Bharti, Big Blue connect again, this time for Africa...

Bharti Airtel has begun replicating the successful India telecom model in Africa and has even roped in IBM to manage the computing technology and services that power its mobile phone network spanning 16 African countries.

The two companies have signed an in-principle pact, with the agreement expected to be finalised by the fourth quarter.

The 10-year agreement is estimated to be worth $1-1.5 billion.
In India, Bharti is already in a long-term pact with IBM for IT support. The initial agreement between the two was worth around $750 million in 2004, which has since scaled up to $2 billion.

Bharti had pioneered the outsourcing model in India, by engaging with firms such as IBM, Ericsson and Nokia Siemens for IT and infrastructure requirements, so that it could focus on the core telecom business. Bharti’s outsourcing model was picked up by all major telcos in the country.

Ever since it acquired the African operations of Kuwaiti firm Zain Telecom earlier this year, Bharti has maintained that the Indian model of low tariffs and high usage would be carried to Africa. So, the outsourcing route looked inevitable.

The strategic partnership with IBM is expected to help Bharti scale up the network of the African operations of Zain to more than 100 million customers by 2012, from 45 million now.

In India, Bharti has around 150 million mobile phone subscribers.
Kamlesh Bhatia, principal analyst at research firm Gartner, said the deal size between Bharti and IBM would depend on how it has been structured. His estimate is upwards of $1 billion. “The actual value would depend on the risk and rewards components and how the deal has been structured,” he said.

Zain was a loss-making venture when it was acquired by Bharti, Bhatia said, adding, “Bharti’s priority would be to turn it around.”

The agreement with IBM would result in higher efficiency in back-office operations, and therefore contribute to its profitability, he said.

As for IBM, the agreement would give it a chance to carry forward the emerging market story. “This could result in similar deals for IBM in the telecom sector and beyond,” said Bhatia.

“When completed, the agreement will extend a deep relationship between IBM and Bharti Airtel that was established in 2004 when South Asia’s leading mobile communications provider tapped IBM to run the IT and applications for its entire Indian network,” Bharti said in a statement. Since then, Bharti’s subcsriber base has grown from 6 million to more than 150 million now. “Bharti plans to replicate the success of its relationship with IBM by lowering the barrier to entry for the people of Africa to own a mobile device,” it stressed.

Bharti CMD Sunil Bharti Mittal said, “There are huge opportunities throughout Africa to transform how people communicate and how communities interact. Delivering on that opportunity through affordable mobile communications for everyone is our focus.”

Samuel J Palmisano, chairman, president and CEO of IBM, said in a statement that the company’s relationship with Bharti Airtel was “a powerful example of building a smarter planet. We have achieved great success together in India, and now we are bringing that model to Africa.”