Bharti Airtel set to become global mobile superplayer - New Wireless Intelligence operator ranking sees Indian market leader enter top five

Bharti Airtel’s planned acquisition of 15 of Zain’s African mobile networks will make the Indian firm one of the five largest mobile groups in the world by subscriber connections, according to the latest GSMA Intelligence operator-group rankings. The latest global rankings are based on fourth-quarter 2009 connections data (see table) and are calculated on a pro forma basis to demonstrate the impact of the enlarged Airtel Group. On this basis, the ranking reveals that Airtel – ranked eighth in last year’s ranking - will overtake Norway’s Telenor Group, Deutsche Telekom and China Unicom to become the world’s fifth largest mobile operator group on just under 170 million global connections.

Airtel is to takeover Zain’s mobile operations in 15 African countries: Burkina Faso, Chad, Congo, Democratic Republic of Congo, Gabon, Ghana, Kenya, Madagascar, Malawi, Niger, Nigeria, Sierra Leone, Tanzania, Uganda, and Zambia. According to Airtel, the 15 networks cover a total population of over 450 million with telecom penetration at approximately 32 percent. As well as its home market of India, Airtel also launched in Sri Lanka in 2009 and acquired Warid Telecom in Bangladesh in January 2010, bringing its total to 18 markets, a global footprint surpassed only by the large European operator groups and its new African rival, MTN. Based on Q4 2009 pro forma data, international (non-Indian) markets will account for around 30 percent of Airtel’s total connections following completion of the Zain deal.

Airtel is to acquire the African networks in a deal worth US$10.7 billion (which includes around US$1.7 billion in debt), making it the second-largest African operator group behind MTN, which remains ranked at number twelve by global connections. The two operators will compete in a number of key African markets, including the largest, Nigeria. Zain Nigeria – the country’s third largest operator – will become Airtel’s single largest subsidiary outside of India, accounting for about 35 percent of its international connections base.

Zain intends to sell all but two of its African mobile assets to Airtel, the exceptions being the wholly-owned Zain Sudan (a market leader in the country) and its 15.5 percent equity stake in Wana (ONA) in Morocco. The divestiture means that Zain’s global footprint will be reduced to just six markets and sees the Kuwaiti-based firm drop to number 46 in our rankings on a pro forma basis. Zain ranked number 18 in our study last year and – prior to the African divestitures – had set itself the target of becoming a top ten global operator by 2011.

Meanwhile, the latest operator rankings reflect the unprecedented levels of growth in India, which added more than 50 million net new connections in the fourth quarter and is adding almost 20 million a month in 2010. Alongside growth at market-leader Airtel, second-placed Reliance Communications moved up nine places to become a top ten operator for the first time, overtaking the two US giants – Verizon Wireless and AT&T – in the process. Three other Indian operators also entered the top 25 for the first time: the recently merged Idea Cellular and Spice Telecom (#21), Tata Teleservices (#22) and state-owned operator BSNL (#23). India was also the main driver of connections growth at UK-based Vodafone Group, which remains the second-largest operator group in our ranking. Its Indian arm, Vodafone Essar, is adding around 8 million new connections a quarter, enabling the group to extend its lead over third-placed Telefonica to over 100 million connections (compared to a lead of less than 60 million in our earlier study).

China Mobile comfortably remained the world’s largest operator by connections in Q4 2009, though its closest domestic rival - China Unicom - has dropped out of the top five to be replaced by Airtel. China Telecom – the number three operator in the world’s largest mobile market – has entered the top 25 for the first time at number 24. Operators that join Zain in dropping out of the latest rankings list are Turkey’s Turkcell and Russia’s MegaFon.

Will Croft, Analyst, GSMA Intelligence:

The sweeping scale of these pro forma changes in our operator-group ranking reflects the pace of the ever-increasing M&A activity we continue to see amongst what is already a highly-consolidated grouping of the world's largest operators. Interestingly, however, our study last year outlined that the top 25 reflected 64% of global market connections, a figure that remains unchanged in this latest data. This indicates that while the overall reach of these ‘super’ operators is growing, their effective market share remains stable.

For an enlarged Airtel Group, meanwhile, the key to success - aside from the challenge of obtaining approval - is that Airtel already has the experience of managing one the fastest growing markets in the world. We anticipate that there will be less of an immediate focus on network and infrastructure changes (although these will remain cost saving options) and more of a focus on ensuring they aren’t drawn into the same voice price war we now see in India. Given Airtel’s domestic market is in the midst of a next-generation rollout and calls for consolidation, managing existing operations whilst steering a pan-African purchase seems a daunting challenge. That said, a major opportunity for Airtel would be to transplant their Indian pricing model into some of the low-usage markets Zain occupies to drive usage quickly and garner market share.