Zain (Africa) Speculation Watch: Episode 12

Zain share price: massive spike since the rumour mill started turning

One loyal reader has suggested it's high time that this blog revisited its most regularly explored theme - the ongoing not-so-mini-series that is Zain (Africa) Speculation Watch.

Note the parentheses around the word 'Africa', a set of punctuation marks that, for good reason, crept into the title of this series in Episode 11. Bracketing 'Africa' in this way was to denote that while this continuing investigation into developments at the Kuwaiti MEA telecoms group was initially focused on the rumours about the sale of Zain's African operations, the focus needed to become a bit wider, i.e. speculating about the future of the whole company. This was due to the UAE's Etisalat informing reporters of its interest in buying a 51% stake in the Kuwaiti group.

Since then, that loyal reader I mentioned has urged me to take note of a couple of possibly quite significant elements of the Zain story.

The first of these is the news that a major Zain shareholder is likely to consider selling its stake in the telecoms company if it receives the right price. That shareholder, the Kuwait Investment Authority (KIA) (the Gulf state’s sovereign wealth fund), owns a 24.61% stake in the operator. According to Kuwaiti newspaper al-Rai, "the KIA has no objection to discussing any offer to buy its stake in Zain whether made by the UAE’s Etisalat or others under the condition that the offer would be serious and with attractive returns."

That, then, looks like pretty positive news for the Emirati telecoms group if its interest in Zain really is very strong.

The other bit that my friendly reader brought to my attention is much more cloak-and-dagger.

My friend tells me he's heard whispers that "the whole Zain thing" has been a ruse set in motion with the sole intention of driving up the Kuwaiti group's share price. By way of support for this assertion, my pal urged me to take a look at Zain's stock chart from March to July. "It's quite amazing what transpired", my correspondent reminds me. Kuwaiti blogger 'Alpha Dinar' concurs, having noted back on July 13th that Vivendi’s USD 12 billion rumored proposal to acquire Zain’s African operations "has stolen headlines for the past few weeks, sparked large volumes, and resulted in a huge spike in Zain’s stock price."

I asked my correspondent whether he felt that the likes of Vivendi (and other rumoured Zain Africa suitors like France Telecom) could really be tempted into declaring their interest and thereby enabling any such ruse to succeed. My friend's response: "If the new buyers weren't really aware of the game, and if the game was well-played, I don't think they would have been able to keep the genie in the bottle. In any case, if Party A wanted to manipulate the share price, they would be the ones leaking and Party B wouldn't have been able to stay in stealth mode. I don't know how likely it is. I'm not saying that's what happened. I'm just saying that the price did indeed jump up quite a bit, and despite the talks having failed, it hasn't gone down that much at all."

My correspondent concedes that games of the kind being alleged here are not terribly common in Bahrain or Kuwait. He asserts, however, that this is a game often played in other parts of the world and that the fact remains that "the stock was even and then - BOOM - a ninety degree angle."

Who knows? Not me, that's for sure.

One company whose talks with Zain could be said to have "failed" is Vivendi, which announced on July 20th that it was "interrupting" the discussions. No reason was given at the time. Since then, however, Kui Kinyanjui, writing for Kenya's Business Daily Africa, has alleged that the French telecoms and media conglomerate's interest cooled following a disappointing trip to her home country. Kinyanjui writes that "a dozen senior Vivendi officials jetted into the country to view close hand one of the Zain operations their company hoped to purchase" and that "they came, they saw, were disappointed, and in the process, a multi-million dollar deal was scuttled." The article describes Zain's struggle to compete with Kenya's market-leading cellco Safaricom and cites unconfirmed information from Kenyan sources which indicates that Zain is "keen to sell its Kenyan, DR Congo and Sierra Leone units, and could consider separate bids from disparate telecommunications firms for those operations."

Such rumours of Zain breaking up its African portfolio and selling off operations piecemeal have been far less prominent than stories of that whole portfolio being sold to a single buyer. One prospective purchaser, however, has expressed an interest in buying up only those Zain-owned opcos which would complement its own existing African footprint.

