01 Jun 2012
Think Locally, Act Globallyby Garry EmmonsTopics:
Issue Focus: The Global Manager
In 1976, in India’s Punjab region, 18-year-old Sunil Bharti Mittal (OPM 27, 1999) borrowed a modest sum from his father and founded a business making crankshafts for local bike manufacturers. He first dialed in to telecom in 1983 when, on a trip to Taiwan, he saw the popularity of electronic, push-button phones. At the time, India had tough restrictions on importing consumer products, so Mittal brought in component parts and built and sold his own phones. In 1992, after reforms by India’s government improved the country’s business climate, he formed a consortium that included SFR-France, Emtel-Mauritius, and MSI-UK and bid successfully for one of four mobile-phone network licenses auctioned by the government. Three years later, Bharti Airtel launched mobile services in Delhi and in time became India’s largest telecom company. Then, looking overseas for new markets, Mittal decided on Africa, where mobile penetration is still only about 40 percent, and 60 percent of the continent’s 1 billion people are under 25.
In 2010, for an enterprise valuation of US$10.7 billion, Bharti purchased from Zain, a Kuwaiti firm, its mobile operations in 16 African nations. “It would have taken us years to achieve Zain’s scale,” Mittal explains. “Furthermore, our business model fit beautifully, and the only other major challenge was that of cultural integration.” Within two years of buying out Zain, operating in Africa as Airtel, Bharti has added more than 14 million new mobile customers (for a current total exceeding 50 million), while investing approximately US$1 billion in network infrastructure.
Some observers opined that Southeast Asia’s markets appeared more similar to India’s and a more logical move than expansion into so many disparate African countries. Mittal begs to differ: “Africa’s improving political climate, encouraging social and economic development indicators, and a large, youthful population give it a solid platform for growth.”
As for the cultural issue, Mittal notes that India and Africa have a shared past—in trade relations and, in the diplomatic realm, cooperation during the heyday of the Non-Aligned Movement—that has helped build trust and familiarity. And Mahatma Gandhi’s campaign against British rule, begun in South Africa, inspired freedom movements in several African nations. Although Mittal says Bharti would have moved into Africa anyway, these long-standing ties no doubt eased the Indian company’s welcome. But from early on, Mittal points out, Airtel engaged with all its stakeholders based on the merits of its own operation. “We are now in 17 African countries,” Mittal observes, “and it’s essential that we keep local requirements in mind. All regional and country heads run their operations independently, reporting to Bharti Airtel senior management at our Nairobi headquarters. We empower local managers even as we strengthen our management processes with an eye to future growth.”
Africa also looked like fertile ground for the same partnering approach Bharti first developed inside India—blending multinational and local-management skill sets—to forge success in a cross-border, globalized enterprise. Says Mittal of the Bharti model, “We’ll never have the domain knowledge that world leaders in IT or networks have. We’ve had to focus on what we know best: getting customers on to our network and giving them a great experience. So just like India, in Africa we outsourced to, and partnered with, IBM for IT and Ericsson, Nokia Siemens, and Huawei for network. If we do well, then they do well. It’s that simple.”
This low-cost model helps Bharti reduce operating costs and pass savings on to customers. With aggressive rollout and marketing, this approach has helped make India the second-largest mobile market in the world, with the lowest tariffs globally, a model that has been adopted elsewhere internationally, Mittal notes.
Looking ahead, by diversifying into emerging business areas in India’s booming economy, Bharti’s goal is to become “India’s finest conglomerate” by 2020. Meanwhile, in Africa, consumer spending is estimated to reach US$1.4 trillion by that date. Maybe that global big picture is another good reason why the irrepressible Mittal is smiling these days.
Class of OPM 27