Monday, July 12, 2010

Africa - Airtel is rebranding Zain and investing substantially to increase teledensity

[the new vision] Bharti Airtel, the Indian telecom giant that recently acquired Zain Africa operations for $10.7b has promised to take market leadership in most of its operations. Yesse Oenga is the boss of Zain Uganda, that will rebrand to Airtel after the takeover, and speaks about how this will tilt the industry.

With the acquisition of Zain by Bharti Airtel, how are you planning to grow the subscriber base?

Bharti has just taken over and there is the stated intention of investing in the market. The whole idea is to take coverage to the furthest and also deliver new technologies for broadband. That is the stated intention.

The opportunity they find is teledensity is still low but this is a product of investment levels and how we are evolving as a sector. Telephony penetration is still just at 30%.

How will Bharti Airtel take advantage of the low teledensity?

By investing in expanding coverage to address gaps in low teledensity and the virgin rural market. We will use the sunflower model which ensures efficient investment in technology, reduced costs in technology and, therefore, allowing affordability.

In India, the average usage is about 450 minutes per person per month but it is 80 minutes in our part of the world.

What is your strategy to reign in on the high tariffs?

Bharti is coming to bring in efficiency and drive affordability and ultimately delight the consumer by leveraging scale partly using resources from India where the brand is by far the market leader.

We are not a first world economy and, therefore, affordability is critical. The Indian model to be able to do 450 minutes when we are doing 80 minutes is our approach-getting high quality networks that cover all the areas then you work with partners like Ericsson, IBM, Nokia who won and manage the technology.

Using the technology where we buy all the towers is not going to be tenable.

The idea of having seven masts on a hill when one can do is going to the past. That waste must go and costs will come down. If there are several masts, ultimately the consumer meets the costs.

When you are dealing with technology suppliers you get their efficiencies then you agree what the economic model should be so that they can make money. This is a long-term arrangement.

Manoj Kohli, Bharti joint MD, last week mentioned the high interconnection fees between telecoms that also impacts on tariffs, saying it is too high for this market. How will you help lower this?

This is an industry issue. It is now down to sh131 from sh180. The pressure is going to be to take it lower and it is a dialogue that we will progressively engage in. It is a global reality that costs are going down.

What role do the small players have in this discussion that seems to be decided by the market leaders?

The industry is interconnected. There will always be give-and-take and there will always be issues that favour one today.

I expect that both the big and small players have a stake. The product of the last adjustment was work done by the Price WaterHouseCoopers. We were asked to share our cost models. Disputes will always be there, we will fight.

When the elephants (giant telecoms) fight, will the grass (customers) not suffer?

In our case when you kill the grass (customer), you the elephant suffers.

There are reports that the rebranding process will be complete in three weeks, is this true?

No, all we know is that there will be a rebranding process towards end of this year. The process of planning and preparing is ongoing.

So what will be the new name after the rebranding; Bharti or Airtel?

The brand will be Airtel.

How will the takeover help to boost local human resource skills and the expertise of Ugandans?

The consistent model is to bring efficiency in technology. It was developed in India.

The whole idea is transferring the knowhow in areas where there is need. We nurture this talent and get it exposed.

The size of the market of 130 million in India is obviously not the same like here and this brings insights, especially for the talent we have here, when they go to India and get exposed to this market. We have been asked to prepare a few people for that market.

What impact will this have on Uganda's human resource then, will we have some local chief executives?

It will be good. Currently, we have a chief commercial officer in Zambia who is Ugandan, a human resource director in Kenya is Ugandan and we have three people in Amsterdam and Bahrain. We have people in Sierra Leone, Nigeria. As a result we are growing African talent.

The Zain one network has been a success for East Africa, can we have this platform across Asia and Africa now that we have Bharti Airtel?

If we can have Asia and Africa fusing, why not?

I expect that this will be a natural thing. The game is about consumers and we try to provide what they want.

What is your strategy to move into the equally untapped broadband market especially with the coming in of the sea cables?

Airtel is an investor in EASSY which lands in about two months time.

Zain was largely connected to SEACOM.

The new one (EASSY) brings more benefit. You will see us very active taking advantage of these undersea cables.

Has Zain severed its contracts with ZK Advertising?

Advertising agencies are centrally decided. The decision to appoint ZK was made at the group level. Getting another agency to run Airtel was a group decision as well.

The telecom sector was also severely hit by the global financial slowdown last year, have things improved?

It is growing, we are enjoying the confidence of consumers who know the recession is over. Why Zain is Rebranding

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