In a recent Reuters note on France Telecom's need to limit margin erosion, Finance Director Gervais Pellisier is quoted as saying that the French incumbent telco "might look at some of the African assets of Kuwait's Zain if the latter decided to sell them in parts." Any willingness on the part of Zain to consider a piecemeal sell-off of some African assets - as alleged by Kui Kinyanjui - would presumably, then, be music to the ears of Mr. Pellisier and his colleagues.

Were a sale of Zain itself or just of Zain's African assets to go ahead, one stumbling block could come in the form of legal action brought by Econet Wireless, the telecoms group led by Zimbabwe-born businessman Strive Masiyiwa. As a recent Guardian article reminds us, in late 2000, Masiyiwa led a consortium that won a licence to operate a mobile phone network in Nigeria. Econet Wireless had a 5% stake in the consortium and claims it had a right of first refusal to buy out the rest of the network in the event of any bid emerging. A bid did emerge from Mo Ibrahim's Celtel International, but, writes the Guardian's Richard Wray, "a series of legal obfuscations blocked Econet from ever getting the chance to bid."

Celtel was, of course, subsequently acquired by Zain and Wray states that the fast-growing Nigerian mobile phone business now accounts for about half of all the Kuwaiti group's African revevnues. In court, says Wray, "Masiyiwa's lawyers are arguing he should be allowed to buy back Zain's Nigerian business at the price set in 2006, in effect blasting a hole straight through Zain's plans to sell its whole African operation with Nigeria as the jewel in its crown."

Well, another episode of Zain (Africa) Speculation Watch has probably left you not much the wiser. It was ever thus. Let's see what happens in the next installment. Don't touch that dial etc.

Zain (Africa) Speculation Watch: Episode 12

Zain Africa Speculation Watch: Episode 3

Zain-branded retail store in Uganda: needing a new paint job soon?

(image from Honeysun blog)

Telecoms media news sources, analysts and bloggers continue to be divided on the issue of whether there is much substance to the rumours about Zain looking to sell its African assets. Some commentary about this story, which, for me at least, popped up seemingly out of nowhere last week, continues to express a high degree of skepticism. The tone of some writing, meanwhile, seems to present Zain's desire to offload the former Celtel International operations pretty much as a given, focusing on quite detailed analysis of particular challenges that will have to be faced during the process.

Zambian journalist Michael Malakata, for example, writes in terms of how "Zain's efforts to sell its African operations" are likely to be hampered by problems such as a move by Econet Wireless Group to block the Nigerian element of the deal. Just as Malakata's article seems built on the assumption that Zain's exit from the African scene is actually going to happen, he also seems very sure that Orange/France Telecom is set to acquire the sixteen mobile operators supposedly up for sale - rather than Vivendi, whose name has been bandied about very freely these last few days.

Adam Durchslag of Reuters, conversely, seems more interested in examining the case for Vivendi being involved and gets a big thumbs up from me for making a pun of the word za(i)ny in the title of the blog post he wrote yesterday. I avoided the temptation to do so myself, but only just.

In his article, Durchslag picks up on widespread bemusement about how getting out of Africa would make sense in the context of Zain CEO Saad al-Barrak's recently stated ambition for the business to a top-ten global mobile operators by 2011.

With this in mind, Lesley Stones of South Africa's Business Day offers some useful thoughts on what could drive any sale, asserting that while Zain’s African operations accounted for 65% of its subscribers and 56% of revenue in 2008, "they absorb more than 75% of its capital expenditure, yet only account for 15% of net income." Stones states that "while Zain’s net income rose just 6% last year, if Africa had been excluded it would have been up 34%."

Adam Durchslag, meanwhile, considers the idea of a rather different kind of Zain-Vivendi tie-up potentially being on the cards, such as Zain taking a minority stake in the larger French group. If there is any substance to rumours of these two companies being in talks, perhaps that scenario is more likely than Vivendi simply buying operations from Zain. As Durchslag notes, it is worth considering Vivendi's ability to afford a USD 12 billion transaction. He points out that the French group has about EUR 8.3 billion of net debt and, "according to some analysts, has only EUR 1 billion for manoeuvre without jeopardising its investment grade BBB credit rating."

Durchslag then considers another possibility - that of Vivendi, through its Maroc Telecom subsidiary (which owns telcos in Mauritania, Burkina Faso and Gabon) buying only some of Zain’s African operations.

