Indian Institute of Management Kozhikode


Bharti Airtel 2008*
Bharti Airtel Limited was one of the world's fastest growing telecom companies that carved for itself a leadership position in the global telecommunications sector. In October 2007, it achieved the distinction of becoming the fastest private telecom company in the world to reach the landmark of 50 million customers in a single country, within a short period of 143 months of start of operations1. It was India’s leading private sector provider of telecommunications services, covering a wide spectrum comprising mobile, fixed line, broadband and enterprise services. As of December 2007 it was India's largest integrated private telecom service provider with 55.16 million mobile subscribers constituting a market share of 24.09% of the entire mobile telephone industry (refer Exhibit 1a for the subscriber base of all players in the industry)2. It was present across 4,855 towns covering 62% of the Indian population3. Bharti Airtel was the first telecom company to have an All-India footprint by covering all the 23 telecom circles of India4. It was one of the five largest companies in India in terms of the market capitalization5, and the flagship organization of Bharti Enterprises, one of India’s leading business groups with diverse interests such as telecom, agro products, insurance and retail. Its brand 'Beetel' wass the country’s largest manufacturer and exporter of world class telecom terminals. It was ranked amongst the best performing companies in the world in the Business Week IT 100 list 2007. Bharti Airtel was a pioneering force in the telecom sector with many path-breaking initiatives to its credit. It was instrumental in bringing the mobile communication to the masses by launching several services at much lower price levels. It revolutionized the telecom industry by following ARPM model (i.e. Average Revenue Per Minute) rather than the ARPU model (i.e. Average Revenue Per Minute) which was the standard across the globe6. It adopted a unique business model through its strategic partnerships with Ericsson, IBM, Nokia, and Siemens in IT and network realms which had set a trend in the global cellular industry. Indian Telecom industry Indian economy witnessed robust growth levels fueled by favorable demographics and rising income levels from nineties onwards. This era of rapid economic growth was accompanied by exponential growth in the telecom sector. This growth began with the liberalization of the Indian Telecom Sector in 1994 (refer to the Exhibit 2 for a summary of the reforms) and the mobile subscriber base in India has since then been increasing manifold. Telephone services in India were provided by the government through its Department of Telecommunications till 1985. In line with the reforms in the government, Mahanagar Telecom Nigam Ltd (MTNL) in 1986 and Bharat Sanchar Nigam Ltd (BSNL) in 2000 were created as public sector organizations out of DoT to offer services in Mumbai and Delhi and rest of India respectively. A detailed overview of the Indian Telecom industry can be obtained from Exhibits 1a to 1d and Exhibit 2. The Indian mobile telecom market was continuing to attract a lot of attention in the global telecom sector owing to the fact that it was one of the world's fastest-growing telecommunications markets (Exhibit 1b). Despite the significant growth in subscriber base, the mobile penetration level in India

* Written by S. Jeyavelu and A. Radha, IIM Kozhikode based on secondary data. 1 Airtel breaks into world's Top 10 with 50 mn users, Economic times, 2 Oct, 2007 2 accessed on 6 Feb, 2008 3 accessed on 4 Feb, 2008 4 Congratulate Sunil Bharti Mittal, Economic Times, 27 Oct, 2007 5 Bharti Airtel Limited Annual report 2006-07 6 Lifetime offers may dent ARPUs for operators. mccode/news/article/news_article.php?autono=195771 accessed on 6 Feb, 2008

