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India's Bharti picks IBM to upgrade its Africa mobile network

22 Sep 2010 12:00 AM | Anonymous

India's top mobile phone firm, Bharti Airtel, said Friday it had chosen United States computer giant IBM to supply information technology services to upgrade its 16 new African networks.

Bharti Airtel, the world's fifth-largest mobile phone company, completed the purchase of Kuwait's Zain's African cellular operations for 10.7 billion dollars in June. The deal included the assumption of a $1.7 billion debt.

The move marks the first significant step by Bharti Airtel to replicate its business model in sub-Saharan Africa, where it aims to nearly triple the current number subscribers to 100 million by 2012-2013.

"There are huge opportunities throughout Africa to transform how people communicate," Bharti Airtel chairman Sunil Bharti Mittal said when announcing the African partnership.

The decade-long joint venture with IBM will allow Bharti Airtel to "deliver innovative and affordable 2G and 3G mobile services across the (African) continent," the New Dehli-based company said in a statement.

Under the agreement, IBM will manage the computing technology, customer and other services underpinning Bharti Airtel's mobile communications network, spanning 16 countries including Nigeria, Uganda and Kenya.

Bharti gave no financial details but analysts have pegged the deal's value at between one and 1.5 billion dollars.

The African venture continues a partnership that began in 2004 when Bharti tapped IBM to run the information technology systems for its Indian network.

Since then, Bharti has seen its growth explode to over 150 million subscribers, becoming India's leading mobile provider.

Bharti said details of the venture are expected to be finalized by the year’s end, adding that IBM also views Africa as the next big emerging growth market as it diversifies revenues.

The African partnership is "a logical extension" for Bharti as it tackles the competition in Africa, said Romal Shetty, executive director of Indian telecoms at global consultancy KPMG.

"It's key to Bharti's success in Africa, there's a huge amount of knowledge IBM has about Bharti and it's logical for Bharti to take them to Africa," he said.

Bharti is facing a tough challenge from MTN, Africa's largest cellular operator, which "has very strong branding across Africa," added Shetty.

The Indian company said it hoped to duplicate in Africa the Indian success of its relationship with IBM, "by lowering the barrier to entry for the people of Africa to own a mobile device."

According to global consultancy Deloitte, only 40 percent of Africans have a mobile phone but demand is growing by 25 percent annually.

Bharti, which pioneered low-cost telecoms in India, hopes to cut Zain's high cost base and win subscribers – and get subscribers to talk by offering lower tariffs.

Bharti is famous for its so-called "minutes factory" business plan – the low-cost, high-volume model that has made it such a success.

"We have achieved great success together in India, and now we are bringing that model to Africa," IBM chief executive officer Samuel Palmisano said.

"By building a 21st-century telecommunications infrastructure for the continent... we expect to help spark transformation," he said.

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