This raises of the question of whether Zain could conceivably be open to the possibility of breaking up its African operation and selling assets piecemeal to groups looking to fill gaps in their pan-African footprints - rather than a single transaction in which the whole lot are sold to a single buyer. Kenyan newspaper the Daily Nation carried rumours on Tuesday that Zain's Kenyan outfit "could end up in the hands of MTN Group, the powerful South African transnational." The article asserts that "MTN has for years been known to covet the Kenyan market", having previously tried and failed to buy the operation now known as Zain Kenya.

Writing for another Kenyan newspaper, Macharia Kamau considers MTN as a possible suitor, but spends more time considering the Vivendi option. In the spirit of Alanis Morisette, Kamau feels that if Vivendi succeeds, this would mark an "ironical" return of the company to the Kenyan market. Kamau reminds us that Vivendi sold a 60% stake in KenCell (the predecessor of today's Zain Kenya) in 2005. Any loyal Kenyan subscribers of this operator's services, therefore, are already on third brand name in a four year period. A further transaction could mean four brands in four years - that's almost as confusing as the regularity with which my favourite football club hires and fires managers.

Even this high degree of brand name turnover, however, would be trumped in Nigeria. Writing for that country's Vanguard newspaper, Prince Osuagwu, notes that if "Zain Group finally agrees to sell its Celtel Africa unit to a bidding French media conglomerate, Vivendi SA this week, the Nigerian operation of the company may be heading for the 6th... name change."

Osuagwu spoke with Zain Nigeria subscribers and reports some discontent at the prospect of yet another rebranding, feeling that some might switch to rival service providers because of "fears that the network might not catch up with competition after going through [the] image crisis that may possibly follow."

Thanks for bearing with me on another long-ish ramble through the Zain empire as I try to figure out whether this is a hot story, a non-story or something in between. There's bound to be a least one more episode in this mini-series. Don't touch that dial. No flipping.

Zain Africa Speculation Watch: Episode 3

The challenges of doing business in Zimbabwe (continued)

In March I wrote about how the trouble political and economic situation in Zimbabwe seemed to be continuing to deter big telcos from seeking to exploit the country's under-penetrated market. One of the many challenges I mentioned then was the operator Econet Wireless suspending post-paid services due to foreign currency shortages.

Since then, it seems that the same operator has had to suspend the sales of prepaid lines, which must have been very damaging given the overwhelming preponderance of prepaid users in the customer base of any operator in an emerging market.

Happily, according to an report from TeleGeography, market-leading Econet Wireless, has resumed the sale of prepaid SIM cards, following recent upgrades to network capacity and regulatory clearance to charge users in foreign currency.

The challenges of doing business in Zimbabwe (continued)

Zimbabwe's troubles deter (most) big telcos from investing

I seem to have been writing about the world's trouble spots rather a lot of late. Continuing in that vein, let me now turn my attention to Zimbabwe, the unhappy scene of human rights abuses and economic mismanagement leading to hyperinflation and general impoverishment. A hotly disputed election and an outbreak of cholera have added to the myriad woes of the southern African nation.

The country's parlous economic condition has naturally affected telecoms operators.

On January 28, Global Mobile Daily reported that Zimbabwe's Econet Wireless had resumed post-paid services, after they were withdrawn in November due to foreign currency shortages. The resumption of post-paid services was made possible by the Government's “belated decision to allow operators to bill subscribers in foreign currency”.

That decision, however, seems to have led to price rises large enough to alarm the Zimbabwean telecoms regulator (POTRAZ), which, according to a recent Cellular News article, has now revised telephone tariffs downwards by up to 40% in a move meant to make services more affordable. This seems to be an interim measure, pending the completion of an ongoing review apparently intended to balance the affordability of services for consumers with the viability of operators.

Given the famously poor state of the country’s economy, it is not surprising that Zimbabwe remains a laggard in terms of mobile penetration, even in the context of Africa, which is itself the continent with the lowest cellular teledensity. According to the World Cellular Information Service database maintained by Informa Telecoms & Media, Zimbabwean mobile market penetration stood at just 12.26% at the end of last year, compared to a 37.73% penetration rate for Africa overall.

