Stat pres

Remove retail and insurance
Cash cows:- mobile services
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?- problem child check---->>
Introduction

In a recent TV interview (CNBC-TV18) Sunil Mittal, the CEO & MD, of Bharti Airtel
was asked, “What the future holds for Bharti?” He replied,”We have out-played a
good many and a good many will out-play us. How we keep them at bay is the
challenge.” What he probably meant is - to devise and pursue a strategy that will
keep Bharti Airtel ahead of it’s competitors.

TELE-COMMUNICATION SCENARIO IN INDIA

The Indian Telecommunications network is the third largest in the world and the second
largest among the emerging economies of Asia. The telecommunication sector has emerged as
one of the key sectors responsible for India’s resurgence and economic growth.

Growth

This rapid growth has been possible due to various proactive and positive decisions of the
Government and contribution , both by the public and the private sector. The rapid strides
in the telecom sector have been facilitated by liberal policies of the Government that provide
easy market access for telecom equipment and a fair regulatory framework for offering
telecom services to the Indian consumers at an affordable prices. There is a genuine
commitment to creating a modern and efficient communications infrastructure that
takes account of the convergence of telecom, IT and media.
.
INDUSTRY OVERVIEW

Total Telephone Subscribers
• The number of telephone subscribers in India increased to 846.32 Million at the end of
March 2011 from 826.25 Million at the end of February 2011, thereby registering a growth
rate of 2.43%. The share of Urban Subscriber has declined to 66.65% from 66.72% where
as share of Rural Subscribers has increased from 33.28% to 33.35%. With this, the overall
Tele-density in India reaches 70.89.

• Subscription in Urban Areas grew from 551.27 million in February 2011 to 564.08 million
at the end of March 2011. Rural subscription increased from 274.98 million to 282.23
million. The growth of Rural Subscription (2.64%) is higher than the Urban Subscription
(2.32%). The overall Urban teledensity has increased from 154.01 to 157.32 and Rural
teledensity increased from 32.95 to 33.35.

Wireless Segment (GSM, CDMA & FWP)
• Total Wireless subscriber base increased from 791.38 Million in February 2011 to 811.59
Million at the end of March 2011, registering a growth of 2.55%. The share of Urban
Subscriber has declined to 66.30% from 66.36% where as share of Rural Subscribers has
increased from 33.64% to 33.70%. The overall wireless Tele-density in India reaches
67.98.

• Wireless subscription in Urban Areas increased from 525.17 million in February 2011 to
538.05 million at the end of March 2011. Rural subscription increased from 266.21 million

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to 273.54 million. This shows higher growth in Rural Subscription (2.75%) than Urban
Subscription (2.45%). The Urban wireless teledensity has increased from 146.72 to
150.06 and Rural teledensity increased from 31.90 to 32.75.

• Private operators hold 88.01% of the wireless market share where as BSNL and MTNL,
two PSU operators hold only 11.99% market share. The graphical presentations of market
shares and shares in net additions of all the service providers during the month of March
2011 are given below

About Bharti airtel

Bharti Airtel was established as Bharti Tele-Ventures Limited in 1985. It is a joint
stock holding enterprise headquartered in New Delhi. Bharti Airtel Limited, commonly
known as Airtel, is an Indian telecommunications company that operates in 19
countries across South Asia, Africa and the Channel Islands. It operates a GSM
network in all countries, providing 2G or 3G services depending upon the country of
operation. Airtel is the fifth largest telecom operator in the world with over 207.8
million subscribers across 19 countries at the end of 2010. Airtel is the 3rd largest
in-country mobile operator by subscriber base, behind China Mobile and China
Unicom.

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Coverage map of Bharti Airtel across 19 countries

Airtel is the 5th largest mobile operator in the world in terms of subscriber base and has a
commercial presence in 19 countries and the Channel Islands.

Its area of operations include:

The Indian Subcontinent:
o Airtel Bangla, in Bangladesh
o Airtel, in India
o Airtel Sri Lanka, in Sri Lanka
Airtel Africa, which operates in 16 African countries:
o Burkina Faso, Chad, Democratic Republic of the Congo, Republic of the
Congo, Gabon, Ghana, Kenya, Madagascar, Malawi, Niger, Nigeria,
Seychelles, Sierra Leone, Tanzania, Uganda and Zambia.

