Tuesday, 26 May 2009

Bharti- MTN merger

Why? And why now?

Bharti (India's largest mobile service company) has announced plans to pursue once again a merger with MTN of South Africa. (click title to read more on this).

Bharti is a phenomenally successful company. WIth 100 million subscribers in India, revenues of USD 8 Bn and profits of USD 1.7Bn, it is by far the leader in the Indian market.

I am proud of this company which has set new standard in the business. It was the first company to completely outsource its IT infrastructure and hence reduced hugely its costs. Thereby giving customers prices of Rs 1 per minute of talk time (2 cents per minute).

Now, It wants to expand globally, and is looking at emerging markets as a first step.

I wish the company every success, but i am not clear why they should want to do this.
India has 300 million subscribers and this is expected to rise to 600 million in another 5 years. Bharti can double its subscriber base in India itself. Why go out?

If costs need to be reduced, they can be done in India, as the size of the company's customer base doubles. If this is urgent, why not merge with AT&T?

Is it about management resources? I dont think Bharti needs to look out of the country to get that.

In addition, i dont think the company has exhausted all sources of growth in India. Value added services are still in nascent stages, customer segmentation and customer service can be improved, there are new businesses such as IPTV where Bharti is making a play.

Surely the company is confident it has the resources to handle the demands of the Indian market as it ventures abroad. This is a very interesting and exciting move. And i repeat i am proud of this company and its ambitions.

The Indian press this morning is full of stories of how the merger will be executed and what the final company will look like. But take a minute folks, and help me answer two basic questions:

Why? And why now?


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