Bharti Airtel : Shaping a Global Dream

Bharti Telesoft , established in 1995 as a small telecom venture, emerged to be the largest integrated telecom player by 2006. It was rechristened as Bharti Airtel, a brand people all over India readily reckon. After the public listing in 2001, the company had always focussed on growth – through both organic and inorganic means. While Airtel’s acquisition of JT Mobile and Skycell helped it become a pan India player, it’s the master IT infrastructure outsourcing deal which contributed to the humongous growth during 2003-2008. While revenues and EBITDA grew at CAGR of 54% and 72% respectively, the subscriber base grew at a CAGR of 82%. As on May 2010, the company had 134 Million subscribers commanding 30% market share.

As the high ARPU urban Indian mobile market saturated, telecom companies started looking for growth opportunities outside India. From mid 2008, Airtel started exploring the possibility of acquiring South African telecom major MTN. The deal envisioned Bharti acquiring MTN operations in 21 countries for a whopping US $45 billion. MTN tried something similar to make Bharti a subsidiary and the deal fell apart.

Bharti continued its position as a market leader in India and also launched services in Sri Lanka during end of 2008. However, the MTN deal was still on their mind. Almost a year later, Bharti started new negotiations with MTN in May, 2009. The proposed deal was a US$23 billion merger creating a telecom behemoth with 200 million subscribers and US$20 billion in revenues.

The deal structure included Bharti holding a 49% stake in MTN and MTN on their part holding 36% in Bharti. A dual listing at Indian and South African markets was proposed to maintain respective company identities. However, even after much negotiation, the South African government did not let go a prized asset like MTN and deal had to be called off.

By 2010, with introduction of newer players in the Indian market, the competition got stiffer and the tariff war seriously squeezed margins. Desperate of inorganic growth, Airtel acquired a 70% stake in Bangladesh’s Warid Telecom for US$ 300 million in early 2010.

During Feb 2010, the news of Bharti’s acquisition of Zain Africa surfaced for the first time. The proposed deal included Zain’s operations in 15 African countries, excluding Sudan and Morocco, with a combined user base of 40 million subscribers. The deal provided Bharti with opportunities in 15 new geographies, with low penetration and huge growth oppurtunities.

Having faced with bitter consequences twice, the management was extra cautious not to let go of this last opportunity. The roadblocks this time was steep valuations, regularity oppositions from Governments of Congo and Gabon as well as a minority ownership dispute in Nigeria from local player Econet. Bharti’s dedicated persuasion, lead by Sunil Mittal himself, ultimately bore fruit.

Finally, in June 2010 Bharti acquired Zain’s Africa assets for an enterprise valuation of US$ 10.7 billion, making it the world’s 5^th largest telecom player, with 170 million subscribers and US$13 billion in revenue – a truly global enterprise.