Bharti Airtel Ltd and Indian Telecom Sector

Alyn VargheseAzharuddin Mansiya

Mrinal KaulSandeep Kumar A

Subrato Das

Platform1882-Platform 2009

• T & T Relation - Year 1850 - Year 1882

• Posts and Telegraph - Year 1888 - Year 1984

• 1949 & 1950 - Own your Phone Scheme Inaugurated and operationalized.

Important Milestones

• Rajiv Gandhi + = Laid Foundation of Telecom Revolution in the year 1987.

• DOT was split into VSNL and MTNL in year 1986 .

• In year 2000 DOT becomes BSNL.

• In the year 1997 TRAI was formed under the Ministry of Telecommunication and IT with objective to be an effective regulatory framework and to ensure fair competition and protection of consumer interests. Also to ensure resolution of disputes between Government (in its role as licensor) and any licensee

NTP94

• The focus of the Telecom Policy shall be telecommunication for all and telecommunication within the reach of all.

• Another objective will be to achieve universal service(basic telephone) covering all villages as early as possible.

• The quality of telecom services should be of world standard.

• It is necessary to ensure that India emerges as a major manufacturing base and major exporter of telecom equipment.

Revised NTP94

• Telephone should be available on demand by 1997.

• All villages should be covered by 1997.

• Urban area- PCO for every 500 persons by 1997.

• All VAS available internationally should be available in India preferably by 1996.

NTP99

• Availability of affordable and effective communications for the citizens.

• Create a modern and efficient telecommunications infrastructure taking into account the convergence of IT, media, telecom and consumer electronics and thereby propel India into becoming an IT superpower.

• Convert PCO’s, wherever justified, into Public Teleinfo centres having multimedia capability like ISDN services, remote database access, government and community information systems etc.

• Achieve efficiency and transparency in spectrum management .

• Unified Licence for Telecommunication Services permitting Licensee to provide all telecommunication/ telegraph services covering various geographical areas using any technology;

• Licence for Unified Access (Basic and Cellular) Services permitting Licensee to provide Basic and /or Cellular Services using any

technology in a defined service area.

Addendum to NTP99

Specific Targets of NTP99

• Encourage development of telecom in rural areas by 2002.

• Provide Internet access to all district head quarters by the year 2000.

GSM and CDMA

• In year 1995 GSM entered India. Historic call made by MobileNet-joint venture between Telstra (Australia) & B.K. Modigroup.

• In year 1996 Tatatele services launched first ever CDMA based cell operations.

• Call rates were hovering around Rs 17/min and basic handset was priced at Rs 40000.

• But who is the father of Basic telephone ? And who is the father of Cell phone ?

Mr. Martin Cooper

As of 2009 …

The Moment Of Truth …. 1995

Factsheet- Airtel• Telecom giant Bharti Airtel is the flagship company of Bharti Enterprises.• Headed by Sunil Bharti Mittal• India’s largest integrated and the first private telecom services provider• Bharti is now the world's third-largest, single-country mobile operator and

sixth-largest integrated telecom operator.• Has a customer base of 110 million people in India.• Has a footprint in all 23 circles.• Market share of 23.5 overall (as of Sep ‘09) and 26.82% (as of June ‘09) in

the rural market.• Bharti has 30 % market share in terms of revenue.• It is worth about $25 billion and is growing fast.• Airtel's operation in Sri Lanka, known as Airtel Lanka, commenced

operations on the 12th of January 2009.

Organisational Structure

Source: www.airtel.co.in

Evolution of Airtel in India• Bicycle parts Business (1976-1980).• Bharti Telecom Ltd (1985).• Conglomerate with Siemens AG (1985).• Bharti Tele Venture

– Airtel was founded in 1995 as Bharti Tele-ventures(1995)– Touchtel (2001)

• Discontinuation of Multi Branding strategy(2004). Telecom services under ‘Airtel’.

• BTV renamed to BAL(2006).

Marketing the brand ‘Airtel’ Second Largest Advertiser in India after HUL in 2008.

Touch Tomorrow(1999)

Express Yourself (2003)

Business Model The secret of Airtels’ success is its effective business model.

Airtel focuses solely on Customer acquisition & servicing (retention) Business development/expansion

All other functions are outsourced

Network Management – NokiaSiemens ,Ericsson and Huawei Backend Applications and IT systems- IBM Call Centres- IBM Daksh, Mphasis, Firstsource, Teleperformance, Aegis and HTMT Value added services- On Mobile, Comviva, Yahoo, Google and Cellebrum Blackberry enterprise & internet services- Reliance India Mobile

Source: Airtel quarterly report for the 2nd quarter and half year ended 30th September 2009

Airtel & Oligopoly

• Number of operators• Measures of concentration

– Concentration ratio: indicator of the relative size of firms in relation to the industry as a whole

– Herfindahl Hirschman index

Market Share

Airtel (24.3 %)Vodafone (18.8%)Reliance (18.9%)Idea Cellular (11.2%)Bsnl (12.7%)Tata Indicom (9.7%)Others (4.4%)

