Bharti Airtel Hints At Merging Africa, India Operations By 2013

Airtel-Kenya

VENTURES AFRICA – Following a decline in the company’s volume and revenue growth in recent times, the world’s No.4 telecoms company by customers, Bharti Airtel ltd., has revealed plans to merge its Indian and African operations into a single business entity under a global CEO by the first half of 2013 .

In a move to cut cost and generate business synergy across the globe, Manoj Kohli, the joint managing director of Bharti Airtel and Chief Executive of its Africa operations, is likely to head the combined entity, while Gopal Vittal, the Director for special projects at Bharti Airtel, may head either the Indian or African operations. Sanjay Kapoor, the current CEO of Airtel’s India and South Asia business, may head the other territory. The new organisational structure may also see global heads of key functions such as marketing, IT, finance and sourcing & procurement reporting to the global CEO.

According to a report by The Economic Times on Monday while citing an unnamed person familiar with the development said: “A lot can change between now and next year both in terms of the structure and the people.”

Airtel, India’s largest mobile phone company by number of users and sales, with operations in 17 African countries is reportedly taking this step as part of its “One Airtel” exercise to generate business synergies globally.

While Company insiders who spoke with the newspaper said the “One Airtel” move is meant to bridge synergies, cut costs and help the company transform from a voice-led business model to one with data and lifestyle offerings centered on the consumer, they also confirmed that Bharti Airtel is working with leading consultants and headhunters to extend “One Airtel” to all geographies. However,restructuring and the roles of top management have not yet been finalized, and would only be discussed by the board early next year.

Just last August, Bharti Airtel completed its “One Airtel” structure exercise for India and South Asia, which is one of the two current units of the company, accounting for 75 percent of revenue. The remaining revenue is derived from Africa, its other unit.

The newspaper noted that Bharti is searching for its next big thing. Its profitability has tumbled for 10 consecutive quarters, as it is under attack from competitors in India and Africa revival is taking longer than anticipated.

The telecoms company recently admitted for the first time that its loss-making African operations may not meet its target of $5 billion in revenues and $2 billion in core earnings, or EBITDA, for the year to March-end 2013.

Bharti shares have fallen by 33 percent in the past one year.

However, an analyst with a domestic brokerage in a business report was quoted as saying while the company has kept costs low overall by outsourcing a large part of its operations, there is still scope for some reduction in expenditure. It is believed that streamlining the Indian and African operations will lead to some rationalization of top-level employees. Besides, the company has a relatively high bench of employees, and this can be used optimally after operations are streamlined. But these won’t cause a serious dent to overall costs, unless the company is also able to merge functions such as marketing, branding and sourcing of services and capital goods.

Analysts figured that while Bharti Airtel’s Indian Business is expected to grow in the future at a faster pace, it accounts for a small proportion of consolidated revenue, and it is unlikely to push overall growth by much. Meanwhile, the Africa business which grew by only 9 percent in the June quarter is expected to be in the mid-teens at best.