Company Analysis of Bharti Airtel

Boggarapu Nikhil 10/12/14 Executive Communication

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Company Analysis of Bharti Airtel

Company Analysis of Bharti Airtel

Abstract

Company analysis is done to evaluate capability, stability, Market Share, Growth rate,

Sustainability and profitability of a company. It is done through collection of secondary data from

various resources available in the Internet. Company Analysis helps the people to know more about

the company. The main objective of this study is to analyze the company position of Bharti Airtel

from the public point of view. It is done through various information collected from Internet. There

are various tools and techniques of financial analysis out of these techniques Investigator has used

ratio analysis for the analysis of financial statements of Bharti Airtel based on the secondary data

including balance sheet and profit and loss account . Investigator has calculated various types of

liquidity ratio, activity ratio and profitability ratio which helped to analyze and interpret real profit

and liquidity position of the company. Investigator has collected information regarding market

growth and market share of Bharti Airtel in the market and the company has largest market share

from subscriber and revenue based in the telecom sector and it is 4th Largest Telecom Company in

the world

Keywords: financial Analysis, Evaluate Capability, Stability, Market Share, Growth rate,

Sustainability and profitability

Mr. Boggarapu Nikhil – Student, Master of Business Administration, KCT BS,

Coimbatore.

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Company Analysis of Bharti Airtel

Introduction

Bharti Airtel Limited, commonly known as Airtel, is an Indian telecommunications Services

Company headquartered at New Delhi, India. It operates in 20 countries across South Asia, Africa

and the Channel Islands. Airtel has GSM network in all countries,

providing 2G, 3G and 4G services depending upon the country of operation. Airtel is the

world's fourth largest mobile telecommunications company with over 261 million subscribers

across 20 countries as of August 2012. It is the largest cellular service provider in India, with

186.41 million subscribers as of October 2012. Airtel is the third largest in-country mobile

operator by subscriber base, behind China Mobile and China Unicom.

Airtel is the largest provider of mobile telephony and second largest provider of fixed

telephony in India, and is also a provider of broadband and subscription services. It offers its

telecom services under the airtel brand, and is headed by Sunil Bharti Mittal. Bharti Airtel is the

first Indian telecom service provider to achieve Cisco Gold Certification. It also acts as a carrier

for national and international long distance communication services. The company has a

submarine cable landing station at Chennai, which connects the submarine cable

connecting Chennai and Singapore.

Sunil Bharti Mittal founded the Bharti Group. In 1983, Mittal was in an agreement with

Germany's Siemens to manufacture push-button telephone models for the Indian market. In 1986,

Mittal incorporated Bharti Telecom Limited (BTL), and his company became the first in India to

offer push-button telephones, establishing the basis of Bharti Enterprises. By the early 1990s, Sunil

Mittal had also launched the country's first fax machines and its first cordless telephones. In 1992,

Mittal won a bid to build a cellular phone network in Delhi. In 1995, Mittal incorporated the

cellular operations as Bharti Tele-Ventures and launched service in Delhi. In 1996, cellular service

was extended to Himachal Pradesh. In 1999, Bharti Enterprises acquired control of JT Holdings,

and extended cellular operations to Karnataka and Andhra Pradesh. In 2000, Bharti acquired

control of Sky cell Communications, in Chennai. In 2001, the company acquired control of Spice

Cell in Calcutta. Bharti Enterprises went public in 2002, and the company was listed on Bombay

Stock Exchange and National Stock Exchange of India. In 2003, the cellular phone operations

were rebranded under the single Airtel brand. In 2004, Bharti acquired control of Hexa com and

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Company Analysis of Bharti Airtel

entered Rajasthan. In 2005, Bharti extended its network to Andaman and Nicobar. This expansion

allowed it to offer voice services all across India. In 2009, Airtel launched its first international

mobile network in Sri Lanka. In 2010, Airtel acquired the African operations of the Kuwait

based Zain Telecom. In March 2012, Airtel launched a mobile operation in Rwanda. Today, Airtel

is the largest cellular service provider in India and the third largest in the world.

Airtel operates in all telecom circles of India. Its network is present in 5,121 census towns

and 457,053 non-census towns and villages, covering approximately 86.6% of the country’s

population as of September 2012. Airtel is the 6th most valued brand according to an annual survey

conducted by Brand Finance and The Economic Times in 2010.

