Bharti AirtelStrategic Outsourcing

Group 3 – Section DAlka | Amritanshu | Anshul | Ankur | Atika |

Ankit | Deepika | Rohit | Shubham

AGENDA

Problem Definition

Bharti History and Background

Indian Telecom Market

Bharti’s Telecom Network

Relationship with Vendors

Technical Problems Faced

Bharti’s Proposed Deal

Questions on the Case

PROBLEM DEFINITION

• Bharti Airtel faces multiple issues with various changes in technology

• Moving over all operations to its vendors

• How would Vendors react ?

• How would Internal Stakeholders react ?

• Is this the right way to go ?

BHARTI AIRTEL COMPANY BACKGROUND

Bharti Airtel Limited commonly known as Airtel is an Indian multinational telecommunication Services company Headquarter at New Delhi, India.

It operates in 20 countries – India , Sri Lanka , Bangladesh and 17 countries in Africa

It is the largest cellular service provider in India, with 192.22 million subscribers as of August 2013

Airtel is the Second largest Asia-Pacific mobile operator by subscriber base, behind China Mobile.

The Company Provides Internet Access over 96 cities . Submarine Landing Station At Chennai

Wireless• 2G• 3G

Enterprises• Carriers• Corporates

Telemedia Services• Fixed Line• Broad Band• IPTV

Passive Infrastructure Services• Infratel• Indus

DTH

Fully integrated telecom player offering end to end solutions and entering new geographies

The Company...Bharti Airtel – An Integrated Telco Company divisions

Bharti Airtel Timeline

1995Bharti Cellular launched cellular services 'AirTel‘ in Delhi

2001• Mobile licenses for 15 circle

•Went public raised $ 1 bn through FDI

•First telecom Provider to launch national and international long distance

2004•Bharti, in a first in the telecom industry, signs a 10 year comprehensive IT outsourcing deal with IBM.

•Bharti becomes India’s first mobile service provider to complete a national footprint in all 23 telecom circles.

2006• Bharti Airtel

launches its services in Sri Lanka (2G/3G network).

• Bharti Airtel crosses the 100 million telecom customers mark.

2010• Acquires

70% stake in Warid Telecom, Bangladesh.

• Acquires mobile operations of Zain in 15 African nations

• Becomes the world’s fifth largest mobile operator.

MARKET STRUCTURE

• Divided into 23 circles 4 metros 20 circles

• Further divided into A,B,C category based

on economic parameters and revenue potential

• Each circle has licenses Four operators per circle are allowed Licenses are saleable

MAJOR PLAYERS OF TELECOM INDUSTRY

1) Bharti airtel-19852) BSNL-20003) Vodafone Essar-20074) Reliance communications-19995) Idea cellular-19956) Tata communications-19867) Tata teleservices-19968) Aircel-19999) MTNL-1986

Bharti Airtel is holding the lead position in India by recording a five per cent growth in the year 2011. The company is dealing with four major categories namely digital television, enterprise, telemedia and mobile.

BSNL or Bharat Sanchar Nigam Limited is the oldest player in the telecom sector in India and they hold the pride of being the first to connect even remote villages through their telephone service.

Vodafone Essar began its operations in the year 1994 and the company has operations all over India with more than 106.34 million customers.

Reliance is one of the largest private sector company in the information and telecommunication sector in India.

Idea Cellular is a part of Aditya Birla Group and they are the leading GSM Mobile service provider in India. They are offering both pre-paid and post paid mobile service.

Tata Communications influence its domain expertise and advanced solutions across India and global network, with connectivity to more than 400 PoPs & 200 countries.

Tata Teleservices hold the pride of being the first to introduce CDMA mobile services in India. The company introduced its mobile operations in the year 2005 under the brand name of Tata indicom.

INDIAN MARKET SHARE – TELECOM OPERATORS

COMPANY WIRELESS MARKET WIRE-LINE MARKET

BHARTI 25 1

BSNL 16 86

MTNL 1.5 4.6

HUTCH-ESSAR 12 -

TATA 2 -

IDEA 11 -

RELIANCE 19.5 1

OTHERS 13 -

TELECOM COMPANIES MARKET SHARE IN INDIA AS OF AUGUST 2011

RELATIONSHIP WITH VENDORS

NOKIA SIEMENS ERICSSON

IBM

COMVIVA

KEY DEFINITIONS NEEDED TO PROCEED

• Mobile Phone

• Base Substation

• Cellular networks

• Network Substation

• Home Location Register

• Visitor Location Register

• Authentication Center

• Equipment Identity

Center

• Cellular Network

• Network Congestion

• Network Traffic

• Erlangs – A,B,C

• Network Technology

• GSM

• CDMA

• 3G

TYPICAL GSM NETWORK

PROBLEMS WITH SWITCHING

• GSM and the GPRS Switch for Bharti

• GSM and 3G Switch

• Competitors with CDMA for 3G Switches

GSM CDMA3G/

QUESTIONS ON THE CASE

1. What must Bharti do to succeed well in the Indian mobile phone market and what are its core competencies?

2. What do you see as advantages and disadvantages of the outsourcing agreement outlined by Gupta?

3. How do the different outsourcing agreements work towards building these core competencies?

4. If you were Bharti, What major concerns would you have about entering an outsourcing agreement with IBM? With Ericsson, Nokia, or Siemens?

