Outsourcing, managed services, and more generally cost-reduction strategies have been major areas of interest in African telecoms markets in the past couple of years, as the decline in ARPU levels started to have a impact on revenues which was not compensated as much by the organic growth experienced until then. African operators began to work on their costs and look more closely at their margins rather. At last year’s AfricaCom congress, Zain Africa’s Chris Gabriel gave a keynote speech in which he presented the key points for a sustainable business models: scale and efficiency were at the top of his list, and most operators investing in Africa would have agreed.
Indian operators are renowned for business models that excel at optimising scale and efficiency, in order to achieve strong margins in very low-ARPU markets. The “Indian model” has been praised as the champion of emerging markets, and it is no wonder that it is often mentioned as one to emulate in Africa. Indeed, a number of Indian companies have been trying to enter the continent, with Essar in East Africa, Tata in South Africa and, as announced this month, Bharti in talks with Zain group to buy its African operations. The move would make sense, as Bharti would bring its knowledge of low revenue markets to operations which need a shake-up. In particular, it could develop interesting value-added services, for example on the content side. I met an Indian VAS vendor who was talking enthusiastically about how mobile content is driven by the same two obsessions in India and Africa: music and sport (although the sports people are so passionate about are different: cricket in India and football in Africa).
But is it as straightforwad as it sounds? Talking about the Bharti-Zain news with participants at Mobile World Congress last week, I heard some questions about how easily Bharti could work its magic in Africa. The company has limited experience of the continent - or indeed of any market outside India – and working cultures are very different. In India, Bharti can count on a relatively well-trained workforce, which will be harder to find in some African markets, unless it brings in its own staff. In addition, it would be unfair to say that Zain hasn’t attempted the so-called Indian model in its markets, outsourcing key areas to reduce costs and concentrate on selling services. But the group’s efforts haven’t been as rewarded as its backers hoped for, and some of its operations have amounted huge debt.
Changing business models, and the new ownership trends in Africa’s telecoms markets, will certainly be key topics of discussion at this year’s African events in the Com World Series. We are currently drafting the programmes for the new NigeriaCom event in Lagos in September, and for the annual AfricaCom in Cape Town in November. Now is the time to get in touch and give your input.