Brightstar deal could actually be a transformation opportunity for Bharti’s Beetel

20 Jul 2014 | Uncategorized

A news release from global IT distribution major Brightstar Corp. earlier said it would be acquiring a majority stake in Beetel Teletech Limited. It did not disclose the terms of the agreement though. 

Though on the surface, the deal appears to be yet another Bharti move at generating free cash to deleverage the flagship company Airtel’s balance sheet, which continues to be pressured due to a high incidence of debt, there could be a deeper goal at work.

Beetel Teletech has been the oldest telecom business arm of the Bharti Group and was its flagship and mainstay much before the group launched its services business. Beetel was formed in 1985 while the services business Airtel came into being in 1995. More importantly, Beetel also gets its due share of credit for having been among the early telecom manufacturing company (though it added other lines of business, also, later).

Yet, Beetel has not been able to perform as well as Airtel. While Airtel has grown organically as well as through acquisitions to become the leading telco in India and the fourth largest globally in terms of number of subscribers, Beetel’s journey cannot be termed as equally phenomenal.

The deal with Brightstar shows that Bharti hasn’t chosen to give up on Beetel. While it has given a majority stake to Brightstar, it is understood to have retained a substantial interest. More significantly, it is retaining the Beetel brand and all its existing employees, and the headquarters continue to be the same as well.

Bharti Enterprises, evidently, has faith left in its Beetel subsidiary and is possibly even seeing it as a strategic play. How?

Well, to call a spade a spade, Beetel has not been able to seize the opportunities that went by it in the past. Most importantly, it failed to capture a share out of the mobile handsets market even as the likes of Micromax, Karbonn and Lava came from nowhere to make it so big in India that they are going global.

Beetel somehow stayed stuck with its fixed-line manufacturing business, for which at least India has been a shrinking market (India’s fixed-line subscriber base has dipped from 42 million in 2003 to about 28.9 million at the end of 2013, according to Telecom Regulatory Authority of India data.)

Obviously, Beetel Teletech has been on the wrong side of the device market, given that the mobile subscriber base can broadly be considered to have swelled from 28.4 million in 2003 to 886.3 million in 2013.

Bharti was so focused during these years on the Airtel service business (and understandably and rightly so) that Beetel didn’t get the management bandwidth that was required at that inflexion point in time.

But better late than never, as they say. With the Brightstar deal, Bharti likely has an opportunity to transform Beetel from a legacy fixed-line phone making company to a new-generation maker of multiple devices, including but not limited to smartphones and tablets.

Significantly, with Brightstar’s global distribution network and reach, Beetel could get to a scale quicker if it were to have the right products in place.

This was reflected in the statement from Rakesh Bharti Mittal, Vice Chairman, Bharti Enterprises, “The Indian mobile market is entering the next phase of growth, which will be driven by data services on 3G and 4G technologies. The smartphone market in the country recorded triple-digit growth in 2013 and offers a huge opportunity going forward,”

“The new mobile businesses and related technologies that Brightstar is bringing to Beetel will help drive significant growth by leveraging our deep distribution strength,” Mittal added.

Marcelo Claure, Founder and CEO of Brightstar Corp echoed that, “India represents a tremendous growth opportunity for both devices and attached services as consumers continue to upgrade from feature to smartphones in record numbers.” “Beetel is a recognized leader in technology distribution in India, and we look forward to enhancing the company’s strong position.”

This post was first published on Light Reading India
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