This difficult market is contested by three cellcos. Econet Wireless is the dominant player, with 59.61% of the market by December 2008. Last month Global Mobile Daily reported that POTRAZ had invited Econet Wireless and its two existing competitors to apply for 3G licenses. The market-leading MNO has reportedly been ready to offer 3G services since summer 2007, but the commercial launch has been delayed by the lack of necessary frequencies that can only be allocated by the regulator, according to the GMD article.

The other two players are state-owned NetOne Cellular (25.51% share) and Orascom Telcom-backed Telecel Zimbabwe (14.88%). Willingness to Invest in countries whose political and economic climates are not to the taste of other telcos is something of a recurring theme for Egypt's Orascom Telcom. The company made headlines last year by offering mobile services in secretive international pariah North Korea. Other large international groups, however, are strikingly absent from the Zimbabwean scene. None of the bigger African mobile empire-builders - MTN, Zain, Vodacom, Orange - have made a move on what is a decent-sized market with a population of over 13 million. My feeling is that it will not be until there is a serious improvement in the country's overall prospects that any other major groups will be tempted to set up camp in Zimbabwe.

Zimbabwe's troubles deter (most) big telcos from investing

The going gets tougher in African mobile markets?

By writing here quite regularly about developments in Africa, I might have created the impression that I am a regular visitor to that continent. Not so. While it has been my pleasure to meet many telecoms sector executives who work hard to grow their businesses and widen the availability of services across Africa, these meetings have always taken place either on European soil or in the Middle East. Typing with crossed fingers might sound difficult (and painful), but that is what I need to do today because I am fervently hoping to avoid any last-minute problems which might prevent my finally correcting this glaring omission from my experience of world travel. All going well, I should soon be representing my company in Kenya on an admittedly too-short trip to the East African country.

With this in mind, it is perhaps understandable that one article which caught my eye around a week ago was a Financial Times piece about predictions made by MTN boss Phuthuma Nhleko. The influential South African businessman believes the continent will see a wave of telco sector consolidation in the next 1-2 years, and the article contends that this will result from both new entrants and more established competitors struggling to maintain healthy margins in increasingly crowded markets.

At first sight, you might think that there is plenty of room to play in Africa, where mobile penetration stood at just 37.75% by December 2008, according to the Informa Telecoms & Media-run World Cellular Information Service. The FT's Tom Burgis feels that this figure is "far lower than in all other regions." For me, the fact that WCIS logged just 44.64% penetration across the Asia-Pacific region suggests to me that while Africa does stand out, it is clearly not the only part of the world where further robust subscriber growth looks like a possibility.

Despite initially appearing to pick out Africa as the stand-out telco sector investment opportunity of 2009, the FT's Burgis first raises then dashes hopes of truly excellent growth prospects there, arguing that "all but the earliest arrivals in most countries have struggled to make inroads, despite often having to build infrastructure from scratch."

Does that claim stand up to examination? Let's take a look at Africa's most populous state, Nigeria. Here, the country's very first mobile operator is actually among the laggards: WCIS market intelligence suggests that M-TEL, the mobile arm of wireline incumbent Nigerian Telecommunications Limited, had fewer than 260,000 subscribers at the end of 2008, down from around 700,000 in December 2006. At the end of 2005, M-TEL subscribers numbered over one million.

So what has caused this alarming exodus of M-TEL customers? While the success of MTN and others has hurt in recent years, the arrival of the South African cellco's Nigerian subsidiary in 2001 did not immediately cause a reversal of M-TEL's fortunes. Quite the reverse, in fact. The country's first-to-market MNO continued to grow well when MTN and fellow 2001 entrant Econet Wireless Nigeria hit the local mobile scene.

Any subscriber loyal to the latter ever since its launch would be forgiven for having become a bit confused by regular branding changes. Econet was redubbed Vee Mobile in 2004 as a result of a protracted wrangle that I won't even try to summarise here. 2006 saw another rebranding when the MNO was acquired by Celtel International, another transaction not without twists and turns. A notable difficulty was the the last-ditch attempt by Econet Wireless to block the USD 1 billion acquisition. At the time, Informa's Global Mobile reported that Econet, as a co-founder of the cellco, had "long asserted preemptive rights" and was claiming to have "raised more than US$1.5 billion to acquire the company" while protesting that it had been "prevented from making payment."

