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From India, With Ingenuity

The need to cut costs and take telecommunications to far flung African communities has seen India drive into this continent’s market.

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Indian companies like Bharti Airtel are pioneering the telecommunications industry in Africa using bold business strategy and the experience they gained from opening up communications in their own country 20 years ago.

“When we took charge of Zain’s African operations, we made a commitment to bring world-class, affordable mobile services to customers in Africa and take our networks deep into rural areas,” says Manoj Kohli, joint managing director and CEO of Bharti Airtel’s international operations. This radical move immediately established Airtel as the world’s fifth-largest mobile service provider, immediately gaining 42 million customers. This unique business trend is being employed by Indian companies in Africa, who have adopted a strategically integrated approach to doing business. By integrating socially, politically and economically into 15 African countries, they differ in strategy from their Chinese counterparts, who tend to operate in isolation, importing Chinese workers and goods. Arthur Goldstuck, an expert analyst in telecommunications in Africa, says Airtel’s aggressive marketing strategy of cost cutting and increased volumes is making inroads into the East African market.

According to Goldstuck, this approach to price fighting in Africa and bringing down the costs of calls, SMS and data has dropped the average tariff in Kenya from 12 shillings in June last year to three shillings. Kohli believes it is incorrect to look at tariffs alone. “We have simply corrected the 20-30% premium that Zain was charging over the normal price. This was unsustainable and we brought the tariffs to more affordable levels for the customers.”

The socio-economic spin-offs of Airtel’s presence has contributed greatly to improving the lives of people, especially in the remote areas, says Dobek Pater, telecommunications and market analyst at Africa Analysis. An increase of 10% in teledensity (the proportion of cellphones in use by every 100 people in an area) is almost equivalent to 1% of GDP growth in some of these countries. However, technical challenges on the continent can be enormous. Initial investment is required to develop infrastructure, which can be very high. Extensive rollout of base stations is necessary for any network to expand into Africa, which is both expensive and time consuming from a regulatory and infrastructural point of view. Airtel has received support from governments across all markets, who share its vision of taking the benefits of telecom to every corner of the respective countries.

The Indian business strategy of social and political integration is key to doing business in Africa, and is the ingredient that has seen Bharti and Neotel successfully expanding their networks and distribution to cover a larger population, particularly in rural areas. The sharing of passive infrastructure in African countries also avoids unnecessary infrastructure duplications and helps bring down costs for the industry. Sunil Joshi, CEO of Neotel, says their approach to human capital development is unique and effective. The establishment of the Neotel Training Academy, where 30 people are currently being trained in telecommunications, is a benchmark of social and economic integration as 70-80% of these people will be employed by Neotel. “We believe in leveraging local resources within South Africa and getting the local context by engaging with government and ICASA. Our approach is to socially align with what the needs in the country are. For example, currently we employ 1,000 people in South Africa, of which the majority is local. We are also very proud of the fact that in terms of BEE we have a level three listing, which shows that we give the right focus in terms of the local dynamic.”

 

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