Bharti Airtel Strategy Final

8/8/2019 Bharti Airtel Strategy Final

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Presented By: -

Ambika Khanna

Arjun Trehan

Arpita Gupta

Chitra Chakrobarty

Divjot Singh

Mahendra Rathi

Nitesh Saboo

Nilanjan Maitra

Nishant Rana

Ramesh Ramanathan

Rahul Dwivedi

Ravish TandonNishita Saxena

Shikha Gupta

Sumit Chandoke

Strategic Management


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Indian Telecom Sector

Fastest Growing Sector CAGR 22% (2002-08)

Second Largest Telecom Market Lowest tariff charges in the world

Wireless Subscribers 315.3 Mn Wireline Subscribers 38.4 Mn

Teledensity 30.6

23 Circles - 4 Categories ( Metro, A, B & C)

Bharti Airtel Largest player with presence in 23Circles

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Why Mad Rush forTelecom ??

3

225.21

206140.3

98.47653

19.9

5.17.0

9.112.8

18.3

0

50

100

150

200

250

200203 200304 200405 200506 200607 200708 (as

of June

2007)

Subscribers(in

million)

0

4

8

1216

20

24

Teledensity(inpercent)

Telecom Subscriber Base Teledensity

Large number of

additions in telecomsubscribers

Low teledensity

(depicting largeuntapped potential)

Telecom

Advantage

CAGR40

.4%


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4

Go-ahead tothe CDMA

technology

INDI A

Privateplayers wereallowed inValue Added

Services

NationalTelecomPolicy (NTP)wasformulated

1992

1994

1997

Independentregulator,TRAI, wasestab

lished

NTP-99 led tomigration fromhigh-cost fixedlicense fee to low-cost revenue

sharing regime

1999

2000

2002

BSNL wasestablishedby DoT

ILDservices wasopened tocompetition

Internettelephonyinitiated

Reductionof licencefees

2003

Calling PartyPays (CPP) wasimplemented

UnifiedAccessLicensing(UASL)regime wasintroducedReference

Interconnect order wasissued

2004

Intra-circlemergerguidelines wereestablished

Broadbandpolicy 2004wasformulatedtargeting 20millionsubscribersby 2010

2005

FDI limit wasincreasedfrom 49 to 74percent

Attemptedto boostRural

telephony

2006

Number portabilitywas proposed(pending)

Decision on 3Gservices(awaited)

2007

Department of Telecommunication (DoT) is the main bodyformulating laws and various regulations for the Indian telecom

industry.

ILD International Long Distance

Evolution of Telecom In India


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Telecom Ecosystem

5

Indian Telecom Industry Framework

Indian GovernmentBodies

Independent Bodies

WirelessPlanning andCoordination(WPC)

Department ofTelecommunications

TelecomCommission

Group onTelecom and IT(GoT-IT)

TelecomRegulatoryAuthority of India(TRAI)

Telecom DisputesSettlement andAppellate Tribunal(TDSAT)

Handles spectrumallocation andmanagement

DoT Licensee andfrequencymanagement fortelecom

Exclusive policy makingbody of DoT

Handles ad hocissues of thetelecom industry

Independent regulatorybody

Telecom disputessettlement body

They formulate various policies andpass laws to regulate the telecomindustry in India.

They undertake various researchactivities and monitor the quality ofservice provided in the Indian telecomindustry. They also provide variousrecommendations to improve the statusof telecom operations in India.


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Vision 2010

By 2010 Airtel will be the mostadmired brand in India:

Loved by more customers

Targeted by top talent

Benchmarked by more businesses

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Vision 2020

To build India's finest businessconglomerate by 2020

Supporting education ofunderprivileged children throughBharti Foundation

Strategic Intent:

To create a conglomerate of the future bybringing about Big Transformationsthrough Brave Actions.

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Mission

We at Airtel always think in freshand innovative ways about the needsof our customers and how we want

them to feel. We deliver what wepromise and go out of our way todelight the customer with a little bit

more

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Demand for VAS &Broadband services Among

Youth

28 % Urban Population

Rapid Urbanization

Rising Income level

Changing Demographics

Source: Mckinsey Report

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CDMA Already there arebig players in thissegment Reliance ,

Tata

3G Value added servicespotential still to betapped fully

2G/3G GSM Currently

commands 70% ofmobile subscribers inIndia

Technology

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I t t T


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Integrate Te ecomCompany(Product Portfolio)

Wireless Services

2G/3G

Rural Market

TelemediaServices

Fixed Line

Broadband

DTH

Enterprise Services

Carrier

Corporate

PassiveInfrastructure

Bharti Infratel Indus Tower

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Bharti AirtelCorporatestructure

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Wireless Market Share -India

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SWOT ANALYSISStrengths

Largest Telecom player in India subscriber baseover 100mn

Pan India Presence

High Pat Margins 24.8%

Low debt on books D/E of 0.3 Good ARPU of RS 199

Strategic Alliance with other stakeholders in BhartiAirtel include Sony-Ericsson, Nokia - and Sing Tel