The British Crown Dependency islands of Jersey and Guernsey, under the brand
name Airtel-Vodafone, through an agreement with Vodafone

It is the largest cellular service provider in India, with over 164.61 million
subscribers at the end of 2011 April and a presence in all the 23 telecom circles.
The company offers mobile voice and data services, fixed line, high speed
broadband Internet access(DSL)in 96 cities in India, IPtv, dth and turnkey
telecom solutions for enterprises. It also acts as a carrier for national and
international long distance communication services. The company has a submarine cable
landing station at Chennai, the submarine cable connecting Chennai and Singapore.

Vision of Bharti Airtel – By 2015, airtel will be the most loved brand, enriching the lives of
million.

Bharti airtel’s businesses can be categorised broadly under three strategic business
units (SBU’s)

1. Mobile telephony
2. Telemedia
3. Enterprises

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The mobile business is the major revenue earner(star) where as the other two SBUs
are in different stages of their business cycles.

Figure 1

VALUE CHAIN ANALYSIS OF AIRTEL

Airtel is the first telecom company in the world to outsource everything except marketing ,
sales and finance. Its network (base stations, microwave links, etc.) are maintained by
Ericsson, Nokia Siemens Network and Huawei, business support by IBM and transmission
towers by another company (Bharti Infratel Ltd. in India). Ericsson agreed for the first time,
to be paid by the minute for installation and maintenance of their equipment rather than
being paid up front. This enabled the company to provide pan-India phone call rates of Rs.
1/minute (U$0.02/minute). Call rates have come down much further. In the year 2009-10,
Bharti has roped in a strategic partner Alcatel-Lucent to manage the network
infrastructure for the Telemedia Business.

Value chain of Bharti Airtel

Value Chain

Information
Technology
(IBM)

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Network Strategic investor Passive Call Centre
Outsourcing & (Temasek, Voda Infrastructure(Bhar Outsourcing(IBM
Maintenance(Erics fone, Warburg ti Infratel, INDUS DAKSH, Mphasis,
son, Nokia- pincus, Singtel) Power) Nortel)
Siemens)
Pricing and Payment Pricing linked to capacity Increased sharing of Enhanced & consistent
As a % of revenues, + passive infrastructure customer experience
thus reducing fixed cost. Payments linked to uses
& network quality Reduced Capex spend Common platform across
Service level agreement (assured network quality) the group
For quality & deployment
Service level agreement Scalable business model
Deliver service delivery to met business needs
Platform enabling delivery
Of content to end user WP was instrumental in
Devices like mobiles, PCs Providing support at the
etc. Early stage

Singtel had 50:50 JV in
Chennai landing station

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Analysis of Bharti Airtel

Resources & Capabilities:

Product
Innovation

Core
Pricing VAS
Competencies

Marketing
and
Branding

Industry Analysis ( Porter’s Five force model)

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Threat of
New
Entrants

Supplier Threat from Customer
Power Competition
Power

Threat of
Substitutes

Remove B. Sevies...............................

THREAT FROM COMPETITION
1. Market Coverage

HIGH

As compared to its nearest competitor, Reliance & Vodafone the market share of
three companies in wireless telecom as on 31.03.2009 to 31.03.2011 is given below:

FY ending on Bharti Airtel Reliance Vodafone
31.03.2009 23.97% 18.55% 17.55%

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31.03.2010 21.84% 17.53% 17.26%
31.03.2011 19.99% 16.72% 16.58%

Competitor Analysis
(Profit Margin)
40.00%

20.00%

0.00%
Bharti Rcom IDEA MTNL

Set graph
Data below

Net Profit Margin
OP Profit Margin
Mar-11
Company Mar-10 Mar-11 Mar-10

Bharti 25.04% 16.41% 21.45% 10.17%

Rcom 33.30% 37.05% 21.03% 5.82%

Vodafone 21.32% 12.20% 19.38% 17.15%

2. Declining MoUs in India

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Declining ARPU in India

Customer Power

Market Scenario

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Suppliers Bargaining Power

Threat of Substitutes

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Threat of New Entrants

Analysis of competitive Advantage

1. Cost leadership Advantage

A firm gains cost leadership in an industry when its cost of production is
lower than that of its competitors. Airtel has gain cost leadership by
managing its processes and resources efficiently and effectively. By
bringing down its operational costs, Airtel offers its products and
services at lower prices compared to it’s competitors. It also earns higher
profits because either the profit margins are greater or the sales volume
has increased.