By the time Celtel brand made its debut in Nigeria, the pan-African mobile group founded by Dr. Mo Ibrahim had already been acquired by Kuwait-based MTC, now known as Zain. In 2007, when MTC came up with the Zain brand, it was announced that the Celtel name would continue to be used across the group's African footprtint, at least for a while. As Global Mobile Daily reported at the time, the the decision to retain the Celtel name "was aimed at maintaining continuity", precisely because of how recently the operations in Nigeria and Kenya had been rebranded.

Fast forward to August 2008: after barely two years of operating with the Celtel name, the Econet-Vee Mobile-Celtel branding roadshow arrived at its most recent stop.

"Zain wants to be one of the top 10 mobile operators in the world within the next three years, and it has developed the Zain brand as the main vehicle for that global aspiration, because the company sees mobile telecoms as a commoditized business in which branding is one of a few important differentiating factors that are available to it," said my former colleague Matthew Reed at the time. Matt, the Middle East & Africa Intelligence Centre editor continued with words of warning: "Celtel is one of the best-known and most successful homegrown brands in Africa, and there are risks - as well as huge costs - in rebranding the Celtel operations. Zain also regards its One Network scheme as an important differentiator, but to some extent it can be copied by other multicountry operators."

The Nigerian market entry of MTN and Econet-Vee Mobile-Celtel-Zain (phew!) was enabled by the January 2001 auction of some GSM licences, with one reserved for existing player M-TEL, which up to then had run a TACS network used by around 40,000 subscribers. My understanding is that the Nigerian Government had intended to sell three licences in addition to the one put aside for M-TEL. One of these was not used.

One 2001 AllAfrica article that I found today tells the story of how Mike Adenuga, a billionaire businessman, banker and oil mogul had hoped to take part in the country's GSM revolution. His company, Communications Investment Limited (CIL), had emerged as one of the auction winners of the three slots auctioned by the government, but, the article states "barely a month later, things [had] turned sour for CIL and its quest for a digital mobile telephone licence." What went wrong for CIL, continues the article, "depends on who you talk to" with the the Nigerian Communications Commission saying that "CIL failed to pay for is licence in time" and CIL saying "it had demonstrated that it had produced the funds but was delaying the final stage of payment, because it was trying to clarify the status of the frequency it had been allocated."

"When you begin from day one with a frequency that is encumbered, that puts you at a disadvantage with your competitors," a spokesman for CIL told Allafrica at the time, adding that CIL "realised that the frequency given to it by NCC had previously been awarded to another company, and was the subject of a court case."

After this frustrating delay, Mike Adenuga finally got to compete in the Nigerian mobile arena in 2003, when Globacom launched services. Since then, the company has gone on to acquire over 16 million subscribers, including the roughly 30,000 that have been persuaded of the value of 3G services since Globacom's W-CDMA network launch in February last year. Going to market later than the 2001 auction winners does not seem to have prevented Dr. Adenuga's company from establishing a solid presence in the market, although it is worth noting that Globacom's market share has been declining fairly steadily since peaking at around 31% in the Spring of 2007. Globacom, now with a 25% share of the Nigerian market, has sought growth opportunities elsewhere in West Africa, rapidly establishing a solid presence in Benin and buying a mobile licence in Ghana, where sub-50% mobile penetration and a population of over 20 million may present a good growth opportunity.

Given the MTN CEO's comments reported by the Financial Times this week, it will be interesting to see if Globacom's foray into Ghana proves challenging in terms of maintaining decent margins. Back in Nigeria, we can watch how Etisalat manages to fare, having entered the market as recently as last year. Despite Globacom being pushed back in terms of market share over the last couple of years, with 16 million subscribers, it seems hard to argue that going to market later than its competitors has hurt the company badly in the sense of establishing a presence.

I will be interested to see how far an examination of further African markets in future posts will dig up evidence to support the notion that the going is about to get tougher for new entrants and established players alike.

The going gets tougher in African mobile markets?

Bharti Airtel to go international in 2009? Could competitive pressures at home make it a must-do strategy?

