts and investors remain upbeat on the long-term outlook for the telecoms group. Shares in Bharti have risen more than 50 per cent in the past year, while rival Reliance Communications has dropped more than 50 per cent over the same period.

G.V. Giri of brokerage IIFL in Mumbai said that a move to reduce costs, simplify the chain of command and maximise the mobile business would make sense in the context of broader industry trends as operators looked to sell fixed-line, mobile or broadband services all at once.

“Looking five years out, you would expect telecoms groups to have a tighter degree of convergence in areas such as billing and technology,” he said.

And while Bharti has recorded several consecutive quarters of falling net profits, it is better placed than some of its rivals to continue growing.

Mr Giri said: “The rate of [new subscriber] additions continues to be strong, voice Arpu [average revenue per user] has stabilised, the company is getting an increasing share of revenue from data. We expect to see an improvement in margins.” 

Bharti is also expected to be a beneficiary of long- expected consolidation in the Indian market.

But hanging over the group is the integration of the Africa businesses. While rates per minute in Africa are far higher than in India, at about 6 US cents a minute versus 1 cent in India, the integration process is taking longer than some had expected. 

Bharti has had to deal with the logistics of working with governments and infrastructure in 15 countries across Africa. 

“The African operations are dragging on results. But nobody expected it be smooth sailing. Trying to get value out of Africa will take time,” said Kamlesh Bhatia, research director at Gartner.

However, he said that Bharti has strong management and had shown itself in the past to be a trendsetter, outsourcing back-office operations and telecoms towers far earlier than rivals.

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Bharti Seeks To Streamline Operations

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