Operational NET
margin MARGIN

2. Differentiation Advantage

The differentiation strategy adopted by the firms needs to possess
sufficient skills and abilities to differentiate the product from that of the
competitors based on some attributes that allow the consumers to
perceive the product as different from that of the competition. Firms that
adopt the differentiation strategy successfully have access to advanced

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scientific research, a highly skilled labour force, effective customer
communication strategies, etc.

Airtel is providing free digital EPABX with free leased lines (no
connectivity charges).So the firm is providing latest EPABX to the
customer which is costing approx Rs 50,000.

Best service provider, good call center service esp. in local
languages, good service even in the remote areas, emphasis on
“barriers break when people speak”, new initiatives like google
search on airtel live, downloads etc
3. Focus strategy

A firm pursuing a focus strategy tends to serve a specific
segment instead of catering to the entire market. This segment
may be a special group of customers, a specific geographic
area, or a particular product or service line. The customers will
also be loyal to the company and therefore, the entry of a new
competitor into that area becomes difficult.

Airtel is focusing on the customers who is having more than
Rs10000 monthly landline billing. Airtel is offering landline
services which consist of PRI (Primary Rated Interface). Airtel
can provide its service to a specific geographic area i.e. from
Dahisar to Churchgate in western region & Thane to Panvel in
eastern region.

Of late, Airtel has extended it’s focus to the rural customers
having much less ARPU.

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Infrastructure
Sharing

Rural
Growth Managed
Telephony Services

Factors

Enterprise
Telecom

PESTEL

P Political dummy

dummy
E Economic

S Social dummy

dummy
T Technological

E Environmental dummy

L Legal dummy

SWOT(put it in 2x2 matrix)

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Business Strength

Business Strategy of Airtel

New market Existing Market

New Product Enterprise business Tele media business

Existing Product Rural Telephony,
African Venture

ANOFF’s Matrix

Rural strategy of airtel
As the urban Tele density about to reach its point of saturation, Bharti Airtel, a
pioneer its own field, looked to rural India as its next growth engine.

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Serving rural India was a challenge in itself. Rural users low income, widely
dispersed population, less than ideal public infrastructure were some of the
deterentes. With an ARPU of less than $2 per month, profitability of Rural operations
was always under a Question mark.

On the other hand, with 70% of the Indian populace in rural India (1.1 Bn) and a tele
density of only 18.5% as of September 2009, it had a huge potential for growth.

To counter this challenges, Bharti Airtel adopted a slew of strategies-

a) Alliance / Partnership
To extend its reach to rural India, Bharti Airtel is focusing on innovative
initiatives, including efficient infrastructure deployments, expanding its
distribution network via partnerships and customized content and tarrifs.

Bharti entered into an aggrement with Nokia and SKS Microfinance. Under
these partnerships, Bharti provides subsidised tariffs and SIM cards to rural
users, Nokia provides subsidised Hand Sets and SKS offers Micro financing.

To expand coverage in to rural areas, Bharti Airtel is sharing passive
infrastructure services with vodafone and Idea through its joint venture INDUS
towers. INDUS towers will control more than 60% of India’s network towers.
By sharing infrastructure cost and usage between multiple
operators, Bharti Airtel was able to reduce its operating and capital expenses.

Bharti also formed a joint venture with IFFCO (named IFFCO Kishan sanchar)
and thus benefiting from IFFCO,s rural presence (80% of Indian villages) and
appeal among the rural agricultural community to market and distribute
Bharti’s products.

