In this report, Efem Nkanga looks at what the entrance of Bharti Airtel, India’s largest telecoms company into the Nigerian telecoms space portends for the sector as the Zain brand once again changes for the 6th Time
When Wikipedia described competition as a contest between groups for territories or a niche, it probably had the Nigerian telecoms market in mind. A battle for the soul of the Nigerian telecoms space is set to hit a new dimension with the entrance of Bharti Airtel, a enterprise of Indian origin which has grown from strength to strength since it was birthed in 1995 by Sunil Bharti Mittal
The company, said to be the largest telecoms operator in India recently acquired the African assets of Zain Africa, thus giving it a foothold into the Nigerian Communications sector. This move by Bharti, which had long desired to have a foothold in Africa has seen the Zain brand undergoing a name change for the 6th time as Bharti last week in Abuja and Lagos officially rebranded into the Airtel. This move however is not coming as a surprise to stakeholders in the sector because it is only fair to expect that after spending a whopping $9 billion dollars to acquire a property, one would want to stamp one’s name and authority on the property.
So the name change, though slightly irritating to a few, has not ruffled many feathers and has gone smoothly despite the hiccups in not having President Jonathan at the Abuja name change that left many empty seats unfilled. Despite that slight hitch however, the Zain brand was rebranded to the Airtel brand and is now to be known and addressed as the Airtel brand. Before long, the Zain brand would have been consigned to the annals of history and forgotten by Nigerians who have already started singing the Airtel song.
Many in the sector who had heard about the exploits of the Airtel brand in India are excited that the entrance of the company will be of benefit to the subscriber. The company in India is known for deploying the weapon of low tariffs to expand its market share. It currently offers call rates as two cents a minute or a shilling a minute. Indeed, the Chairman and CEO of Airtel, Sunil Bharti Mittal known as the 87th richest man in the world at the event promised that Nigerians are in for an unparalleled experience that is sure to make them fall in love with the Airtel brand. Soft spoken Mittal who started business in India bout 35 years ago, with less than 65,000 naira reiterated in Abuja that Airtel will offer Nigerians an innovative and affordable offering that will never be forgotten.
In an apparent answer to criticisms of sceptics who felt that the brand had undergone too many name changes for comfort, Mittal emphasised that the name change had to be done to change the identity of the firm’s operations in Nigeria and 15 other African countries and in several Asian nations where it operates. The Chairman of Airtel Nigeria, Oba Otudeko also swiftly tried to play down questions regarding another name change by promising Nigerians that this is the last rebranding exercise that the brand will undergo. Mittal had earlier on explained why the brand had to undergo another name change. He emphasised that as the company expands on the global stage, it became necessary to adopt the new brand identity, Airtel.
“This new brand identity gives the company the opportunity to present a single, powerful and unified face to customers, stakeholders and partners around the world, he said. He added that “The new brand identity reinforces Airtel’s promise to deliver innovative services and a superior brand experience to their 200 million customers across Asia and Africa. He described the brand as ‘modern, vibrant and friendly’ and expressed confidence that the new identity has been created to appeal to the youth in Africa, India and Bangladesh, in sync with the plan of the telecommunication operator to launch affordable and innovative products and services in all its markets.
The Bharti CEO also expressed optimism about venturing into the African market which he described as the continent of hope and opportunity. He emphasised that the strength of the Bharti brand, its unique business model and the historical connection of India with Africa will help unlock the potential of these emerging markets. He stated that Bharti is committed to partnering with the governments in these countries in taking affordable telecom services to the remotest geographies and bridging the digital divide.
However, despite these assurances, there are fears in many quarters that the brand name might likely change again if Bharti does not get its desired leverage from the African operations it bought from Zain in June.
The fact that market dynamics is changing coupled with the fact that projected revenues might not be easily realized is one factor that might possibly make Bharti decide to sell its stake to another buyer in the future like the Zain Group did, after also promising that it was here to stay when it acquired the brand from Celtel.
The competitive nature of the Nigerian market for example is such that other players are already reducing their tariffs through special offers in readiness to combat the Airtel challenge.
The mobile telecommunications operator which currently has over 40 million customers across its African operations and is targeting to achieve 100 million by 2013, but in its just released results, Bharti recorded a revenue loss of 27 per cent due to operating challenges in its newly acquired African markets and steep competition in its Indian market characterised by a price war that has reduced tariffs to the barest minimum.
Responding to a THISDAY enquiry, if the loss recorded affected his optimism about the African assets acquired, Mittal said no but admitted that it affected the optimism of Bharti shareholders. He stated that the firm expects things to pick up in future and expressed confidence that the African market will offer tremendous growth to Bharti not just in terms of subscriber margin but also in increased revenue. Airtel has operations in Nigeria, Burkina Faso, Chad, Congo Brazzaville, Democratic Republic of Congo, Gabon, Ghana, Kenya, Madagascar, Malawi, Niger, Seychelles, Sierra Leone, Tanzania, Uganda and Zambia.
