India’s Bharti Airtel Conquering Africa

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WASHINGTON – What is the connection between India’s telecom giant Bharti Airtel acquisition of the African mobile operations of Kuwait based Zain and President Obama’s huge investments in health care reform, in terms of time, energy and political capital?

The connection is that while a relatively impoverished America, still shaken by the aftershocks of the banking crisis and the ensuing monumental recession, decided to focus on redressing domestic issues of social justice, (health), the emerging markets new players come of age and, deservedly so, start occupying new space. To put it differently, the choice of policy priorities and the ensuing expenditure of huge amounts of limited energies on one issue as opposed to another are not without consequences. As “we do” health care, the “Indians do” telecoms.

The emerging markets come of age

While here in Washington we debate who should get what part of a –shrinking– pie and what is fairness, the former Third World shows that now it has the size, staying power and ability to take a bigger and bigger share of the world’s new markets and of the opportunities that they present.

Nothing intrinsically wrong on the part of President Barak Obama in indicating that health care is important. But so important to make it the most significant national policy issue for more than a year? When the economy  deserves serious attention, to elevate health care to the status of “America’s priority one” was not wise. This was not the issue to concentrate upon, as the US economic foundations, shaken by the disaster of 2008-2009 and still very unsteady, needed immediate attention. But we did not focus on the economy, except for rescue operations. And so, as we have been engrossed in this time consuming, huge, highly partisan and eventually costly domestic debate on health, the world’s balance of power keeps shifting away from us and in favor of a more assertive Asia, finally coming of age.

The dynamics of a “South – South” major deal

What is significant about the Bharti Airtel-Zain deal is both the fact itself and its symbolic meaning. Consider this: this is a very sizable transaction valued at $ 10.7 billion. But, more than the dollar value, it is important to stress that this is an entirely “South-South” deal. Two multinational corporations based in emerging markets –India and Kuwait– agreed on the sale of assets that provide telecom services to the last huge emerging market: Africa. In all this, as the world economy is being progressively transformed, our American footprint is less and less visible. 

Africa’s telecom market is important

Old stereotypes might lead one to dismiss this African telecom acquisition as a mid size deal of marginal value, related to small, inconsequential markets. Well, not so. The deal is sizable and it is about mobile telephony operations in 15 African countries, (Mostly Central and Eastern Africa), with a total customer base of 42 million users to date –and a significant upside potential, considering that Africa, huge growth notwithstanding, is still way behind the rest of the world in terms of telecom services penetration.

Besides, with this acquisition, Bharti Airtel becomes the fifth largest telecom provider in the world; thus “fulfilling our vision of building a world class multinational” –in the words of Sunii Bharti Mittal, Bharti’s Chairman.

Not a watershed; but another sign of Asia’s growing relevance

Is this deal a watershed? Probably not. But it is yet another sign of the systemic transformation underway, indicating the growing relevance of Asia in global markets. And it is really important to stress that, while all this is taking place –Asia coming of age– we in the old developed west are not yet putting our economic house in order.

In its wisdom, the Obama administration did not place US competitiveness on top of its governing agenda. It chose instead health care, a deserving but costly issue. And, contrary to what has been said, this reform will do practically nothing to improve US international economic competitiveness.

Are we focusing on the right priorities?

Eventually the logic of globalization will assert itself, by determining  winners and losers. Those who are investing in new opportunities will be rewarded more. President Obama chose to prove his mettle on domestic social justice issues. Fine. And so, he did; and eventually he won his battle; even though the long term political ramifications and fiscal consequences of an extremely controversial reform that split the country in two are yet to be seen.

But the real point is that, while the White House expended a huge amount of time and energy on health, the likes of Bharti Airtel go around gobbling large pieces of new markets, progressively positioning themselves as global players.

America’s competitive base: is it still there?

Of course America still has its global players. Sure enough, we have HP and Dell and Apple and Cisco, Intel, United Technologies, Dupont and General Electric, and so on. But we have fewer world leaders then we used to; and now, after this horrendous recession, one should seriously reflect on what is and will be the credible foundation of America’s future competitiveness. The auto sector may eventually recover; but it is now in a sorry state, still on respirator, alive thanks to taxpayer subsidies in amounts unthinkable until very recently. (Remember that General Motors until a few years ago was the world’s largest auto producer!) The banking sector, stupendous bail outs notwithstanding, is still in precarious conditions.

Boeing lost its luster…and the list goes on

Boeing, once the unchallenged aerospace star performer and the symbol of America’s technological leadership, just announced yet another delay for the delivery of the first advanced jetliner 787 “Dreamliner” (may be nobody thought at the time that the nickname might become a joke, as this new aircraft is still basically “a dream”). This new delay, piling up on many other delays, not only costs Boeing money in terms of contractual penalties; but it tarnishes the image of American industry and puts in question Boeing’s once coveted reputation of technology and know-how leader. If Boeing cannot deliver on time, while it cannot even provide a realistic estimate of what it takes to fix (admittedly complex) production and assembly problems, is it fair to wonder whether America has still got what it takes to get big projects right? Or have we lost that skill?

Ancient air traffic control systems

On a separate note, we read that now, may be, we are going to take steps to start the modernization of our ancient (1960s vintage) air traffic control system. Note: we are about 20 years late on this, and who knows how long it will take for a total modernization to take place. And America has no high speed trains, while the rest of the world, from France to China, keeps rolling them out, thus creating alternatives to overcrowded skies.

Decrepit infrastructure 

And let’s not talk about our decrepit, chronically underfunded, infrastructure that routinely gets a “fail” grade from professional associations of civil and structural engineers. (While the federal stimulus money addressed some infrastructure projects, it was literally a drop in the ocean, compared to the monumental needs).

Very low broadband penetration

The US meanwhile chugs along being number 16, yes 16, in terms of broadband penetration in the world; while telecoms, internet providers and government regulators bicker on who should be doing what.

Energy policy: still missing

On energy, we have wasted a year with no real policies and no guidance. Now, it seems that the administration may take some steps to allow new Gulf Coast drilling. This may, just may, increase a bit our domestic oil production down the line, something that may provide a little help, some day, in term sof increased production; while we sorely need “now” a real, robust national energy strategy and a strong consensus on how to build a viable post carbon economy.

Education: still a problem

On a different yet equally sad note, new laudable efforts notwithstanding, our secondary public education system remains mediocre to bad, with minority students being the most underserved, thus recreating a de facto racial discrimination, due to limited or zero access to good jobs for millions of under educated kids.

Meanwhile, Nissan rolls out its all electric “Leaf” model

In the meantime, auto maker Nissan is busy advertising its new “Leaf” all electric car to be rolled out very soon. It will be built in Japan, the UK and in the Nissan plant in Smyrna, Tennessee. Being proactive, Nissan has created partnerships with a variety of US public institutions and utilities, so that they will work together in establishing the basis of an electric distribution system that will be able to support the new electric vehicles, once they will be on the road.

Time to adopt a strategy that will prioritize American competitiveness

The point of all this is that governing is about choosing the right priorities, building a broad consensus around them and then implementing them expertly. While America still has an enormous reservoir of talent and expertise, we do not have the right priorities in place and consequently we have not mobilized in a smart way the country’s still impressive potential.

Instead of making the economy issue one, our Government chose to get involved with social issues that, however important, are not vital and should not have been placed on top of the “to do list”. And, as we deal with our chosen priorities, the likes of Bharti Airtel take over huge chunks of emerging markets.

 

 

 

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