<div><em>Airtel wants to sell its operations in four African countries - Burkina Faso, Chad, Congo and Sierra Leone — with a revenue base of $730 million, representing 16 per cent of overall Africa revenue</em><br><br><br>Sunil Bharti Mittal has always been adamant about his African dream. When a merger deal with South Africa-based telecom company MTN failed in 2009, he went on to acquire the loss-making operations of the Kuwait-based Zain group.</div><div> </div><div>The company shelled out $10.7 billion (of which $8.5 billion was debt) to get hold of a customer base of 42 million in 15 countries. Airtel took the pain of negotiating the deal with regulators in all 15 countries where the company acquired Zain’s operations.</div><div> </div><div>Now that Airtel wants to sell its operations in four African countries - Burkina Faso, Chad, Congo and Sierra Leone — with a revenue base of $730 million, representing 16 per cent of overall Africa revenue, the question is, will it exit the Africa operations gradually?</div><div> </div><div>The management, as always, is hopeful about its prospects in the remaining Africa operations. But in hindsight, it was this obsession about African market that made Airtel overlook some inherent risks in the African business deal.</div><div> </div><div>While every analyst agreed that Airtel’s decision to diversify its revenue base was good, there were questions raised over the price that it paid for the deal. However, Sunil Bharti Mittal was ecstatic about the fact that the company will not have any problem in getting the resources in place for the deal. After all the company had tied up resources for a two times larger deal with MTN that eventually fell through.</div><div> </div><div>Zain’s African operations were losing money in 2009 and this is the reason why the company was ready to let go of its operation in 15 countries. In the nine months to September 2009, Zain’s African operations reported a net loss of $112 million against a profit of $169 million in the corresponding period the previous year. Seven of the 15 countries reported losses. The highest revenue earner, Nigeria, lost $88 million.</div><div> </div><div>The Zain group had not invested enough in creating the infrastructure in the country through which it could tap the vast growth in the telecom sector. Airtel spent over $5 billion to reorganise the networks and sales and distribution infrastructure in the continent. Even that was not enough to win the tariff war with MTN.</div><div> </div><div>The strategy to have the lowest tariffs to win over the subscribers did not yield good results. The company’s average revenue per user or ARPU did not grow despite an increase in the customer base.</div><div> </div><div>The ARPU in the year ended March 2013 came down to $5.9 from $6.8 in March 2012. It further came down to $5.52 in March 2014 and within an year fell 20% to $4.4.</div><div> </div><div>Revenue per site also fell by 27% from $24,522 in March 2012 to $17,781 in March 2015.</div><div> </div><div>All this while, Manoj Kohli, the head of Africa operations for Airtel, asked investors to look into the bright future instead of staring at the dark present for companies increasing losses.</div><div> </div><div>The minute factory model of the company had failed in the African continent. Bharti had paid Zain US$252 per subscriber for the deal at a time when Africa had average minutes of use per subscriber/month at just 100. In India, the numbers was between 350 to 400.</div><div> </div><div>Even as the Airtel management says that it is not going to exit the African market completely, its decision to monetize its tower assets for $1.3 billion by divesting its tower assets in five African countries suggests that now, business sense is prevailing over the obsession of becoming world’s largest telecom operator for the management of Bharti. The company’s net debt at the end of fiscal 2015 stood at more than Rs 66,000 crore, most of which had been taken for the Africa operations. Airtel needs to reduce its debt and save its resources for the upcoming 4 G war back in India that is set to begin with the coming launch of Pan India services by Reliance Jio.</div><div> </div>
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