Indian telcos face MTN competition

By Candice Jones, ITWeb online telecoms editor

Johannesburg, 14 Oct 2008

India's telecommunications lions Bharti Airtel and Reliance Communications could face stiff competition from MTN, if Indian speculation is realised.

The Economic Times of India revealed JSE-listed MTN may be considering entering the Indian market under its own steam, after talks with the two Indian giants failed earlier this year.

MTN has not been shy about its strategy to grow itself into emerging economies, and already operates in 21 countries across Africa and the Middle East. The company already sports 74.1 million subscribers and is a huge revenue generator at R41.6 billion, recorded at its interim results this year.

After failed talks with the Indian-owned operators, MTN has scant options left in the Indian market, with most of the remaining businesses owned by international players or government. Indian market commentators have already written off BSNL and Vodafone Essar as options, and Idea Cellular is reported to have an existing partnership with Telekom Malaysia, which leaves MTN with a possible partnership with Malaysia-owned Aircel.

In May, MTN announced it had walked away from the discussion table with Bharti when it became clear a “suitable structure” could not be agreed on.

Almost in the same breath, MTN announced an offer from Reliance to begin share swap talks. This deal fell through in June after a still ongoing blood feud between Reliance shareholders and brothers, Anil and Mukesh Ambani, permanently put discussions on the shelf.

No chance of failure

MTN has been following an acquisitive strategy for some time, evident in its recent purchase of Cote d'Ivoire's second fixed-line operator Arobase Telecom, and Afnet, an Internet service provider.

However, Econometrix senior economist Tony Twine says MTN could do no wrong if it goes it alone in the Indian market. “Economic downturn or no downturn, anyone who plays in the Indian ICT market will have to do extremely badly to fail.”

He says despite international economic pressure, India is still showing an annual growth rate of 9%, second only to China. “Most of this growth is internally generated and spurred by urbanisation. It is not dependant on how well Europe and America do.”

He says that, while many businesses are antsy about investing what cash reserves they have, the Indian market ICT market can only bring success. “It's a colossal market, with proven growth potential. Good luck to MTN if they decide to do this.”

Open war chest

MTN last reported R27 billion cash on hand, of which it has dedicated R7 billion to developing its South African infrastructure. The company has said the local investment could save it between R1.2 billion and R1.5 billion - an amount that could go far in an Indian investment.

“Not only is MTN cash-flush, but they are also hugely cash-generative. They have a substantial war chest to take on the big players anywhere in the world, let alone India,” states Twine.

He says that, with a good process-driven model, the business plays in a different ballgame from the businesses being affected by the global economy. “MTN could do well anywhere in the world. Place them in a country where there is an already developed ICT appetite and it would be difficult for it to do badly.”

MTN Group spokesperson Nozipho January-Bardill refused to confirm or deny the speculation, saying: “In line with its vision to be the leading provider of telecommunications in emerging markets, the MTN Group continues to actively seek value-enhancing investment opportunities in emerging markets. MTN cannot comment on market speculation about specific corporate activity.”