Airtel could drop low-cost strategy

Bharti Airtel is going back to the drawing board to chart a new strategy for the African market, following what it termed as an unexpected and surprising response to its low-cost model from the continent.

The Indian telecom company told participants at the Mobile World Congress 2012 in Barcelona, Spain, that it was surprised to find that the African market did not increase its talk-time, which was critical to supporting its low-cost model.

"Unlike India, we were surprised that in Africa, lower tariffs could not increase volumes. In Africa, subscribers use the money saved on lower-calling rates to buy food and not to talk more.

"This means that we have to think of a new model that works there," the firm's chairman and MD, Mr Sunil Mittal, said.

This vindicates data released by the Communications Commission of Kenya at the height of the price wars, which indicated that low calling rates failed to lift talk-time.

The announcement is a signal that the firm could opt out of the low-cost model, which has forced mobile operators across most of the 17 countries it operates in Africa to follow suit.

It will also be welcome relief to Safaricom and Telkom Orange, who have described the low-cost model as unsustainable.

The firm, however, said Africa remains critical to its future growth and hoped to transfer experiences and success in its business model to the developed markets.

Mr Mittal said Africa and other emerging markets need smartphones and tablets to be priced below $50 to allow the data evolution that is shaping up to turn into real growth.

"My suggestion is that countries can give a huge tender to a single phone maker to deliver the smartphones as long as they are below $50," he said.

By PAUL WAFULA pwafula@ke.nationmedia.com IN BARCELONA, SPAIN