Earlier this month, I was wondering where MENA region-headquartered groups such as Orascom Telecom, Etisalat, Zain etc. might next go shopping for extensions to their empires. I discussed the view that the current economic climate has created a nice opportunity for Gulf-based telcos. That view was echoed this week by my former Informa Telecoms & Media colleague Nick Jotischky, whom I last saw in Dubai last December at GSM>3G Middle East, the final Com World Series event in which I was involved before leaving the company.

My guess for a while has been that any telcos struggling in the current climate may be prepared to sell off assets at rather lower prices that they would consider in happier times, hence the opportunity for MENA region players. Moreoever, writing this week, Nick notes that traditonally strong and expansionist mobile players such as Orange/France Telecom and Telenor are now more reluctant to get involved in further acquisitions activity, which may make the prices of potential targets lower still for Gulf region telcos looking to expand further. In Nick's article, he wonders whether powerhouse cellcos from China and India might also have the appetite for global expansion. "Some say the global mobile telecoms industry could go the way of the steel sector, which is largely dominated by emerging market players," writes Nick.

Nick notes that Bharti Airtel and China Mobile are the leaders of the two fastest-growing mobile markets in terms of subscriptions, with India adding just over 100 million subscriptions in 2008 and China 89 million. Nick feels this means that these two giant cellcos are therefore focusing on their domestic markets, noting that China Mobile is also busy rolling out its TD-SCDMA network. Bharti Airtel, Nick asserts, "has intense - even brutal - competition to contend with while preparing to launch its 3G network."

One element of the tough competitive environment in India is the fact that state-owned operators BSNL and MTNL have beaten Bharti Airtel and other private sector MNOs to the punch in terms of going to market with 3G services. According to a telecoms.com article, BSNL has rolled out 3G services in an additional eleven cities following the launch of its first 3G service in Chennai earlier this month. MTNL, meanwhile, has launched 3G services in central New Delhi with the stated aim of attracting 200,000 to the service within two years.

The article notes that "if BSNL and MTNL were to have a substantial head start over 3G rivals, particularly if the spectrum auctions, as many industry commentators now believe, are unlikely to take place until the end of this year, the licences would surely look less attractive to investors weighing up India's 3G opportunity." If this has the effect of driving down the amount of money the Indian Government is able to raise through the long-delayed auctions, the article continues, this too could work to the advantage of BSNL and MTNL because the price they both have to pay for their 3G spectrum has to match the highest winning auction bids in each of the respective circles.

As the telecoms.com article also notes, BSNL also has a first-mover advantage when it comes to BWA spectrum because while the BWA auctions are scheduled to take place the same time as the 3G licence awards, "BSNL is already sitting on a chunk of pan-Indian 20MHz spectrum in the 2.5GHz band." Again, the article continues, BSNL does not have to pay for its BWA spectrum until the BWA auctions take place.

In the mobile space, Bharti Airtel, with 26.38% of subscriptions according to the World Cellular Information Service, leads a select group of larger Indian cellcos. Other major players include Vodafone Essar (18.77% market share), Reliance Communications (16.63%) and Idea Cellular (11.71%). Of the two state-owned 3G early movers, BSNL is another significant player, occupying fourth place in the market with 12.74% of subscriptions. MTNL, which is also active in wireline telephony and CDMA WLL, is a much smaller GSM mobile player, with only 1.20% of subscriptions.

Of the few further existing opertators with single-digit market share, one in particular has been in the news quite a lot of late. CDMA network operator Tata Teleservices (7.01% market share) has announced that it will be seting up 100 new cell sites in the state of Gujarat by August, according to a Business Standard story today. This seems to be the latest component of a drive to extend the geographical reach of the Tata network. In October, Global Mobile Daily reported the company's plans to expand its services into the Jammu and Kashmir operating circle by the end of November, thereby becoming the fourth operator in that market alongside BSNL, Bharti Airtel and Aircel. The war chest for this expansion will be boosted by the USD 822.67 million which Tata Teleservices raised by selling a 49% stake in its tower unit to Quippo Telecom Infrastructure, a deal which was announced in January.

The CDMA operator has certainly been deemed attractive by NTT DoCoMo of Japan, an existing shareholder which has had a move to add a further 20.25% stake in the business approved by India's cabinet, according to a Global Mobile Daily story of 24th February. This stake was up for grabs because its previous owner, the broadband player Tata Communications was strapped for cash and had pressured the Indian Government to allow the sale of a share in the CDMA mobile operator, according to an earlier Global Mobile Daily article, which reported that Tata Communications has been "particularly hard hit by the credit crunch and that the operator has told the Department of Telecommunications that it will be nearly impossible for it to carry out its business plans unless it receives new funding."