Experience of launching 3G services in SriLanka High cash balance of $1bn

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SWOT ANALYSISWeakness

Tariff war at its peak

Increased competition due to new licenses &issuance of cross over technology

ARPU drop is a certainty, expect drop of about

20% M & A regulations restrict attractive synergies

DTH a big worry

Land Line & fixed line service are in a matured

stage

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SWOT ANALYSIS

Opportunity Lot of scope in rural areas

Current Tele-Density 37 is still low amongdeveloping countries

Low broadband penetration company wellequipped to take business to next level

Fast extending International Private Lease Circuitmarket, only player other than VSNL to have

International Submarine cable network

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SWOT ANALYSIS

Threat India centric - Major revenues from India

93% revenues from Bharti Televentures, only 7%from other group companies

Mobile Number Portability by Jan 2010 impacton margins

Inability to obtain 3G spectrum in key circle

Revision of spectrum usage charges

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BCG Matrix for Bharti Airtel

LOWHIGH

HIGH

LOW


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Porters 5 Forces

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1. Threat from Competition

Wireless Market Top 4 garnering 75%market share

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HIGH


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Competitor Analysis

OP Margin Net Margin

Company

Sep-07Sep-08Sep-072

Sep-083

Bharti 43.00% 38.00% 26.40% 19.30%

Rcom 37.90% 31.60% 23.90% 13.20%IDEA 32.80% 26.60% 14.10% 6.50%

MTNL 23.70% 22.90% 7.00% 6.80%

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Best OP Margins& Net Profit

Margins among

Peers

Source: CMIE November 2008


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AMOU & ARPU Stats

838

461

303

88Russia

China

India

USA

0

2

4

6

8

10

Q1 2006 Q2 2006 Q3 2006 Q4 2006 Q1 2007

ARPU

(USD

perm

onth

GSM CDMA

Minutes of Usage per Month Mobile

Services

ARPU* in India Mobile Services

Despite a low teledensity of approximately

19 percent, India has the second highest

minutes of usage per month. This offers

huge growth opportunity to telecom

companies.

The declining ARPU implies that India Inc. is

tapping a large market at the bottom of the

pyramid by reducing tariffs; thereby,

enhancing affordability.

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2. Customer BargainingPower

Lack of differentiation among

Service Providers

Cut throat Competition

Low Switching Costs

Number Portability will have Ve

Impact

Businesses & Consumers

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HIGH


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Market Scenario

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Postpaid Vs Prepaid Customers & Market Share


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4. Threat of Substitutes

Landline

CDMA

Video Conferencing

VOIP - Skype, Gtalk, Yahoo Messenger

e-Mail & Social Networking Websites

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BROADBANDSERVICES

DIMINISHINGMARKET

HIGH


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5. Threat of New Entrants

Huge License Fees to be paid upfront & High

gestation period

Entry of MVNOs & WiMAX operators

Spectrum Availability & Regulatory Issues

Infrastructure Setup Cost - High

Rapidly changing technology

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LOW


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Airtel Strategy

MANTRA : Focus on Core Competenciesand Outsource the rest!

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Strategy

Airtel partnered with leading players intelecommunication players across theglobe.

It has managed to work with the best ofdomain specialists globally and emerge asa world class entity.

Partnerships include operational contracts

with marquee vendors and strategicinvestors ranging from private equityinvestors to global telecom giants.

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S i hi / Sh h ld


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Strategic partnerships/ Shareholders Technology and Capital

Warburg Pincus a celebrated PE investor held astake for a substantial period of time and wasinstrumental in providing Airtel support in its earlystages.

Vodafone was a strategic investor in Airtel.

Temasek the Singapore based investor holds aconsiderable stake in it.

Was also affiliated with Singapore Telecom.

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Operational Strategies.

Higher emphasis on ARPU/min stark contrastwith other operators who concentrate on ARPUonly.

Aim to be become a one stop shop for alltelecommunication services under the Bhartiumbrella.

Exploring opportunities in international markets.

Hived off tower infrastructure into a separateentity.

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Performance till date

Bharti Airtel has enjoyed an excellent run eversince the telecom sector opened.

It has managed to hold on to its leadershipposition inspite of the presence of other playerswith deep pockets Ambanis, Tatas, Birlas andVodafone.

Has coped well with regulatory changes.

Continues to attract and delight customers.

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Strategies

Translate its expertise in Indian markets toother emerging economies.

This could call for acquisitions globally.

Technology leadership is a must Airtelmust ensure that its reliance on GSMtechnology does not render it obsolete.

Indian market inspite of being the worldslargest is still not matured. Opportunitiesabound in the hinterland which must beexploited.

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To Diversify into new businesses inagriculture, financial services andretail business with world-class

partners

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Growth Factors

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Road Map Growth Path

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VPN &VoIP

WiMAX

3G

2G/2.5G


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References

Bharti Airtel, Annual Report -2009 Investors presentation, Bharti Airtel Limited,

November 2009 Telecommunication Services, Indian Industry: A

Monthly Review, CMIE November 2009

Analyst Report Bharti Airtel, Asit C. MehtaInvesment Intermediates Ltd.

Telecommunication Sector Report March 2009,CRISIL

Capitaline Database http://capitaline.com Indian Telecommunication Sector - August 2008,

IBEF Report Next Big Spenders Indian Middle Class,

Businessweek

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http://capitaline.com/http://capitaline.com/


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THANK YOU !!

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Bharti Airtel Strategy Final

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