Organizational Structure

Airtel's initial organizational structure concentrated on the hierarchy of the operations

inside the company as a whole. The structure depicted the corresponding operation/region of

different in-charges and it didn't hold anyone responsible for each of its services. So, the company

found it better to restructure its organizational chart. The transformed organizational structure has

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Company Analysis of Bharti Airtel

two distinct Customer Business Units (CBU) with clear focus on B2C (Business to Customer)

and B2B (Business to Business) segments. Bharti Airtel's B2C business unit will comprehensively

service the retail consumers, homes and small offices, by combining the erstwhile business units -

Mobile, Tele media, Digital TV, and other emerging businesses (like M-commerce, M-health, M

advertising etc.). The B2C organization will consist of Consumer Business and Market Operations.

Review of Literature

Rachana Bajaj (2013)1 Financial analysis is done to evaluate capability, stability and profitability

of a company. It is done through various financial ratios calculated from the financial statements

of a company. Financial analysis helps investors to appraise whether they should invest in a

particular company or not. The main objective of this study is to analyze the financial position of

Bharti Airtel from the investors' point of view. It is done through various ratios calculated through

financial statements of company for the period from 2005 to 2012. There are various tools and

techniques of financial analysis out of these techniques Investigator has used ratio analysis for the

analysis of financial statements of Bharti Airtel based on the secondary data including balance

sheet and profit and loss account Investigator has calculated various types of liquidity ratio, activity

ratio and profitability ratio which helped to analyze and interpret real profit and liquidity position

of the company. Bharti Airtel has the largest market share from subscriber and revenue based in

the telecom sector. In nutshell, it is found that investors can be benefitted in the long run by

investing in the telecom industry because telecom industry is otherwise growing industry. Indian

government is also providing various facilities in the development of telecom industry. Telecom

commission has approved 100% FDI in telecom sector. And among the industry Bharti Airtel has

the largest market share from subscriber and revenue based. Roma Mitra Debnath (2008)2

Technological modernization is increasingly viewed as a premeditated necessity in today's era of

growth and prosperity for any country. Telecommunications has entered a new age of development

with advanced technology and increased competition with established players.

Financial Analysis of Bharti Airtel

Benchmarking telecommunication service in India: An application of data envelopment analysis

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Company Analysis of Bharti Airtel

The prime focus of the service providers is to create a loyal customer base by benchmarking their

performances and retaining existing customers in order to benefit from their loyalty. The paper

aims to address these issues. The results are insightful to the telecom policy planner as benchmark

them in terms of their efficiency. It also identifies the inefficient service providers who can

improve their efficiency by making the efficient providers as their role model. The paper also

identifies some generic insights. Sharma, Alka Singh, Mandeep (2012)3 In Indian context,

telecommunication has emerged as one of the fastest growing services, as it has witnessed

phenomenal growth from 22.8 million subscribers in 1999 to 746.77 million by the end of

November 2010 (Ministry of Finance, Govt. of India, 2011). However, despite this unparalleled

growth, few critical issues have emerged which affect the growth in a negative manner. These are

decreasing ARPU, undifferentiated services, increased competition, rapid evolution of technology

and highly dynamic customers. The present study has been undertaken to analyse the customers'

perception about the following aspects of key telecom providers the value added services (VAS),

service quality, customer satisfaction and loyalty. The results suggest that value added services are

perceived to be a strategic tool to differentiate service of one provider from the other. Further a

comparative analysis of the leading service providers has been undertaken from customer’s

perspective to understand the variations in satisfaction and loyalty levels of their customers.

Subhasish Majumdar, Partha Pratim Bhattacharya (2014)4 in this paper, we have

discussed Porter Five Forces model and presented mobile communication market scenario in India.

Then we have analyzed the intensity of competitions among different mobile phone service

providers. Different forces which may throw a challenge to the existing leader are thus found out.