IFFCO Kisan Sanchar provides subsidized handsets and connections at
competitive rates in rural areas. It also helps Bharti Airtel to identify and
acquire suitable locations for deploying its cell sites. In addition, it offers
tailored services including voice-based updates on crop prices, farming
techniques, rural health initiatives, and “help line” services.

b) Airtel approach

Bharti Airtel first studies the commercial viability of a rural community (and the
surrounding villages) based on parameters such as source of livelihood,
average income, and involvement in frequent commercial transactions or

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travels. The company has developed a prioritized deployment strategy based
on the specified criteria. Qualifying villages are first to receive a base station,
which also caters to nearby communities. To help ensure efficient usage and
profitability for each of these base stations, Bharti Airtel tracks the revenue
generated per base station (instead of ARPU, which is considered less
relevant in a rural context).

The following best practices have also been established:

● Bharti Airtel has adopted the strategy of direct communications to
market its value proposition to rural customers. To make its services
accessible, the company provides all of its marketing content in local
languages. Vans are used to cover rural areas with staff who educate
locals about mobile services and usage.
● The company has developed a shared phone service called Public Call
Offices (PCOs) in rural regions to increase awareness about its brand
and services.
● Bharti Airtel Service Centers have been set up in villages to address
customer queries and complaints as well as act as sales and
distribution points. These centers employ local people and offer sales
and customer services using local dialects.
● Bharti Airtel has already established over 18,000 service centers in
rural India, covering over 400 languages and local dialects. The
company plans to expand this network.

Africa strategy (Existing Prod.- New market)

According to IMF the world economy grew by 5% in 2010, led by 7.1% growth of
emerging economies and a 3% growth of advanced economies. With the morphing
of the emerging economies (India, Africa, China etc.) from the worlds back office to
nerve centre of activities. Both Africa and Asia are expected to be the fastest
growing regions with 7% and 5.4% per annum growth respectively in real GDP
between 2010 and 2050. The economic growth prospects in these geographies
prompted Airtel to devise its “Look Africa” strategy.

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Worldwide Presence (at the Beginning)

Airtel operates in the following countries:

Country Site Remarks

Airtel Bangladesh had about 3.2 million
Bangladesh bd.airtel.com customers at the end of 2010.

Airtel Burkina Faso is the dominant
Burkina
africa.airtel.com/burkina player with 1,433,000 customers
Faso
representing 50% market share.

Airtel Chad is the no. 1 operator with
Chad africa.airtel.com/chad
69% market share.

Democratic Airtel is the market leader with almost 5
africa.airtel.com/drc
Republic of million customers at the end of 2010.
the Congo

Airtel Gabon has 829,000 customers and
Gabon africa.airtel.com/gabon
its market share stood at 61%.

Airtel Ghana had about 1.76 million
Ghana africa.airtel.com/ghana
customers at the end of 2010.

Airtel is the market leader with almost
India airtel.in 152.5 million customers at the end of
2010.

Airtel Kenya is the second largest
Kenya africa.airtel.com/kenya
operator and has 4 million customers.

Airtel holds second place in the mobile
telecom market in Madagascar, has a
Madagascar africa.airtel.com/madagascar 39% market share and over 1.4 million
customers.

Airtel Malawi is the market leader with a
Malawi africa.airtel.com/malawi
market share of 72%.

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Airtel Niger is the market leader with a
Niger africa.airtel.com/niger
68% market share.

Nigeria ng.airtel.com

Republic
Airtel Congo is the market leader with a
of the africa.airtel.com/congob
55% market share.
Congo

Airtel is the leading comprehensive
telecommunications services providers
Seychelles africa.airtel.com/seychelles with over 55% market share of mobile
market in Seychelles.

Sierra
africa.airtel.com/sierra
Leone

Airtel Lanka commenced operations on
Sri
airtel.lk 12 January 2009. It had about 1.8 million
Lanka
mobile customers at the end of 2010.

Airtel Tanzania is the market leader with
Tanzania africa.airtel.com/tanzania
a 38% market share.

Airtel Uganda stands as the no. 2
Uganda africa.airtel.com/uganda
operator with a market share of 38%.