On Prospects of tariff reduction, Mittal noted that the call tariff in Africa is still high and there is scope for cutting tariffs despite high cost doing business and infrastructure and logistics problems.
Over the past four months, Airtel has made tariff interventions in 11 of its 16 markets in Africa, introducing purse friendly tariff and products and services which customers have long yearned for in Africa.
He also expressed confidence that the company’s business model which allows it to lower tariffs while generating higher revenue through high volume will work in Nigeria which is reputed for its appallingly high cost of supplying power to base stations as well as security and multiple tax issues.
Over the next couple of months the company plans to launch a number of world leading product innovations which focus on delivering relevant information for its customers to enhance their quality of life and provide tools that will help them overcome their daily challenges.
When Bharti in June acquired the Zain brand, several reactions of stakeholders had been premised on the fact that tariffs will likely decrease due to the known operating model of Bharti. Infact, the Chief Executive Officer of MTN Nigeria, the current largest operator in the nation’s telecoms space at a forum at the time news of the acquisition broke, acknowledged the fact that the entrance of Airtel will increase competition in the telecoms sector and widen the choice of consumers. Farroukh had in response to a question on what strategy MTN intends to deploy to tackle the arrival of Bharti Airtel into the Nigerian telecoms space in the area of tariffs stated that MTN will offer the best rates despite the challenges of the Nigerian operating environment. He emphasized that the market will regularise tariffs naturally and the benefits of competition will come into play.
The issue of tariff reduction had long been desired in the sector with stakeholders calling for a reduction of tariffs. The Nigerian Communications Commission for example is in support of tariff reduction and just recently promised that tariff reduction was imminent in the Nigerian telecoms sector. The commission had at one time informed stakeholders that MTN Nigeria had already given a commitment to reduce tariff by 20 per cent .
As telecoms companies strategies to tackle the Bharti Airtel challenge, it is said to be working feverishly to replicate its Indian success in Nigeria.
The fact that it already has the experience of operating in a large market like Nigeria will enable it succeed as the familiarity of operating in a dynamic environment like India means that the similarity of both markets will be an advantage to its operations.
Airtel already has about 200 million subscriptions as of today. It currently offers land-line telephone services and broadband Internet access (DSL) in over 96 cities in India. Apart from acting as a carrier for national and international long distance communication services, Bharti also has a submarine cable landing station at Chennai, which connects the submarine cable connecting Chennai and Singapore.
It has a unique business model and is credited with being the first mobile phone company to apply the outsourcing model to everything except marketing and sales and finance. Ericsson and Nokia Siemens currently maintains the Airtel network made up of base stations, microwave links, etc. The company made a unique business proposition to Ericsson and got the Swedish company to agree to being paid by the minute for maintaining Bharti’s equipments, rather than being paid up front. This unique model of operations led to a massive drop in call rates that was of tremendous benefit to subscribers in India. Recently, the company sealed a pact with leading organisations such as IBM, Tech Mahindra and Spanco as partners to drive world class customer service across 16 African countries. Under the agreement Bharti Airtel, which owns and currently operates the ‘Zain’ brand in 16 countries across Africa, will outsource core customer service functions like call centres and back office as it prepares for significant growth in the region. IBM also offers the company business support, while Alcatel Lucent manages the network infrastructure for Airtel’s telemedia business.
Bharti is said to be structured into four strategic business units in India, which is expected to be replicated in Nigeria. The units include Mobile, Telemedia, Enterprise and Digital TV, but Mittal, responding to a query on the matter said that the Enterprise segment would not be offered in Nigeria for now.
Though the brand has changed identity too many times in the Nigerian market, subscribers are in for a good time as operators will strive to satisfy and keep their subscribers happy to forestall the subscribers being enticed to try what Bharti has to offer, if they are not already on the network.
Operators will no doubt, going forward to base their long term strategy on ensuring that they satisfy their customers with affordable and quality service.
With Nigeria surpassing the 80 million subscriber mark, there are endless possibilities for any serious operator to not only retain but grow market share by using the customer satisfaction strategy.
The fact that consistent subscriber growth has been recorded in the sector with an increase of more than 80 million subscribers from less than half a million in a decade shows that Nigerians take communications serious.
As the brand transforms into Airtel, Nigerians like the Managing Director of Financial Derivatives Company Limited, Bismarck Rewane, reiterated that the transformation at the end will be beneficial to Nigeria. He said that because Bharti is currently the largest telecoms firm in India, its foray into Nigeria will accelerate the growth of the sector. He added that Bharti has a similar telecoms landscape as in population and density as Nigeria and this coupled with the financial clout of the Indian telecoms giant will also make it able to invest and compete effectively in the highly competitive Nigerian market. Zain which had operated under many brand names since it started operations in Nigeria first as Econet, Vodafone, Vmobile, Celtel, Zain and now Airtel has over the years been recognized as having a bias for satisfying the customer. Nigerians expect Airtel to not only continue in its tradition of putting the customer first, but expects it to go beyond its borders and enable affordable quality service as promised.