Bharti outsources African IT to IBM
15 October 2010 |
Bharti Airtel has appointed IBM to manage its IT operations in the 16 African countries where it now owns a network in a move to control costs in its overseas investments.
The 10-year outsourcing contract, estimated at more than $1 billion in value, will see IBM consolidate the Indian carrier’s technology operations across Africa into one integrated system. The deal, the details of which will be finalised before the end of the year, will include the management of all IT applications, data centre operations, servers, storage and desktop services.
IBM already provides similar services to Bharti Airtel in India, where the telecoms company has more than 140 million mobile customers. Bharti has said it expects to be able to leverage experience of the Indian market in Africa. Both continents are noted for their low average revenue per user (ARPU). IBM plans to increase mobile subscriptions in Africa by lowering the cost of services.
Ajay Chitkara, chief operating officer for Bharti Airtel’s global data business division, said that African enterprises as well as consumers would soon benefit from new services from the operator: “We will target the IP market with our strong IP backbone worldwide,” he claimed. “Our aim is to unleash the true power of affordable, high-speed bandwidth for end users in Africa. Our full suite of integrated telecoms offerings together with our end-to-end service modules will help customers in the region to leverage the power of various productivity enhancing applications and solutions.”
Bharti Airtel became involved with the African market in June of this year with the $10.7 billion acquisition of Kuwaiti operator Zain’s mobile network assets on the continent, followed more recently by the buy-out of Telecom Seychelles.
Bharti Airtel is reported to be close to selling the mobile phone towers it acquired from Zain to its Bharti Infratel infrastructure subsidiary. The deal, combined with the savings made through the IBM outsourcing arrangement, will help it fund future African activities, say analysts.
“Bharti Airtel’s agreement with IBM to consolidate and outsource its IT functions affects around 72 million subscribers,” said Andy Hicks, research manager for telecommunications with analyst firm IDC. “We expect growth numbers in these 16 countries to follow the typical Sub-Saharan pattern – subscriptions will continue to expand rapidly, but average revenue per user will fall as mobile phones spread to poorer and more rural populations.”
Hicks said that Zain’s failure to turn a profit in Africa does not necessarily bode ill for the Indian operator: “Bharti Airtel’s Indian market model involves driving OPEX as low as possible while encouraging high network utilisation,” he said. “Bharti, which has announced that it will bring its African operations under the Airtel banner in October, feels urgency on two fronts. First, it is spending to shore up network quality, rural coverage and customer care in advance of the rebranding. Second, it needs to cut debt and operating shortfalls to avoid credit downgrades on top of the ones it incurred when the acquisition closed.”
Hicks said he understands that Bharti Airtel is also looking to pursue network sharing to further cut its African cost base.