African Telecom: Strategic Communications

Normally I’d have bookmarked this kind of item for an “Off the Radar” post. But for a variety of what seem like obvious, if intuitive and somewhat intangible reasons, I’m elevating major telecom transactions to “On the Radar” status, alongside weapons sales, nuclear agreements, gas and oil deals and the like. In this case, that’s partly because it’s an Indian telecom company, Bharti Airtel, buying Kuwait-based Zain’s African operations, to the tune of a $10.7 billion purchase price. (The deal has yet to be finalized, pending due diligence.)

This is significant for a few reasons. First, as Thomas P.M. Barnett recently pointed out in his WPR column, Africa has become quite the focus of strategic attention recently. For now, most of that attention is coming from the East — and in particular from China — and most of it is centering on resource extraction.

Today’s deal illustrates the way in which India is trying to play catch up with China in Africa, but also the way in which second-order markets, such as telecom, are part of the competitive landscape. For now, African telecom is more attractive for the mass it offers than for the actual revenue. As the article indicates, Zain’s African share accounts for 62 percent of its subscribers (which total 65 million), but only 15 percent of the group’s net profit. But given the widespread practice of SIM-sharing in Africa, there’s a lot of upside potential as income rises with development.

So for now, this is as much about positioning as profit. But increasingly; and across a growing spectrum of sectors, Africa is a strategic position to occupy.