So far very little analysis is done on telecom sector using Porter five forces model. Analysis

indicates that although to meet competition the top service provider is struggling hard but the

presence of strong rivals has put a challenge. From above discussion, we may conclude that the

presence of rivals is the main area that needs company’s management serious attention. Company

may follow the strategy of horizontal integration by taking the decision of merger or acquisition

with any of its one or two rivals. The leader should offer special packages

Benchmarking telecommunication service in India: An application of data envelopment analysis

Porter Five Forces Analysis of the Leading Mobile Cellular Telephony Service Provider in India

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Company Analysis of Bharti Airtel

Problem Identification

For several years running, Sunil Bharti Mittal-promoted Bharti Airtel has been the

undisputed leader in the Indian telecom market. As of March 31, 2013, it had 188.19 million

wireless subscribers and 21.69 per cent market share. The operator’s rapid rise – from the time it

began as a small company offering mobile services in Delhi only, in 1995 – is symbolic of the

strong growth witnessed in the Indian telecom industry. Today, the company offers mobile voice

and data, fixed line, 3G, national and international long distance, IPTV and direct-to-home (DTH)

services. It also manages 82,083 tower sites through Bharti Infratel and Indus Towers. In 2012,

Bharti Airtel raced ahead of its rivals to offer 4G services in the country. These services were

launched on long term evolution-time division duplexing networks, making India one of the first

countries to commercially offer 4G services through this platform. As per industry estimates,

Bharti Airtel currently has over 3,200 4G users. Going forward, analysts expect significant activity

in the 4G space, especially with the entry of Reliance Jio Infocomm in this market. Bharti is

currently the only operator to provide high-bandwidth 4G services in four circles – Bengaluru,

Chandigarh, Kolkata and Pune. Globally, the company operates in 20 countries: 17 African

countries besides India, Sri Lanka and Bangladesh. It is the world’s fifth largest telecom operator

in terms of subscribers. Business Week has ranked Bharti Airtel among the six best performing

technology companies in the world. Bharti has made large infrastructure investments over the past

decade and a half, and currently owns a 171,610 route km optic fiber network across India. Its

global infrastructure includes over 225,000 route km of networks, covering 50 countries and five

continents.

Industry analysts attribute Bharti Airtel’s swift success to Mittal’s business astuteness and

strong support from his core team. According to the former managing director of a telecom firm,

“In the formative years of the telecom sector, Mittal’s perspective was sharper than that of others.

He was able to grab opportunities that he saw while others dithered.” Also, Mittal’s outsourcing

and “minute’s factory” business model, which has driven low-cost mobile telephony in the

country, is well known. However, the past four years have been rough for the operator with its

financial performance witnessing a major slide. During 2012-13, it registered a net profit of Rs

22.75 billion, the lowest in seven years. This marked a decrease of about 50 per cent from Rs 42.59

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Company Analysis of Bharti Airtel

billion in 2011-12. Its earnings before interest, taxes, depreciation and amortization margin, though

still high, declined from 33.2 per cent in 2011-12 to 31 per cent in 2012-13. The company’s market

capitalization declined from Rs. 1,279 billion to Rs 1,108 billion during this period. The biggest

challenge for the company is servicing its debt, which stood at Rs 638.39 billion as of March 31,

2013. This debt was raised largely to fund the $9 billion acquisition of Zain’s African operations

in 2010. The financial pressure is expected to increase in the coming years as the operator needs

funds to pay the one-time spectrum fee and to renew its licenses for the Delhi and Kolkata circles

in November 2014. While the company has obtained a stay order from the Delhi High Court on

the Rs 52 billion one-time payment for spectrum held beyond 4.4 MHz, it will need to participate

in an auction for license extension in the two circles as the government has rejected its application

for automatic renewal. Borrowing additional funds is not prudent for the operator. Besides, its

funding options have become limited as it already has a huge debt on its books. In this scenario,

reviewing its existing business strategy and tapping new revenue streams are the only way forward

for the company.

Key concerns

The major challenges faced by Bharti Airtel in the past two years include hyper competition, a

difficult regulatory environment, falling margins and a decline in almost all operational metrics.

The entry of new players in the market in 2008 led to a price war and incumbents like Bharti were

forced to offer services at rock-bottom prices. While low-cost mobile services resulted in

subscriber growth, the operating margins slid significantly. “The cut-throat competition in the last

two to three years has impacted incumbent players,” says a senior research analyst at Kotak

Securities. As a corrective measure, all operators hiked 2G tariffs in 2012. This has helped

companies like Bharti improve their margins to some extent.

