Bharti's Minutes Factory Moves to Africa
 |
|
Image: Malay Karmakar
|
y history is that I’ve been constantly proving people wrong. I did that in 1995, 2000 and 2005. It’ll be the same in 2010 too.” Sunil Bharti Mittal, chairman and managing director of the Bharti Group, has been telling his senior managers and partners in recent meetings.
Meanwhile, his top lieutenants Manoj Kohli, CEO (International) & joint MD, Bharti Airtel, and Akhil Gupta, deputy group CEO and managing director of Bharti Enterprises, are busy zipping across Africa, to ensure their boss’ naysayers are proven wrong this time too.
Bharti Airtel brings to Zain Africa a strong balance sheet, marketing savvy, and managerial talent. All of these attributes will come into play only if Kohli and Gupta can ship to Africa Bharti’s treasure chest: The Minutes Factory.
Totally homegrown and yet in tune with the latest management theories, the Minutes Factory enabled Bharti to change the telecom business. And all eyes are on how it teleports this model to Africa.
What is the Minutes Factory? First, here is what it is not. It is not a “subscriber-led” model. The description comes from richer economies of the developed world that were the first to launch mobile phone services, Europe in particular. Since it was a new technology, the cost of setting up a network was high. In the 1990s, most mobile operators wanted well-heeled customers who would be willing to pay $1 a minute. They were also very selective in rolling out the network. “Even today in many cities in Europe you may not get a mobile signal if you are in a slightly less frequented part of the city,” says Arvind Mahajan, executive director, KPMG. Mobile companies then spent a lot of money attracting high-paying customer.
For almost seven years, the Indian market and mobile operators used the same “subscriber-led” model and nobody could make money. While the cost of setting up the network remained high, very few subscribers signed up because the cost of making or receiving a call remained very high: About eight rupees a minute.
Then in 2001-02, Bharti came up with the Minute Factory model. Bharti outsourced network planning and IT backbone — considered core to the business — and converted its fixed costs to variable costs. Bharti was able to target millions of pre-paid customers that the subscriber-led model didn’t allow it to. This allowed it to invest a certain minimum amount to set up a network that can handle a threshold level of calls and then wait for the usage to build. Only when usage started increasing did Bharti invest more in the network.
If minutes were cars, then Bharti puts up the “additional assembly lines in the manufacturing plant” — towers and radios — only when the customers for the additional minutes show up.
The problem in mobile telephony, like in car manufacturing, is that it is not possible to do business in small measure; adding capacity to handle just 50 extra calls or just 50 additional cars, is difficult. New towers and radios will handle at least 5,000 extra calls. A new plant will make at least 5,000 cars. The manufacturer must wait till the demand reaches that level.
The beauty of the Minutes Factory is that it can add small capacities fairly rapidly and economically. The key to this is an array of partnerships that “manufacture” the minutes. The speed comes because each partner is a specialist and can do its bit better than anyone. Financially this works because Bharti doesn’t have to invest in equipment and towers in advance.
But what Bharti does is observe consumer behaviour. Essentially, it collects usage statistics from each of the radios in a network and when it notices the usage level going up in a certain part of the network, it calls into action its partners, to whom it has outsourced its network. Sometimes partners themselves monitor the network and tell Bharti that it is time to install new radio stations or set up a totally new tower to handle the expected increase in traffic. But the final decision on adding equipment is always the company’s because only its staff knows of tariffs and schemes that can change calling behaviour and traffic patterns.
This entire arrangement allows Bharti’s network utilisation to be high all the time. This is akin to any factory’s capacity utilisation being high. Combine this with Bharti’s ability to configure “new” assembly lines for additional “minutes” in quick time and you get a situation where the minutes are made only when they are ready to be consumed.
Single Page View
