24438667 bharti airtel strategy

8/8/2019 24438667 Bharti Airtel Strategy

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Presented By: -Gaurav Aggarwal - 02Dhawal Kantawala - 12Yatin Mota - 19Hardik Shah - 29Anurag Surana - 31Jwalit Vyas - 33Suyash Gupta - 34

NMIMS- MBA Capital

Markets- 2008-2010



GROUP 7 2

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

23 Circles

–



GROUP 7 3

Why Mad Rush for Telecom ??

225.21

206140.3

98.47653

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 (as

of June

2007)

S u b s c r i b e r s ( i n

m i l l i o n )

0

4

8

1216

20

24

T e l e d e n s i t y ( i n p e r c e n t )

Telecom Subscriber Base Teledensity

Large number of

additions in telecom subscribers

Low teledensity

( depicting large untapped

) potential

Telecom

Advantage

. % C A G R

4 0 4



GROUP 7 4

-Go ahead to the CDMA

technology

Private players were allowed in

Value AddedServices

National Telecom Policy

( )NTP wasformulated

1992

1994

1997

Independent,regulator

,TRAI wasestablished

-NTP 99 led to migration from

-high cost fixed license fee to

-low cost revenue sharing regime

1999

2000

2002

BSNL was established

by DoT

ILD services was opened to

competition

Internet telephony

initiated

Reduction of licence fees

2003

Calling Party( )Pays CPP was

implemented

Unified Access

Licensing( )UASL regime

wasintroduced

Reference Interconnect

order wasissued

2004

-Intra circle merger guidelines

were established

Broadband policy 2004

was—formulated

targeting 20 million

subscribers by 2010

2005

FDI limit was increased from

49 to 74percent

Attempted to boost Rural

telephony

2006

Number portability was proposed

( )pending

Decision on 3G services

( )awaited

2007

( )Department of Telecommunication DoT is the main body formulating.laws and various regulations for the Indian telecom industry

–ILD International LongDistance

Evolution of Telecom In India



GROUP 7 5

Telecom Ecosystem

ndian Telecom Industry Framework

I I

ireless lanning and

oordination( )PC

epartment ofTelecommunication s

elecomCommission

roup on elecom and IT

( - )oT IT

elecom Regulatory uthority of India

( )RAI

elecom Disputes ettlement and

ppellate Tribunal( )DSAT

Handles spectrum allocation and

management

–DoT Licensee and frequency management

for telecom

Exclusive policy making body of DoT

Handles ad hoc issues of the telecom industry

Independent regulatorybody

Telecom disputes settlement body

They formulate various policies and pass laws to regulate the telecom

.industry in India

They undertake various research activities

and monitor the quality of service . provided in the Indian telecom industry

They also provide various recommendations to improve the status of telecom

.operations in India



GROUP 7 6

Bharti Airtel

• Largest Private Integrated TelecomCompany in India

•

• 3rd Largest Wireless Operator in theWorld

•• Largest & Fastest Growing Wireless

Operator in India•• Largest Telecom Company listed on

Indian Stock Exchange

•



Vision 2010

• By 2010 Airtel will be the mostadmired brand in India:

– Loved by more customers

– Targeted by top talent

– Benchmarked by more businesses

•

•



Vision 2020

• To build India's finest businessconglomerate by 2020

• Supporting education of underprivileged children throughBharti Foundation

• Strategic Intent:

– To create a conglomerate of thefuture by bringing about “Big

Transformations through BraveActions.”



Mission

• “ We at Airtel always think in freshand innovative ways about theneeds of our customers and how

we want them to feel. We deliverwhat we promise and go out of ourway to delight the customer with a

little bit more”



Core Values

• Empowering People - to do their best• Being Flexible - to adapt to the

changing environment and evolving

customer needs• Making it Happen - by striving tochange the status quo, innovate andenergize new ideas with a strongpassion and entrepreneurial spirit

• Openness and transparency - withan innate desire to do good

• Creating Positive Impact – with adesire to create a meaningfuldifference in society.



Objectives/Goals

• To undertake transformationalprojects that have a positiveimpact on the society and

contribute to the nation buildingprocess.