In addition, acquiring 3G and broadband wireless access (BWA) spectrum in 2010

turned out to be a costly affair for the operator – it spent Rs 122.95 billion on acquiring 3G

spectrum in 13 circles and another Rs 33.14 billion for BWA airwaves in four circles. These

investments have not paid off as 3G service uptake has been below expectations, while the 4G

ecosystem is yet to mature.

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Company Analysis of Bharti Airtel

Strength1.Largest cellular service provider in India, with over 164.61 million subscribers at the end of April 20112.Largest Telecom operator in the world with 207.8 million subscribers across 19 countries at the end of 20103.Only Indian operator, with VSNL, that has an international submarine cable4.High brand visibility5.Strong advertising with celebrity brand ambassadors

Weakness1.Price competition from BSNL and MTNL2.Untapped Rural Market

Oppurtunity1.Fast expanding cellular market2.Latest and low cost technology3.Untapped rural market

Threats1.New entrant's low price offering2.Saturation point in Basic telephony service3.Mobile Number Portability

SWOT

Methodology

Sources of Data

The study is primarily based on secondary data. The required data have been collected from carious

websites and relevant data available in the Internet.

Sampling Framework

Annual Reports of the company has taken into consideration and has analyzed the companies over

a period of years

Interpretation

SWOT Analysis

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Company Analysis of Bharti Airtel

Source: TRAI

Challenging Model

Revenue Market Share

BSNL+MTNL7%

Aircel5%

Bharti Airtel30%

Vodafone23%

Idea15%

Tata Docomo9%

Reliance8%

Others3%

Revenue Market Share

BSNL+MTNL

Aircel

Bharti Airtel

Vodafone

Idea

Tata Docomo

Reliance

Others

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Company Analysis of Bharti Airtel

Source: TRAI

The above chart explains the revenue market share of Telecom Companies in India for

the year 2014. BSNL+MTNL has a market share of 7%, Aircel has a market share of 5%, Bharti

Airtel has a market share of 30%,Vodafone has a market share of 23%,Idea has a market share of

15%, Tata DoCoMo has a market share of 9%. Reliance has a market share of 8% and others has

a market share of 3%.

Subscribers Market Share

The above chart explains the subscriber’s market share of Telecom Companies in the year

2041.Bharti Airtel has a market share of 23%, Vodafone has a market share of 18%, Idea has a

Market share of 15%, Reliance has a market share of 13%, BSNL has a market share of 11%, Tata

DoCoMo has a market share of 7%, Aircel has a Market Share of 8% and others has a market share

of 6%.

23.00%

18.00%

15.00%

13.00%

11.00%

7.00%8.00%

6.00%

Bharti Airtel Vodafone Idea Reliance BSNL &MTNL

Tata Docomo Aircel Others

Subscribers Market Share

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Company Analysis of Bharti Airtel

Source: TRAI, Department of Telecom, Company Filings

Spectrum Position

Acquired 115 MHz of 20 year liberalized spectrum positions – Enhanced long term

deployment flexibility

Prime Spectrum to Lead Data Growth Story in Feb 2014 auctions

Secured pan India 4G footprint- widest broadband footprint in India, which

provides ability to build robust network and enhance leadership position in the

fast growing data segment

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Company Analysis of Bharti Airtel

Company plans to roll-out high speed 4G networks in various circles using FD-

LTE technology in the 1800 MHz band besides its existing TD-LTE rollout in

the 2300 MHz band, giving it a pan-India 4G footprint.

Bharti Already holds 3G and 4G spectrum in 21 telecom circles. Bharti has rolled out 3G

and 4G services – with over 8 million 3G customers

Investment Highlights

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Company Analysis of Bharti Airtel

Conclusion

In nutshell, it is found that investors can be benefitted in the long run by investing in the telecom

industry because telecom industry is otherwise growing industry. Indian government is also

providing various facilities in the development of telecom industry. Telecom commission has

approved 100% FDI in telecom sector. And among the industry BHARTI AIRTEL has the largest

market share from subscriber and revenue based.