Zambia africa.airtel.com/zambia

Channel
Islands : Airtel operates in the Channel Islands
Jersey and airtel-vodafone.je under the brand name Airtel-Vodafone
through an agreement with Vodafone.
Guernsey†

†Jersey and Guernsey are British Crown Dependencies. They are not independent countries. Therefore, Airtel's
countries of operation is considered to be 19.

Acquisitions and Mergers

Bharti Airtel aggressively pursued the to expand its base in markets which have less
teledensity to maintain its strategic positioning. For this matter, Africa was a lucrative
market where the company entered through mergers & acquisitions.

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MTN

In May 2008, it emerged that Bharti Airtel was exploring the possibility of buying the MTN
Group, a South Africa-based telecommunications company with coverage in 21 countries in
Africa and the Middle East. The Financial Times reported that Bharti was considering
offering US$45 billion for a 100% stake in MTN, which would be the largest overseas
acquisition ever by an Indian firm. However, both sides emphasize the tentative nature of
the talks, while The Economist magazine noted, "If anything, Bharti would be marrying up,"
as MTN has more subscribers, higher revenues and broader geographic coverage. However,
the talks fell apart as MTN group tried to reverse the negotiations by making Bharti almost a
subsidiary of the new company.

In May 2009, Bharti Airtel again confirmed that it is in Talks with MTN and companies have
now agreed discuss the potential transaction exclusively by July 31, 2009. Bharti Airtel said
in a statement "Bharti Airtel Ltd is pleased to announce that it has renewed its effort for a
significant partnership with MTN Group".

Talks eventually ended without agreement, due to the South African government
opposition.

Zain
In March 2010, Bharti struck a deal to buy the Kuwait firm's mobile operations
in 15 African countries, in India's second biggest overseas acquisition after
Tata Steel's $13 billion buy of Corus in 2007. Bharti Airtel completed its $9
billion acquisition of African operations from Kuwait's Zain, making the firm the
world's No. 5 wireless carrier by subscribers. Airtel has reported that its
revenues for the fourth quarter of 2010 grew by 53% to US$3.2 billion
compared to the previous year, newly acquired Zain Africa division
contributed US$911 million to the total. However, net profits dropped by 41%
from US$470 million last year to US$291 million this year due to a US$188
million increase in radio spectrum charges in India and an increase of US$106
million in debt interest. Economies of scale and efficient working capital
management helped boost profit margin. Economies of scale help reduce the
percentage cost of advertisement.

Product innovation remains a key driver of our market penetration strategy in
Africa. We have successfully launched attractive propositions such as 2Good
in Nigeria, Magic number in all the
OpCos, Loba Nayo in DRC, MNP in Kenya to just mention a few. Besides
working as smart penetration tools, the initiatives have helped us to keep our
existing consumers excited and glued to our networks.
As part of our innovative model we have also successfully set up the Tower
Co, which will run as a separate business in our countries of operation and
will be responsible for managing the end to end process and operations of our
sites. This is another great opportunity, which will not only enable us roll out

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our network with great speed but also provide potential cost efficiencies
arising from site sharing.

Bharti Airtel, which registered a 32.6 percent decrease in net profit in fiscal 2010-11
at $1,354 million from $1,989 million in the previous fiscal, has made up for it with its
51.3 percent increase in consolidated revenues, providing a total revenue of Rs
59,467 crore for the year ended March 31, 2011. The consolidated total revenues for
the full year ended March 31, 2011 of $13,319 million grew by 42.1 percent y-o-y
lifted by the African operations. Bharti Airtel which began its Africa operations last
year, with the largest-ever Indian operator investment of $10.7 billion in Zain Africa,
and later rebranded its logo to signify its international operations in 19 countries, has
reaped the rewards of its investments this year.

Africa continued its upward trend with revenues of $924 million, contributing to a
total net income of $314 million for Q4 FY 11 for Bharti Airtel, which is an
improvement of 7.5 percent from its last quarter, which stood at $289 million.
Speaking about its success in Africa, Sunil Bharti Mittal, chairman and MD, Bharty
Airtel said, "In Africa, we are rapidly expanding our network coverage, improving
distribution width and increasing our efficiency and productivity standards".