• To Diversify into new businesses in

agriculture, financial services andretail business with world-classpartners

• To lay the foundation for building a“ ”



GROUP 7 12

Regulatory Framework

Ø74% FDIInvestment

Ø

ØLack of Transparency inSpectrum &LicenseAllocation

ØØ3G Policy & MNP

still Pending



GROUP 7 13

Declinging Tariff – Rising Revenue

:Source TRAI Report



- . % -GDP growth rate Averaged around 7 9 from 2002 2008

- – %Rising Tele density Target of 45 by 2010

/Growing per capita income disposable IncomeØ )Rs 12000 in 2002 to Rs 33000 in 2008

Falling Handset Prices

Moderate inflation levels which were prevalent during– - %the past 7 years around 5 6

Economic Factors



Ø &Demand for VAS Broadband services Among YouthØØ %28 Urban PopulationØØRapid Urbanization

ØØRising Income levelØ

Changing Demographics

: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

Technology

I t t d T l



GROUP 7 17

Integrated TelecomCompany(Product Portfolio)

qWireless Services

– 2G/3G

– Rural Market

–q Telemedia

Services

– Fixed Line

– Broadband

– DTH

qEnterpriseServices

– Carrier

– Corporate –

qPassiveInfrastructure

– Bharti Infratel

– Indus Tower



18

Bharti Airtel–Corporate structure



GROUP 7 19

Wireless Market Share - India



Soucre: TRAI 20

Geographical Presence India ...



21

Financials Snapshot

Details Q2 FY 09 Y-on-Y

Customers 79.99 mn 57.00%

Revenue $ 1,942 mn 42.30%

EBITDA $ 796 mn 36.50%

Cash Profit $ 673 mn 20.30%

Net Income $ 441 mn 26.80%



22

Financial Snapshot - Ratios

Key Ratios - Airtel Mar-08Mar-07Mar-06Mar-05Mar-04Debt-Equity Ratio 0.38 0.54 0.83 0.6 0.07

Long Term Debt-Equity Ratio 0.35 0.5 0.76 0.5 0.03

ROCE (%) 34.88 34.07 22.55 23.96 0.16

RONW (%) 39.53 43.04 31.82 23.88 -0.27http://www.capitaline.com

Key Ratios - Industry 2007 2006 2005 2004 2003

Debt-Equity Ratio 0.35 0.21 0.27 0.34 0.36

Long Term Debt-Equity Ratio 0.3 0.19 0.24 0.29 0.33

ROCE (%) 9.72 10.28 8.25 8.43 3.07

RONW (%) 10.11 10.62 10.87 6.76 0.18 :// . .http www capitaline com



SWOT ANALYSIS

•

Strengths• Largest Telecom player in India – subscriberbase over 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

Bharti Airtel include Sony-Ericsson, Nokia -and Sing Tel

• Experience of launching 3G services inSriLanka

• High cash balance of $1bn



SWOT ANALYSIS•Weakness• Tariff war at its peak• Increased competition due to new

licenses & issuance of cross overtechnology

• ARPU drop is a certainty, expect drop of about 20%

• Mobile Termination Charges reducedto .20 per min, indications towardszero MTC

• M & A regulations restrict attractivesynergies

• DTH – a big worry• Land Line & fixed line service are in a



SWOT ANALYSIS

•Opportunity• Lot of scope in rural areas• Current Tele-Density – 37 is still low

among developing countries

• Low broadband penetration – companywell equipped to take business to nextlevel

• Fast extending IPLC market, only player

other than VSNL to have InternationalSubmarine cable network• Expected consolidation in industry in

medium term due to tariff wars

•



SWOT ANALYSIS

• Threat• India centric - Major revenues from

India

• 93% revenues from Bharti Televentures, only 7% from othergroup companies

• Mobile Number Portability by Jan

2010 – impact on margins• Inability to obtain 3G spectrum in key

circle

• Revision of License fees

CG i f h i Ai l



27

BCG Matrix for Bharti Airtel

Stars•Mobile Services•Bharti Infratel

?•Broad Band•Insurance•Retail•Fixed Line Services

Cows•

•

Dogs•DTH•

•

•

arket Share arket Share

LOWIGH

H

I

GH



28

Porter’s 5 Forces



29

1. Threat from Competition

– %ireless Market Top 4 garnering 75 arket share

HIGH



30

Competitor Analysis

P Margin et Margin

Company -ep 07 -ep 08 -ep 072 -ep 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