References Misra, A., & Anil, K. (2007). ECONOMIC VALUE ADDED (EVA) AS THE MOST SIGNIFICANT MEASURE

OF FINANCIAL PERFORMANCE: A STUDY OF SELECT INDIAN FIRMS. Journal of International

Business & Economics, 7(1).

Nigam, V., Thakur, T., Sethi, V. K., & Singh, R. P. (2012). Benchmarking of Indian mobile telecom operators

using DEA with sensitivity analysis. Benchmarking: An International Journal, 19(2), 219-238.

Majumdar, S., & Bhattacharya, P. P. (2014). Porter Five Forces Analysis of the Leading Mobile Cellular

Telephony Service Provider in India.

Singh, K., & Sukhija, S. (2010). A Study of Profitability Performance of Telecommunication Companies in

India. Available at SSRN 1613084.

Ramadoss, G. (2013). Customer satisfaction of Telecom services in Tamil Nadu, India. International Journal

on Global Business Management and Research, 77.

Upadhyaya, R. C., & Sharma, V. (2001). Customer Satisfaction with Network Performance of BSNL and

AIRTEL Operating In Gwalior Division (MP).

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Company Analysis of Bharti Airtel

Annexure

Balance Sheet of Bharti Airtel ------------------- in Rs. Cr. -------------------

Mar '14 Mar '13 Mar '12 Mar '11 Mar '10

12 Mths 12 mths 12 mths 12 mths 12 mths

Sources Of Funds

Total Share Capital 1,998.70 1,898.80 1,898.80 1,898.80 1,898.77

Equity Share Capital 1,998.70 1,898.80 1,898.80 1,898.80 1,898.77

Share Application Money 0.00 0.00 0.00 0.00 186.09

Preference Share Capital 0.00 0.00 0.00 0.00 0.00

Reserves 64,729.30 52,247.40 47,530.80 42,212.80 34,650.19

Revaluation Reserves 0.00 0.00 0.00 0.00 2.13

Networth 66,728.00 54,146.20 49,429.60 44,111.60 36,737.18

Secured Loans 1.40 -1,236.50 2.90 17.10 39.43

Unsecured Loans 8,521.30 14,216.30 14,126.50 10,216.00 4,999.49

Total Debt 8,522.70 12,979.80 14,129.40 10,233.10 5,038.92

Total Liabilities 75,250.70 67,126.00 63,559.00 54,344.70 41,776.10

Mar '14 Mar '13 Mar '12 Mar '11 Mar '10

12 mths 12 mths 12 mths 12 mths 12 mths

Application Of Funds

Gross Block 73,949.20 71,911.80 63,885.40 59,457.90 44,212.53

Less: Accum. Depreciation 34,071.00 28,729.20 23,444.60 18,757.20 16,187.56

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Company Analysis of Bharti Airtel

Net Block 39,878.20 43,182.60 40,440.80 40,700.70 28,024.97

Capital Work in Progress 1,244.20 1,030.80 4,466.50 6,479.20 1,594.74

Investments 34,523.90 28,199.10 12,337.80 11,813.00 15,773.32

Inventories 1.10 2.10 32.10 34.40 27.24

Sundry Debtors 2,165.50 2,246.80 2,134.50 1,461.90 2,104.98

Cash and Bank Balance 446.00 362.70 481.20 133.20 54.89

Total Current Assets 2,612.60 2,611.60 2,647.80 1,629.50 2,187.11

Loans and Advances 19,945.20 12,859.10 20,430.80 10,960.20 7,072.42

Fixed Deposits 0.00 0.00 0.00 0.00 761.86

Total CA, Loans & Advances 22,557.80 15,470.70 23,078.60 12,589.70 10,021.39

Deffered Credit 0.00 0.00 0.00 0.00 0.00

Current Liabilities 21,798.60 20,061.70 16,067.20 16,610.30 12,979.55

Provisions 1,154.80 695.50 697.50 627.60 658.75

Total CL & Provisions 22,953.40 20,757.20 16,764.70 17,237.90 13,638.30

Net Current Assets -395.60 -5,286.50 6,313.90 -4,648.20 -3,616.91

Miscellaneous Expenses 0.00 0.00 0.00 0.00 0.00

Total Assets 75,250.70 67,126.00 63,559.00 54,344.70 41,776.12

Contingent Liabilities 87,232.10 123,273.00 8,261.10 6,852.10 3,921.50

Book Value (Rs) 166.93 142.58 130.16 116.16 96.24

Mar '14 Mar '13 Mar '12 Mar '11 Mar '10

12 mths 12 mths 12 mths 12 mths 12 mths

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Company Analysis of Bharti Airtel

