Neither the strongest of the species nor the most intelligent but the one which is more adaptable to change, survives said Charles Darwin. Change is important, change is crucial when your environment is tough, competitive, and dynamic.
Similar is the situation, in the Indian Telecom Market, midst of a hyper competition going on, while the players are facing a difficult time, managing their profits and margins, government has raised close to approx 68000 cr from the recent 3G auction which has furthered raised the attractiveness of the market, which is already attracting new players due to its potential. When we talk about the potential of the Indian telecom market, I need to mention a few points here, though experts feel that the on-going hyper competition may spoil the game (I too have written an article earlier regarding this), this is a short term crisis, but if we talk about the real long term potential of the market, here are some compelling facts and figures.
There are totally, more than 500 million phone users in India, and growing at a rapid speed, this number is expected to hit 1 billion by 2014. The Indian Value added services Industry alone is expected to touch a turnover of Rs 21000 crore by the year 2013. Apart from urban market, the rural India too is a potential market to explore for these telecom companies, the attractiveness of the market has been continuously attracting new players into the market, in order to grab their pie of the market share, the new players have triggered a price war, where the call rates have dropped to the extent that it has hit the margins. Many companies are now charging for calls by the second, rather than by the minute, with plans for as little as 0.50 rupee a minute and when the number portability comes into play, it would further intensify the competition.
As the domestic market becoming hyper competitive, and the market becoming more of a commodity market, what should be the company like Airtel’s strategy? Pioneer in the wireless market, with vast experience, resource and major market share, Airtel has always been a star player in the market, when it comes to quality of network, customer service, offers, marketing and promotions.
Despite having a strong hold in the domestic market, having a competitive advantage of excellent network and customer service, the crowd in the domestic market has driven Bharti Airtel overseas. Growth is life, Sunil Mittal, the super star of the Indian Telecom Industry knows this very well, an expansion plan will definitely workout at a time when all major Players are competing to keep their growth graph going up, Airtel plays the game safely, sensing that the telecom market is becoming more of a commodity market, Bharti Airtel had changed it’s game plan long time ago, though competing enough to sustain its competitive advantage in the domestic market and increase it’s market share, Bharti Airtel focusing more on overseas expansions through M & A deals, this is visible by the series of overseas deals that Bharti Airtel has done abroad till now. Bharti Airtel wants to expand it’s presence globally with in a short period of time, that is the reason why Airtel has been focusing on inorganic growth, though majority of the M&A deals have been unsuccessful in the recent past, even experts write and preach about M&A deals that they fail to create share holder value or destroy share holder value, but if you can do it right, in Jack Welch’s words “M&A deals give you a faster way to profitable growth, They quickly add geographical and technological scope, and bring on board new products and customers. All in all, successful mergers create a dynamic where 1 + 1 = 3 (Synergy), catapulting a company’s competitiveness literally overnight’s.
Now, coming back to the story, let’s have a look at the series of overseas deals done by Bharti Airtel in the Past few months. The company launched its mobile services in Srilanka last year and has more than 1 million customers there. It acquired the Abu Dhabi Group’s Warid; currently holds 70% of the stake, the deal enabled Bharti Airtel to enter the lucrative neighborhood market. Waird has more than 3 million subscribers. The deal gives the company a strong hold in one of the fastest growing telecom markets in the world, having more than 52 million mobile subscribers and the number is expected to touch 100 million by the year 2015. Airtel’s move came after its plan to buy a stake in South Africa’s MTN collapsed. Waird is the sixth largest telecom operator in Bangladesh.
Recently, Bharti Airtel acquired Zain’s African unit in a $10.7 billion deal, with the closing of this deal Airtel becomes the 5th largest telecom company in the world. The deal has given the company a strong presence in the potential African Telecom Market.
The series of deals have brought it total to 18 markets, a global foot print surpassed only by the large European operator groups and its new African rival, MTN. Bharti is also in talks with Tanzania’s government over its stake in Zain Tanzania. If materialized, the talk will make Bharti the second-largest African operator group behind MTN.
With the competition intensifying in the domestic market, at a time when players struggle to defend their market share, Bharti Airtel has been successfully dominating the market for years now, holding its numero uno position, and at the same time seeing the threat of price war affecting the current growth opportunities, Airtel changes it’s game plan, expands its global presence and will continue to do so to offset the pressure in the domestic market and also to fulfill it’s long-term goals of becoming an International Company.
But the biggest Challenge ahead is, how well it manages the M&A deals profitably in the coming months, and how it adapts itself and performs in the new market in spite of all challenges, the company which has handled all the challenges efficiently to reach the position it enjoys today… how well it would handle this new challenge is what is to look for…. Hey! Closely watching Bharti Airtel’s next move…..
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