&P Margins Net Profit Margins among Peers

:Source CMIE November 2008



31

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

A R P U

( U S D

p e r m

o n t h

GSM CDMA

inutes of Usage per Month – obile

Services

*RPU in India – obile 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



32

2. Customer Bargaining Power

ØLack of differentiation among Service

Providers

ØCut throat Competition

ØLow Switching Costs

ØNumber Portability will have –Ve Impact

ØBusinesses & Consumers

HIGH



33

Market Scenario

Postpaid Vs Prepaid &Customers Market Share



34

3. Suppliers Bargaining Power

LOW



35

4. Threat of Substitutes

Ø Landline

Ø CDMA

Ø

Ø Video ConferencingØ

Ø VOIP - Skype, Gtalk, Yahoo Messenger

Ø e-Mail & Social Networking Websites

ROADBANDSERVICES

IMINISHING MARKET HIGH



36

5. Threat of New Entrants

Ø Huge License Fees to be paid upfront & High gestation

period

Ø Entry of MVNOs & WiMAX operators

Ø Spectrum Availability & Regulatory Issues

Ø Infrastructure Setup Cost - High

Ø Rapidly changing technology

Ø

LOW

G E M t i C l ifi ti



37

G E M a trix C la ssifica tio n

Strong

Medium Weak

usiness Strength

.00 .003367

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.67

.33



GROUP 7 38

ØCurrent market shareØBrand imageØBrand equity

ØProduction capacityØCorporate imageØProfit margins relative to

competitorsØR & D performanceØManagerial personalØPromotional effectiveness

Ø

B u sin e ss S tre n g th

d l k



39

Factors Weight Rating(1 –5)

Value =(Weight * Rating)

Resource availability 0.20 3.5 0.7

Overall market size 0.15 4 0.6

Annual Market growth rate 0.20 4 0.8

Profitability 0.15 4 0.6

Competitive intensity 0.10 4 0.4

Technological requirements0.20 4.5 0.9

Total 1.0 4.0

Factors Underlying MarketAttractiveness

/Factors Underlying Market Biz



40

Factors Weight Rating

(1 –5)

Value =

(Weight * Rating)

Market share 0.15 5 0.75

New product development 0.10 3.5 0.35

Brand Image 0.10 4 0.40

Sales force 0.15 3 0.45

Pricing 0.15 3 0.45

Distribution capacity 0.10 4.5 0.45

Product quality 0.10 4.5 0.45

R&D Performance 0.15 3 0.45

Total 1.0 3.75

/Factors Underlying Market BizStrength



41

Airtel’s GE Matrix

Business Strengths

MarketA

ttrac tive

ness

Low

High

LowHigh

Attractive

ModerateAttractive

Unattractive

MobileAirtel

TeleMedia

.00 .003367

.00

.67

.33

Enterprise



Airtel – Strategy

•MANTRA : Focus on CoreCompetencies and Outsource therest!

•



Strategy

• Airtel partnered with leading playersin telecommunication playersacross the globe.

• It has managed to work with the bestof domain specialists globally andemerge as a world class entity.

• Partnerships include operationalcontracts with marquee vendorsand strategic investors rangingfrom private equity investors to

global telecom giants.



Strategic partnerships/ Shareholders – Technology and Capital

• Warburg Pincus – a celebrated PEinvestor held a stake for asubstantial period of time and was

instrumental in providing Airtelsupport in its early stages.

• Vodafone was a strategic investor in

Airtel.• Temasek – the Singapore based

investor holds a considerable stake

in it.



Outsourcing deals in 2004

• Ericsson was given the mandate toprovide, manage and maintain theequipment as well as provide

quality assurance in Airtel‘s then 13mobile circles.

• IBM was given the mandate to

handle the back officerequirements of Airtel’s presence inIndia



Operational Strategies.

• Higher emphasis on ARPU/min – starkcontrast with other operators whoconcentrate on ARPU only.

• Aim to be become a one stop shop forall telecommunication services underthe Bharti umbrella.

• Exploring opportunities in internationalmarkets.

• Hived off tower infrastructure into aseparate entity.

•



Performance till date

• Bharti Airtel has enjoyed an excellentrun ever since the telecom sectoropened.

• It has managed to hold on to itsleadership position inspite of thepresence of other players with deeppockets – Ambani’s, Tata’s, Birla’s

and Vodafone.• Has coped well with regulatory

changes.

• Continues to attract and delight



Future Strategies

• Translate its expertise in Indian marketsto other 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 theworlds largest is still not matured.Opportunities abound in the

hinterland which must be exploited.



GROUP 7 49

Growth Factors



GROUP 7 50

Road Map – Growth Path

VPN & VoIP

WiMAX

3G

2G/2.5G



GROUP 7 51

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

http://capitaline.com/

http://capitaline.com/



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24438667 bharti airtel strategy

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