Government approval was needed because the state holds a 26.12% stake in Tata Communications, formerly known as VSNL, and was therefore able to veto the sale of the company's stake in Tata Teleservices, in which DoCoMo already owned a 26% share. According to yet another GMD story in January, Tata Communications is also planning a USD 51 million bond issue to help finance its bid for WiMAX spectrum.

Tata Teleservices is aiming to grow further by addressing the relatively untapped rural market, having done a deal with Impetus Infotech India to launch services for value-added services aimed at farmers and related communities, providing updated information on current prices of commodities across the country. According to the Business Standard article, Tata Teleservices expects around 60-70% of new additions to its subscriber base to come from rural areas.

Tata Teleservices may also ratchet up the competitive pressure in India's mobile market by enabling Virgin Mobile India, in which the CDMA MNO owns a 50% stake, to enter the GSM space. Prior to reading an Economic Times article earlier this week, I had not realised that Tata would be following Reliance Communications in migrating from CDMA to GSM family technology. This mobile standards migration seems to me quite reminiscent of what has happened in Brazil, where the operator Vivo, which had been the lone CDMA player, chose to make the move to GSM in order to compete more effectively with its rivals.

At present, Virgin Mobile is positioned as India’s first youth-centric mobile service, according to this week's Economic Times piece, and its services are offered on the Tata Teleservices CDMA network via a brand franchisee arrangement.

"Our agreement with TTSL is technology neutral. At present, our services are restricted to CDMA. Once TTSL unveils its GSM network, we will extend the Virgin services into GSM as well," says Virgin Mobile India CEO M.A. Madhusudan. The article states that Virgin Mobile is now gearing up to launch its GSM service as soon as Tata Teleservices does. "Nearly 73% of the Indian mobile market is controlled by GSM operators. An entry into GSM will help us to expand our addressable market and also increase our average revenue per user. Currently, our ARPU is nearly 30% higher than the industry average," said Mr Madhusudan. The article continues: "In a bid to expand its portfolio, Virgin is also keen to enter the business phone segment", qouting Mr Madhusudan: "We are in talks with multiple handset vendors, including Research in Motion... there are also plans to launch data cards."

CDMA operators migrating to GSM. Virgin Mobile beefing up its MVNO play. State-owned operators stealing a march in the 3G space and in the WiMAX services arena. I imagine this is what Nick Jotischky meant by 'brutal' domestic competion for Bharti Airtel. I can therefore understand speculation about India's mobile market leader looking beyond the borders of its home country for growth opportunities. As Nick noted this week, the Indian cellco has shown its hand before, having failed in a previous bid to acquire South Africa's MTN. Nick feels that "as an operator with proven experience of coping with the lowest tariffs in the world while sustaining growth, Bharti would have an innovative approach to the challenges presented by African markets" and argues that "at the root of this innovation in India is Bharti's use of outsourcing, in not only its network and IT functions but also its call-center and customer-relationship services." Nick feels that this kind approach would be an alternative to the one taken thus far by African operators and says that "it will be worth watching how new entrant Econet Wireless Kenya fares, having pledged to use outsourcing as a key strategy."

Nick feels that China Mobile, meanwhile, may be encouraged by recent success in Pakistan and go on to expand elsewhere in Asia. China Mobile's Pakistan outpost, CM Pak (branded Zong), has, in Nick's view, built its success on cheap tariffs and an aggressive network rollout plan. Nick notes that "a sign of that success is the fact that in 3Q08, CM Pak added more subscriptions than any of its rivals."

Nick conludes his article by predicting that "we can expect China Mobile to stretch its Asian coverage and Bharti [Airtel] to return to Africa," but feels it would probably be premature for either company to reach out any farther. I have thought about the China Mobile case a lot less, but having considered the many competitive pressures endured by Bharti Airtel at home, my guess is that the Indian cellco must be thinking very seriously about where it might extend its footprint.

Bharti Airtel to go international in 2009? Could competitive pressures at home make it a must-do strategy?