5. How would you structure the agreements to address your concerns and capture any advantages you have identified?

• Increase base stations from 5000 in 2004 to 40000 in 2007

• Deploy EDGE technology to upgrade to 3G and scale itNetwork Infrastructure

• Hire 2000 to 3000 people to build & maintain the base stationsHR

• Reduce conflicts between vendors and itself.Generate Profit

• Capitalize on top vendor connectionsDistribution Network

• Transitioning from 2G to higher technologies• Expanding the IT network to meet the scalability

requirements

Technologies and Network coverage

• Bharti must focus on providing excellent customer service through “error free” service (low drop-out rates etc)

Customer service

1. What must Bharti do to succeed well in the Indian mobile phone market and what are its core competencies?

Strategies

Focus on Core

competency

Competitive pricing

structure

Focus in Rural

markets

Innovate to offer value added service

Better technology

Information tools and

applications

Bharti's core competencies

Core Competencies (Present)

Operational excellenceWork culture: Strong values which comes from a

family business cultureEstablished Network•First mover advantage – its presence in 15 circlesFormidable presence across diverse portfolio of

mobile, wireless, broadband and business services

Large user base - Able to tap into economies of scale

Marketing - High brand recall by being the earliest and longest in the market.

Technologies - Latest technologies- EDGE

- Presence in GSM ecosystem- plug & play - Occupancy on international fibre optic

n/w- long- distance services

Outcomes

• 25% market share-highest

• Reputation among suppliers- they see Bharti as a profitable client

• Obtained license for mobile operation in 15 out of 23 circles.

• 6 million mobile subscribers

2. What do you see as advantages and disadvantages of the outsourcing agreement outlined by Gupta?

• Risk of excessive dependence on vendor • Lack of flexibility• Possibility of reneging

Telecom infrastructure Outsourcing

• Information misuse• Specialised software for each department by different

firms may be needed• Access to new innovation is restricted• Possibility of reneging

IT infrastructure Outsourcing

• Will non IBM software and hardware applications be ever used again by IBM?

• Will Bharti loose the opportunity to use high end latest non IBM products ?

• Will IBM be swift enough to timely launch the new IT products and services for enhanced customer experience?

IT and Marketing

Department

• Transfer of 1000 employees will be difficult and may not be accepted well by the employees

• Cultural difference between an Indian company and an MNC

HR department

• Difficulty in accepting the unheard deal which is not an accepted practice in the industry

• The risk of running into excessive dependence upon the vendors

• Will vendors be as enthusiastic about the expansion and keep up in pace with the rapid telecom expansion

Board members

2. What do you see as advantages and disadvantages of the outsourcing agreement outlined by Gupta?( Contd )

Agreements with Vendors

• Reduced risk of network equipment

• Resolves conflict between operator and network equipment provider by

• For Bharti, pay as much as you use would resolve the issue of frequent ordering process and related costs

Agreement with IBM

• Future IT operation capacity is going to grow exponentially

• IBM’s revenues are will be shared by Bharti

• Consolidation of IT equipment under IBM

Strategy in Indian Market

• low cost services to its customers

• Reducing risk associated with n/w equipment and paying as per the use

• Consolidation of IT systems• can build its expertise in

understand Indian market and accordingly plan where to expand

• Core competency would be according to marketing need

Advantages of Outsourcing

3. How do the different outsourcing agreements work towards building these core competencies?• Lesser capital expenditure and also more efficient

utilization of equipment as the interests of vendors aligned with Bharti Airtel

• Cost structure being being more reliable and predictable implies the lowest cost of production of minutes in the world

• More efficient use of management bandwidth and time currently being used in budgeting and tendering of network expansion

• Capital freed from the requirement of maintaining excess capacity can be used to improve the customer touch points

• Opportunity for vendors to be part of long term growth story by linking revenues with Bharti’s revenues

4. If you were Bharti, what major concerns would you have about entering an outsourcing agreement with IBM, Ericsson, Nokia, or Siemens?

• Coordinating with vendors on daily basis, also adding the risk of outsourcing company ie company going bankrupt

• Overdependence upon the vendors• Difference about the strategic goal • Vendor’s Lack of expertise • Organizational culture difference • Employees may not accept the transfers• Due to outsourcing, Bharti may loose out

better opportunities available with other vendors

5. How would you structure the agreements to address your concerns and capture any advantages you have identified?

Outsourcing dependency to be reduced by increasing by creating a in house technological capabilities. Engaging other technological partners to reduce dependency on one .

Airtel to maintain a service level agreement with the technology partner to maintain the quality of the service provided.

Data Security check to be in place. All the transactions going through the system should not result in revenue loss. Audit flow of transactions to take place

Servers outside India would cause compromising sensitive data. Strict onsite server access policy

Price flexibility which would depend on fixed contract payment and variable payment with resolution of every service case in the system

Quality of the solutions to be ensured by creating uniformity across the technological partners over all the process and procedures

Up to date with new technology and interface and servers for better service and less down time

Thank You