Last year, the company had completed the acquisition of Zain's African operations in
16 countries for an enterprise value of $10.7 billion. For FY'12, Airtel Africa will make
a capital expenditure in the range of $1-1.2 billion. The Government regulations are
stringent but are now going down, the company said. Further, Kohli admitted that the
company is having supply constraints in Africa but assures that it will be taken care
of. He added that the company expected operating margins of the African arm to
increase in the coming quarters. During the quarter ended March 31, 2011, Airtel
incurred a capital expenditure of $382 million on its African arm.

Tele media strategy(Existing market- new product)

Bharti airtel forayed into television space. With the launch of its DTH satellite
television service offering 175 channel across the country. The service is available to
customers through 21000 retail points including Airtel relationship centre in 62 cities.

DTH service is the culmination of airtel’s “three screens” strategy, that is, to be
present across Mobile phone, computer and TV screen.........................................

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On march 14th 2011, it launched airtel broadband TV enabling the customers to
watch live TV on their computers or Laptops, indicating a shift in strategy from three
screen to multi screen convergence. Airtel broad band TV also works on Wi-Fi,
giving the customers freedom to watch TV anywhere in their homes. Besides, while
watching one can multi task like browsing the Net or working on the laptop/computer.

Enterprise business

Enterprise services delivers end-to-end telecom solutions to large Indian and global corporates by serving as the single
point of contact for all telecommunication needs across data, voice, network-integration and managed services
requirement. Enterprise services owns a state-of-the art national and international long distance network infrastructure,
enabling it to provide connectivity services both within India and connecting India to the world. The international
infrastructure includes ownership of the i2i submarine cable system connecting Chennai to Singapore, consortium
ownership of theSMW4 submarine cable system connecting Chennai and Mumbai to Singapore and Europe,
andinvestments in new cable systems such as Asia America Gateway (AAG), India Middle East andWestern Europe
(IMEWE), Unity North, EIG (Europe India Gateway) and East Africa SubmarineSystem (EASSy) expanding the
Company’s global network to over 225,000 Rkms, covering50 countries across 5 continents. Revenues from enterprise
services for the financial yearended March 31, 2011 were Rs. 41,292 Mn and represented a year on year decline of 8%.
Key financial results for the year ended March 31, 2011
Particulars Financial Year
2010-11 2009-10 Y-o-Y Growth
Gross revenues (Rs Mn) 41,292 44,798 -8%
EBIT (Rs Mn ) 5,536 9,328 -41%
While the Indian economy has been relatively insulated from the global economicslowdown, large corporates did
however exercised caution in IT and Telecom spends whichhad its impact in FY11. Additionally, this segment witnessed
the entry of some of theestablished mobile players in this segment resulting in increased competition andaggressive
pricing.
All this had attributed to the decline in revenues in FY11. With clear signs of revivalworld wide and the Company’s
growing focus of being global network solution provider,the segment is well placed to be back on the growth trajectory.

Conclusion

With the 3G auction gone and the tariff already bottomed-out, there is very limited
downside, in financial terms, for Airtel. Consolidation/ M&A of smaller players in the
telecom industry is more or less a certainty. This might present a unique opportunity
for Airtel. With it’s networking competency, Cost advantage, customer support and
satisfaction; backed by dynamic management and clear vision; Airtel is well poised
to retain it’s leader status in future.

NOTE: NOT FOR PRINTING

In 2005, we created a vision to be the most admired brand in India, Loved by more
customers, Targeted by top talent, and benchmarked by more businesses. In 2010,

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we are pleased to have realised this vision and perhaps gone well beyond on many
of the parameters.

“ In 200 “In 2005, we created a vision to be the Most Admired Brand in

India, Loved by More Customers, Targeted by Top Talent and
Benchmarked by More Businesses. In 2010, we are pleased to
have realised this vision and perhaps gone well beyond on
many of the parameters 5, we created a vision to be the Most Admired Brand in
India, Loved by More Customers, Targeted by Top Talent and
Benchmarked by More Businesses. In 2010, we are pleased to
have realised this vision and perhaps gone well beyond on
many of the parameters

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