Environmental Scanning Reporton

Bharti Airtel

• Incorporated on July 7, 1995 • Largest Private Integrated Telecom Company in

India• 4th Largest Wireless Operator in the World• Largest Telecom Company listed on Indian Stock

Exchange

2

Milestones1995-1996• Launches Airtel in Delhi & HP• BT acquires stakes in Airtel1999-2000• Becomes largest private telecom

player• JV with Singtel2001-2002• Launches Indiaone• Launches India’s first private

submarine cable• Initial IPO• Introduces AR Rehman Signature

Tone• Airtel_Jingle_-_FluteOnly_-

_Original.mp3

2003-2004• SA with IBM & Ericsson• Launches Blackberry• First private player to launch mobile

service in J&K2006-2007• SA with Google,• SA with Microsoft• Forays into Srilanka and USA

The Company is first :

• To launch full roaming service on pre-paid in the country.

• To launch 32K SIM cards.• In Asia to deploy the multi band feature in a wireless

network for efficient usage of spectrum.• To deploy Voice Quality Enhancers to improve voice

quality and acoustics.• Telecom company in the world to receive the ISO

9001:2000 certification from British Standards Institute.

Awards• CNBC-TV18 India Business Leader Award for the Outstanding Company of the year,

2007 • Top honours at the NDTV Profit Business Leadership Awards 2007• Among the top 10 best performing companies in the world according to

BusinessWeek IT 100 list • "Indian Mobile Operator of the Year 2005” • 'The Best Asian Telecom CEO' award. • Asia's 'Best GSM Carrier’

Integrated Telecom Company

Mobile Services– Mobile and fixed

wireless service– GSM technology– Value added services like

Hello Tunes, GPRS, Voice Mail, call conference, call wait, call divert, SMS

Enterprise Services– Internet – VPN – IPLC– VSAT– Audio & Video conferencing. Telemedia Services– Fixed Line– Broadband– DTH

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Business Segments

Indian Telecom Sector• Fastest Growing Sector – CAGR 22% (2002-07)• Second Largest Telecom Market• Lowest Tariffs• Low Teledensity

8

225.21206

140.398.4

7653

19.9

5.17.0

9.112.8

18.3

0

50

100

150

200

250

2002–03 2003–04 2004–05 2005–06 2006–07 2007–08 (asof June2007)

Sub

scrib

ers

(in m

illion

)

0

4

8

12

16

20

24

Tel

eden

sity

(in

per

cent

)

Telecom Subscriber Base Teledensity

99

0.230.22

0.19

0.170.16

0.11 0.11 0.11

0.09

0.05 0.050.04

0.030.02

0

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US

DINDIAN CONSUMERS GET THE WORLD’S LOWEST MOBILE TARIFFS

Source: Merrill Lynch Global Matrix - Q1 2007

Health Indicators

• Average Revenue Per User (ARPU) • Churn • Minutes of Usage • Total Customers

>>

ARPU TRENDS

<<<<<<

84

159179

315 320 323 326

461

Russia Malaysia Australia Korea Singapore China Thailand India

Source: Merrill Lynch Global Matrix – Q1 2007

HIGHEST MINUTES OF USAGE

SUBSCRIBER BASE

• Average %age Growth =80%

• <<<

Customer Base- Airtel

0.0010.00

20.0030.00

40.0050.00

60.0070.00

Year

Tota

l Sub

scri

bers

(in

Mn)

Customer Base

Health Indicators

Parameters Unit Dec. 2008 Sept. 2008 Jun-08 Mar-08 Dec. 2007 Sept. 2007 Jun-07

Customers 000s 88,270 79,988 71,777 64,268 57,341 50,950 44,676

Average Revenue Per User (ARPU) INR 324 331 350 357 358 366 390

Minutes of Use (MOU) Minutes 505 526 534 507 474 469 478

Post-paid Voluntary Churn % 1.10% 1.10% 1.00% 1.00% 0.90% 1.10% 1.10%

Post-paid Company Initiated Churn % 1.20% 1.40% 1.40% 1.50% 1.80% 2.10% 2.50%

Pre- paid Churn % 2.90% 3.20% 3.80% 4.30% 3.90% 3.80% 4.00%

STEEP ANALYSIS

Telecom Environment

Demand for VAS & Broadband services Among Youth

28 % Urban Population

Rapid Urbanization

Rising Income level

Out of town employment

Outstation trips

Social Factors

Source: Mckinsey Report

CDMA – Already there are big players in this segment Reliance , Tata

3G – Value added services potential still to be tapped fully

2G/3G – GSM Currently commands 70% of mobile subscribers in India

Threat from VOIP

Next Generation Network

Infrastructure sharing

Technology

GDP growth rate - Averaged around 7.9 % from 2002-2008

Growing per capita income/disposable Income Rs 18,885 in 2002 to Rs 38,084 in 2008