Sources Of Funds

Total Share Capital 1,964.50 1,898.80 1,898.80 1,898.80 1,898.77

Equity Share Capital 1,964.50 1,898.80 1,898.80 1,898.80 1,898.77

Share Application Money 0.00 0.00 0.00 0.00 0.00

Preference Share Capital 0.00 0.00 0.00 0.00 0.00

Init. Contribution Settler 0.00 0.00 0.00 0.00 0.00

Preference Share Application Money 0.00 0.00 0.00 0.00 0.00

Employee Stock Opiton 0.00 0.00 0.00 0.00 261.96

Reserves 57,791.50 48,422.90 48,712.50 46,868.00 37,716.06

Revaluation Reserves 0.00 0.00 0.00 0.00 2.13

Networth 59,756.00 50,321.70 50,611.30 48,766.80 39,878.92

Secured Loans 11,586.90 13,286.70 12,089.30 7,670.50 4,958.43

Unsecured Loans 64,308.90 59,674.10 56,933.90 48,979.60 5,329.71

Total Debt 75,895.80 72,960.80 69,023.20 56,650.10 10,288.14

Minority Interest 4,210.20 4,088.60 2,769.50 2,856.30 2,855.53

Policy Holders Funds 0.00 0.00 0.00 0.00 0.00

Group Share in Joint Venture 0.00 0.00 0.00 0.00 0.00

Total Liabilities 139,862.00 127,371.10 122,404.00 108,273.20 53,022.59

Mar '14 Mar '13 Mar '12 Mar '11 Mar '10

12 mths 12 mths 12 mths 12 mths 12 mths

Application Of Funds

Gross Block 198,569.30 186,681.80 133,582.10 128,874.30 72,116.34

Less: Accum. Depreciation 57,954.80 49,758.00 0.00 0.00 21,267.28

Net Block 140,614.50 136,923.80 133,582.10 128,874.30 50,849.06

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Company Analysis of Bharti Airtel

Capital Work in Progress 0.00 0.00 0.00 0.00 2,435.94

Investments 15,530.80 6,769.30 1,815.60 622.40 5,162.07

Inventories 142.20 110.90 130.80 213.90 48.39

Sundry Debtors 6,244.10 6,643.00 6,373.50 5,492.90 3,182.48

Cash and Bank Balance 4,980.80 1,729.50 2,030.00 883.90 1,010.74

Total Current Assets 11,367.10 8,483.40 8,534.30 6,590.70 4,241.61

Loans and Advances 15,664.80 15,146.70 13,129.60 10,345.40 5,653.23

Fixed Deposits 0.00 0.00 0.00 73.60 1,567.90

Total CA, Loans & Advances 27,031.90 23,630.10 21,663.90 17,009.70 11,462.74

Deffered Credit 0.00 0.00 0.00 0.00 0.00

Current Liabilities 42,138.30 38,713.80 33,804.60 38,115.20 15,573.92

Provisions 1,176.90 1,238.30 853.00 118.00 1,313.29

Total CL & Provisions 43,315.20 39,952.10 34,657.60 38,233.20 16,887.21

Net Current Assets -16,283.30 -16,322.00 -12,993.70 -21,223.50 -5,424.47

Minority Interest 0.00 0.00 0.00 0.00 0.00

Group Share in Joint Venture 0.00 0.00 0.00 0.00 0.00

Miscellaneous Expenses 0.00 0.00 0.00 0.00 0.00

Total Assets 139,862.00 127,371.10 122,404.00 108,273.20 53,022.60

Contingent Liabilities 38,098.20 21,932.10 21,526.60 16,509.40 4,863.86

Book Value (Rs) 149.40 132.51 133.27 128.42 104.32

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Company Analysis of Bharti Airtel