Report from livemint.com
On 9 June 2010, billionaire Sunil Mittal’s Bharti Airtel Ltd spent $9 billion to become a global firm. It bought Kuwait-based Zain Group’s telecom assets in 15 countries in Africa, the next big geography for growth for Asia’s successful entrepreneurs. It took on $8.5 billion in debt to fund its ambitions. Five years later, the company is yet to declare any profits or meet any of its growth targets.
Airtel had big plans for Africa—a target of 100 million subscribers, up from 42 million at the time of acquisition, $5 billion in revenue, up from $3.6 billion, and $2 billion of Ebitda, by March 2013, less than three years after the acquisition. Ebitda, which refers to earnings before interest, taxes, depreciation and amortization, is a measure of a company’s profitability. Long-time Mittal lieutenant Manoj Kohli moved to Nigeria to helm the new business.
But it has never met these targets and now it looks like Bharti may have bitten off more than it could chew.
“Africa continues to be a pain point—with external factors (currency fall, economy weakness with crude fall) compounding an already tough competitive and regulatory environment,” said a 28 April Credit Suisse research report. “Africa Ebitda is near all-time low.”
It seemed like a good idea at the time. To compete with larger, global telcos such as UK-based Vodafone Group Plc. and Norway-based Telenor ASA, Airtel needed a global presence. Plus, its India operations were suffering from a tariff war and expensive spectrum acquisitions; so why not look outside for fresh growth?