BHARTI AIRTEL SHAKING THINGS UP?

By now almost every Jim and Jack, Martha and Mary (to atleast be gender sensitive), especially in the cradle of mankind, Africa, is aware of Bharti Airtel, otherwise known as Airtel, the Indian Telecommunications company now operating in 19 South Asia, Africa and Channel Islands, thanks to its many acquisitions of other telecommunications firms all over the place. On 08 June, 2010, Airtel, in the largest ever cross - border deal in an emerging market and largest ever telecom takeover by an Indian firm, bought the Kuwait-based Zain Telecom's businesses in 15 African countries.

Airtel, is the market leader in almost over 70% of the countries it is operating in Africa, with an average marketshare in each country of not less than 50%. In kenya however, Airtel’s marketshare at 10%, making it after Safaricom, which has a 78% market share. The other players in the Kenyan telecommunications market are Essar and Telekom Kenya which have a 6% market share each.

On 19th January, 2011, the world woke up to the news that Bharti Airtel had halved its voice call tariffs and cut the price of text messaging by 80% across all networks, in a bid to gain market leadership in Kenya’s 20 million mobile phone market. This is a replica of the low margin - volume game that Airtel pioneered in India. In a market penetration strategy of this kind, the billion dollar question is for how long can this be sustained. Well, the answer in this case is, “for as long as it takes Airtel to diluted the market share of Safaricom to a major extent.

This sure is one hell of a below – the – belt punch to Safaricom and the other players in the Kenyan Market. In a price war, it seems logical for competitors to follow suit to cut the prices as substantially as possible as to counter the competition, but if our fellas in Kenya are to do that, it will be akin to digging their own grave.

Airtel is the 5th largest mobile operators in the world interms of subscriber base. What this means that, following its substantial slashing of the tariffs, the Kenyan Unit of Airtel is sure to make losses, but the parent company will not feel the pinch that much, as it is likely to cover the loss with its profits in its other units. The only other company that can come close is Safaricom, because of Vodafone’s 40% stake in the company and Vodafone is the second largest mobile network provider in the world, but it is not the only one with interests in Safaricom. Vodafone can withstand losses due to tariff reductions in Safaricom, but what about its partner in the company, Telkom Kenya, where will revenues and profits to offset its losses in Safaricom going to come from?

another we need to know is that Airtel has managed to reduce its operating costs considerably and can easily transfer those low costs to its subscribers through tariff reductions for example. Airtel is the first mobile phone company in the world to outsource everything except marketing and sales and finance. Its network (base stations, microwave links, etc.) is maintained by Ericsson, Nokia Siemens Network and Huawei.,[5] business support by IBM and transmission towers by another company (Bharti Infratel Ltd. in India, which as the name suggests is linked to Bharti Airetel).[6] Airtel, because of its business strengths was even able to have Ericsson agreed for the first time, to being paid by the minute for installation and maintenance of their equipment rather than being paid up front.

Apparently, Bharti Airtel in Kenya is merely putting its global presence and business strength to use. However another question, and one which is of much interest to subscribers in the 15 countries Bharti Airtel is operating in Africa is; “Should they also expect Airtel to reduce tariffs in their countries just as it has done in, Kenya, besides before Kenya it had already done this in India?” Well, at first glance, the moment I heard the news, I thought that would be the case but upon critical analysis, I realized believing that would be living in a fool’s paradise.

Airtel is surely not obliged to cut tariffs in all the countries it is operating, because they will be no need at the moment to do so. I would not be surprised to learn that, Kenya is currently Airtel smallest market. So for example in Malawi, a Central African Country where Airtel is a 78% market share dominance, if at all there is to be a tariff slashing, it may not be to the extent Airtel has gone to in Kenya which is just as good news for Aitel’s competitors as it is bad news for subscribers in Malawi, and the other countries with similar competition factors in as fas as Airtel is concerned. However, we may all just have to keep our fingers crossed to know where Airtel is going to strike next with its tarriff cuts.