Herfindahl-Hirschman Calculation

Operator Market share in percentage(M) M^2Airtel 24.3 590.49Reliance 18.9 357.21Vodafone 18.8 353.44MTNL 12.7 161.29Idea 11.2 125.44TTSL 9.7 94.09Others 4.4 19.36

1806

Herfindahl-Hirschman Index

Major Operators in India

• Bharat Sanchar Nigam Limited• BPL Mobile Communications Limited• Mahanagar Telephone Nigam Limited• Bharti Airtel• Vodafone Essar• Reliance Communications• Tata Teleservices• Spice Telecom• Idea Cellular• Sasken Network Engineering Limited

First Mover Advantage Airtel was the first to introduce the following value added services

- Electronic recharge

- Hello Tunes

- Airtel Live

- Song Catcher

- Easy Music

- Blackberry Handsets

- MChek

Balance Sheet

Operational Performance

Comparative Study

Airtel Reliance IdeaARPU 250 161 209AMOU 450 340 375RPM 0.56 0.47 0.56

ARPUAMOURPM

Average minutes of UsageRate per minute

Data as on Sept 09

Average Revenue Per user

Way Ahead

• Airtel faced some challenges to its leadership position in the Indian telecom market.

• Industry experts said that the key to future growth lay in making the Airtel brand attractive to both the tech-savvy urban population and the rural masses where the bulk of the future growth is expected.

• Finding alternate revenue streams in view of the rapidly falling……

SWOT

Strengths• Largest Telecom Player in India - ~110Mn,

23.5%• Strategic Alliance with other stakeholders

in Bharti Airtel include Sony-Ericsson, Nokia - and Sing Tel

• Pan India Presence• Strong Financials

Weakness• Outsourcing of Core Systems• Lack of emerging market investment

opportunity

30

Opportunities• Tie ups for customer application• Presence in emerging market• Current Tele-Density – 30.6 is still

low among developing countries• Brand• Low Rural Telephoney • Match Box Strategy – Scale of

Penetration

Threats• Intense Competition & Shortage

of Bandwidth • Falling ARPU & AMOU

Bharti-MTN Deal

• When and how did it begin? Proposed merger to acquire 49% stake on 25th May 2009. Potential to become 3rd biggest merger of 2009 globally Acquisition aimed at reaching out over 200 million

subscribers.

• Structure of the deal MTN, 36% stake in Bharti Bharti, 49% stake in MTN

Bharti-MTN Deal

Why did it fail?• Locally domiciled• Dual listing structure

Opportunity cost of the deal to Airtel?• Fast growing and under-penetrated countries of

Africa.• Huge scale and operating Metrics.• access to innovative technology

What Next ????

Bharti-ZAIN ?• Valuable ASSET to buy.• Wide Coverage.• Unique one network Strategy.• Bharti-ZAIN or MTN-ZAIN?

WORLDWIDE INTEROPERABILITY FOR MICROWAVE ACCESS.

• “Wireless at maximum”• WiMAX can provide broadband wireless

access (BWA) up to 30 miles (50 km). • It is estimated that India will have 19 million

WiMAX subscribers by 2012 (TRAI).• Bharti acquired licenses in the 3.3GHz range to

utilise the opportunities.

VoIP

• Has Collaborated with Cisco.• Invested heavily in setting Up Infrastructure.• The Market world wide is expected to be at $6

bn by 2012.• The market in India is expected to be at 1.2bn.

Rural Telephone

Rural Market

• Airtel is also the leading player in rural sector with 26.82 % share.

• The market is fast growing.• As the government targets to increase rural

teledensity from the current 2 percent to 25 percent by 2012, rural telephony will require major investments.

Rural Market Share

AirtelVodaphoneIdeaBSNLRelianceAircelOthers

Airtel 26.82 Reliance 12.99Vodafone 19.72 Aircel 7.01Idea 15.72 Others 3.38BSNL 15.36

VAS

• Provide more Value Added Services , e.g• Twitter on Airtel• Ringtones• Wallpapers• Web Applications• Phone Banking (M-Commerce) • Hello Tunes• SMS• Airtel Live• Co-Branding Activities • Business Solutions

Aggressive Marketing

• More Proactive with Plans• Continue on going Ad – Campaigns• Consistent Brand Message • Improve its Customer Care Services and make

it marketable.

TAPPING UNTAPPED MARKET

• Seychelles through its subsidiary Telecom Seychelles Limited.• Europe (Channel Islands) through its subsidiaries Jersey Airtel

Limited (JAL) and Guernsey Airtel Limited (GAL).• In 2006, Airtel became the first Indian telecom operator to

launch 3G services in Seychelles • In May 2007, JAL and GAL entered into a partnership with

Vodafone to launch mobile services in Channel Islands under the Vodafone-Airtel brand.

• Airtel started in operations in Srilanka in 2008