Falling Handset Prices (ASP= INR 3150)

Falling Tariffs

Economic Factors

Regulatory Framework

TRAI, DoT, TDSAT 74% FDI Investment High taxes etc in the telecom industry : 17-26% Lack of Transparency in Spectrum & License Allocation 3G Policy & MNP still Pending

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COMPETITOR ANALYSIS

Major Players

Customer Base Comparison

Financial Comparison

Competitors InformationNet Sales (INR

billion

OperatingProfit (INR billion)

Net Profit (INR billion)

Total Assets (INR billion)

Earnings per Share (INR)

Bharti Airtel 257. 61 106.62 62.44 268.12 32. 9

Reliance Communications 147. 92 61.73 25.86 451.26 12. 53

Idea Cellular 67. 2 24.91 10.44 100.61 3. .96

Tata Communications 32. 83 6.45 3.04 73.25 10. 68

Porter’s 5 Forces

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1. Threat from CompetitionWireless Market – Top 4 garnering 75% market share

25

HIGH

2. Customer Bargaining Power Lack of differentiation among

Service Providers

Cut throat Competition

Low Switching Costs

Number Portability will have –ve

Impact

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HIGH

3. Suppliers Bargaining Power

27

LOW

4. Threat of Substitutes

Landline

CDMA

Video Conferencing

VoIP – Skype , Gtalk, Yahoo Messenger e-Mail & Social Networking Websites

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BROADBAND SERVICES

DIMINISHING MARKETHIGH

5. Threat of New Entrants

Huge License Fees to be paid upfront

High gestation period

Highly regulated

Spectrum Availability & Regulatory Issues

Infrastructure Setup Cost - High

Rapidly changing technology

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LOW

SWOT ANALYSIS

Strengths• Pan India Presence• Largest Telecom Player in India • Strategic Alliance with Sony-

Ericsson, Nokia - and Sing Tel• Strong Financials• Very focused on telecom.• Leadership in fast growing cellular

segment.• The only Indian operator, other

than VSNL, that has an international submarine cable.

Weakness• Outsourcing of Core Systems• Price Competition from BSNL and

MTNL• Untapped Rural Market • Absence of own towers.

Source: CMIE Report NOV 08

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SWOT ANALYSIS

Opportunities• Rural Markets• International Markets • 3G/ Wimax• Current Tele-Density is still

low among developing countries

• Low Broadband Penetration

Threats• Introduction of MNP• Intense Competition &

Shortage of Bandwidth• Substantial payment for 3G

licensing • Saturation point in Basic

telephony service

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BCG Matrix for Bharti Airtel

LOWHIGH

HIG

HLO

W

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IPLCCELLULAR SERVICE

ISPBROADBAND

BASIC TELEPHONE(Fixed Line)

ANSOFF MATRIX

MARKET PENETRATION

ENTERED IN BROADBAND AND FIXED LINE MARKET

PRODUCT DEVELOPMENT

IPLC PRODUCTS

MARKETDEVELOPMENT

LOOKING FOR OVERSEAS MARKET AND RURAL MARKET

DIVERSIFICATION

OUTSOURCING New Market

Existing Market

New Product

Existing Product

FINANCIAL REPORTS

REVENUE TRENDS• Average %age Growth =55%Financial Metrics -Airtel

0

50,000

100,000

150,000

200,000

250,000

300,000

2003 2004 2005 2006 2007 2008

Year

Reve

nue

(in M

n)

Series1

EBITA TRENDS

• Average %age Growth =76%Financial Metrics-Airtel

0

20,000

40,000

60,000

80,000

100,000

120,000

2003 2004 2005 2006 2007 2008

Year

EBIT

DA (i

n Rs

Mn)

Series1

FINANCIAL GROWTH

Financials Snapshot-Performance Indicators

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Particulars 2008

Revenue (in Rs Mn) 2,70,122

EBITDA (Rs. Mn) 114,018

PAT (Rs. Mn) 63,954

EPS (Basic) Rs. 34.23

Financial Snapshot - Ratios

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Key Ratios AirtelTelecom Industry

Debt-Equity Ratio 0.38 0.35

Long Term Debt-Equity Ratio 0.35 0.3

ROCE (%) 34. 88 9.72

RONW (%) 39. 53 10.11

Growth Factors

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Road Map – Growth Path

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VPN & VoIP

WiMAX

3G

2G/2.5G

THANK YOU !!

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