Nigeria to benefit from Bharti’s $1bn new Africa investment

Ben Uzor Jr

Airtel’s Nigeria, Ghana, Kenya and Uganda operations will benefit from an additional $1 billion investment earmarked by Bharti International to support network expansion of its Africa mobile business. This investment move is subsequent to the telecom firm receiving the necessary regulatory approvals in all 16 countries on the African continent acquired in the preceding year.

Sunil Mittal, group chief executive officer, Bharti International, has disclosed that the Indian firm will invest an additional $1 billion in its fledgling Africa mobile business this year. Bharti Airtel acquired Kuwait-based Zain’s Africa operations for $10.7 billion in 2010 in what has been described by many analysts as the largest cross-border takeover in an emerging market.

Analysts, yesterday, see the Indian based firm injecting about $500 million into its Nigerian operations. Mittal has also reiterated the firm’s resolve to further grow its Nigerian business, stating earlier that the success of Airtel on the continent was largely dependent on Nigeria. “We have already invested $11 billion here and have committed nearly $1 billion investment for this year for expansion of our networks,” said Bharti’s boss in a report sighted by BusinessDay yesterday. However, Mittal seemed to dismiss rumours of further expansion into other African countries.

“At the moment, we are focusing on our 16 countries and for any future expansion in Africa, we will see as the opportunities come, as there is nothing on the table at the moment.” According to the report, in its last fiscal year (2010-11), Bharti reported a net loss of $97.7 million in its Africa operations on revenues of $3 billion. At the end of the company’s fiscal fourth quarter (ending March 31), it had 44.2 million African subscribers, which included quarterly net additions of 2.1 million.

With Average Revenue per User (ARPU) for the African unit at $7.2 per month, Mittal noted that some of the Africa businesses were doing better than others. “Out of the 16 countries, most of them are profitable. As far as Africa is concerned, we have to grow in Nigeria; we have to grow in Ghana, Uganda, Kenya. There are a few countries where we have to step up.” Relating to network expansion, Airtel is building a 3G network expected to cover 80 percent of Nigeria’s population by 2012 and required to offer cheaper and reliable internet services to its customers.

Rajan Swaroop, chief executive officer, Airtel Nigeria, who confirmed this in an interview recently, said the project was strategic for increasing market share as the bulk of telecom revenue in Nigeria was expected to come from data services in the next five years. An analyst told BusinessDay yesterday that the extra investment by Bharti would further strengthen the project; adding that Airtel was spurred on by the prospect of increasing revenue from data services as voice revenue continues to drop.

Speaking in an interview with Russell Southwood of Balancing Act accessed by BusinessDay at the weekend, Swaroop declared: “We are building a 3G (Third Generation) infrastructure and by the time we’re finished, we will have covered 70 to 80 percent of the population and that’s, maybe, one year away. We currently have 100,000 to 150,000 subscribers but we strongly believe that the overall potential for this is something like 2 million subscribers out of an overall total of 16 million”.

Commenting on the company’s financials, the Airtel boss revealed that over the last 12 years, the performance of the business has been declining but by virtue of the investments made in infrastructural development, he believed Airtel Nigeria would be self-funding and cash-flow positive in the next 18 months. “We also intend to encourage the Nigerian Communications Commission (NCC) to introduce Mobile Number Portability. Then the best provider will be successful,” he said.

Giving a vivid insight into the company’s position with regard to international fibre and acquisition of bandwidth capacity, Swaroop disclosed that the telecom firm had bought significant capacity from both MainOne and Glo-1 cables. “The price per MEG is down to US$300-350 per MEG per month at volume and this price is a substantial drop from what was available previously. We will probably double our capacity in the next 6 to12 months and prices will come down again. They are currently pretty high compared to rates across the world. In India, it is sub US$10 per MEG”.

Bharti Airtel, who took over mobile operations in 15 African countries in a deal that makes it the world’s fifth-biggest mobile firm with 180 million customers in 18 countries, is known for its low-cost strategy; but the firm has revealed that it will not adopt the same strategy which has made it India’s market leader. In India, Airtel’s call rate charges are as low as 1 US cent as against the 20 US cents charged in Nigeria currently.