If you have been tracking corporate India’s moves in the past 18 months [Tata Corus + Jaguar, Hindalco Novellis, etc] our businessmen are in a hurry to fulfill their global ambitions. Bharti Airtel‘s Mittal is also running on a similar track and this I believe is going to be really big – SingTel will be the silent beneficiary 🙂
Bharti Airtel management hosted the first management call after they bid for the Zain’s African Operations. Here are the key takeaways from the call,
- Bharti and Zain Africa together will have revenues of US$ 13 bn, EBITDA of US$ 5 bn. It will be among the top three operators in terms of geographical coverage and will be among the top 5 operators in terms of subscriber base
- Zain Africa presents a significant opportunity to deploy surplus cash. Bharti will start generating free cash flow (FCF) from FY12E (high capex in FY11E on account of 3G outgo).
- With ~500 mn population, ~35% teledensity, strong GDP growth and low competitive intensity makes Zain Africa a preferred target. On an average, three-five operators are present in African countries where Zain is operating.
- No clear signal on possibility of selling equity to SingTel yet.
- Zain Africa’s tariff stands at US$ 0.07 per minute, which is roughly 6.5x that of Bharti. The management sounded confident of replicating its minute factory model. Bharti intends to replicate its outsourcing and passive-infrastructure sharing model in the African continent and it expects to rationalise the opex and capex significantly
- The management is confident that African market will show usage elasticity. MOU for Zain Africa is in downwards of 100 minutes per subscriber per month, against Bharti’s figure of 446 minutes (3QFY10). The management cited example of Sri Lankan market, where Bharti has rolled out greenfield operations and has witnessed elasticity impact.
- The integration of Zain Africa with Bharti will happen within six months of closing the transaction. Regulatory approvals are expected to come on time.
Good businesses don’t sell cheap and the one with potential for Growth has to sell at a premium. It is the confidence of Bharti Airtel’s executives that despite paying huge premium, they’ll make money in a year or two needs to be commended.