7% with a pan India CDMA and 8 circles GSM presence. and commenced its cellular services during February 2001. CDMA technology works by encoding individual conversations into a series of digits and then spreading the transmission of the sequence over available spectrum.cellular-news. 7 . The two technologies used for mobile services in India are Global System for Mobiles (GSM) and Code Division Multiple Access (CDMA)8. Aircel (9 circles) Spice telecom (2 circles) had lined up plans to expand their presence and become a pan India operator to get a sizeable share of the growing market. the flagship company of the Anil Dhirubhai Ambani Group (ADAG) of companies.4 million subscribers (21. MPLSVPN. it acquired Hutch. The other players such as Idea cellular (11 circles). Later. Africa. but also consistently increased its market share. BSNL-MTNL and Tata Tele controlled 83% market share. IN Services etc. the Middle East. It was the leading player in the CDMA market and had a subscriber base of 34. was the second largest wireless telecom operator in the Indian telecom industry with presence in both CDMA and GSM segments and also the largest provider of long distance carrier services. one of the top players in the Indian GSM segment to http://www.was still around 20.php.8mn and a market share of 17. Reliance Communications. Bharti Airtel was holding a 30. joint ventures.4 million (22. The growth in both the GSM and the CDMA segments was phenomenal and the total number of GSM subscribers had reached 121. In 2008. associated undertakings and investments.5%).reuters. Vodafone Group Plc was the world's leading mobile telecommunications type=media&storyID=nL29172095&pageNumber=1&imageid=&cap=&sz=13&WTModLoc=InvArt-C1ArticlePage1 accessed on 7 Feb. Vodafone.6% market share). CDMA Reliance Communications. while Idea had 14 million customers (11. Competitors The Indian mobile telephony market was highly competitive and the top five players Bharti. VoIP services. consequently widening the gap between itself and Reliance Communications. and http://investing. VSAT. 8 GSM works by dividing a single radio frequency into multiple time slots so it can support multiple calls.8%).500 km of submarine cable system. Internet.1 million customers at the end of March 2007. followed by Bharat Sanchar Nigam Ltd (BSNL) with 27. which was amongst the lowest in the world and was a clear indicator of the huge potential for further growth7. 2008. It was formed out of the former DoT in October 2000 as a public sector unit.5% as compared to the world average of 50%. primarily in network upgradation and It was keen on entering the Indian mobile telephony market and ventured into it through its acquisition of interest in Bharti Airtel. the largest submarine cable system in the world. Bharat Sanchar Nigam Ltd. Exhibits 1a. MTNL holds the license to provide cellular services in Delhi and Mumbai. It was the World's 7th largest Telecommunications Company providing comprehensive range of telecom services in India comprising Wireline. was the second largest GSM operator in the country. GSM and CDMA technologies were not currently compatible or interchangeable with each other and required separate types of wireless phones and network infrastructure. But post FY06. Asia Pacific and the United States through the Company's subsidiary undertakings. Carrier service.43 million by March 2007. with a significant presence in Europe. The company owned and operated FLAG telecom. Bharti Airtel was lagging behind Reliance Communications in terms of market share. 1a & 1d gives industry statistics.6% share of this market with 37. GSM Mobile. Vodafone’s Hutch-Essar had 26. Broadband. all the major players in the industry were aggressively investing in infrastructure. Bharti had not only gained a leadership position in the Indian mobile industry. There was a stiff competition between Reliance Communications and Bharti Airtel for market leadership and in March 2006. which owned 76.

plastics. he signed a contract with a Taiwanese supplier and months later. But the complex industrial licensing regime took its toll on him and his business was wiped out all of a sudden when the government banned import of generators in India in order to support the large industrial houses that ventured into that business. Goa. after he graduated from Punjab University. But the regulatory environment was still stringent and the government did not allow import of push button phones. Himachal Pradesh and Kerala. Within three years he set up two more plants. In those days Indians were exposed only to the rotary phones. It operated in the circles Delhi. brass. In 1980 he sold both the plants and shifted base to Mumbai. 20.get a firm foothold in the market. The portable generators could attract many buyers in India owing to the frequent and regular power outages that many regions in the country were subjected to. Spice amongst top 6 private GSM operators in India with a customer base more than 3. one that turned out yarn and the other that produced stainless-steel sheets used for surgical utensils. He took up this business after recognizing that the portable generators presented a great business opportunity in India while they did not have a huge market in Japan. a congress party politician. 155. Mittal viewed this setback too as an opportunity and luckily. He was involved in a variety of trades before he ventured into the mobile phone business. The company had a subscriber base of 21mn and an overall market share of 9. his venture continued to do well and as of 2008 Bharti was the only player existing out of the original 52 licensees. Vol. He was proved right with his business doing very well and within two years Mittal established a national distribution network with offices in four cities. In 1986. Clay.000. Joan L. Levinstein. Chandler. UP-West.. He expanded the company’s manufacturing capacity in the telecommunications market and by the early 1990s. he also launched the fax machines and cordless telephones in the country for the first time. Uttaranchal. 00158259. the regulators decided that touch-tone phones should be made in India and they handed out licenses to 52 Indian firms. to manufacture the company's push-button telephone models for the Indian market. Madhya Pradesh. Idea cellular. provided mobile telephony services on the GSM platform in 11 out of the 23 circles in India.2% in the mobile industry. relegating Bharti to second-tier status behind other larger industrial groups. Maharashtra. by this time.0 million. Haryana. Immediately. 9 Wireless Wonder. borrowed from his father. and zip fasteners. It was expected to offload its ownership in Bharti Airtel in the coming years to avoid any potential conflicts of interest. Since phones weren't a priority for the big groups. Mittal's first real break came in 1982 when he became the exclusive India agent for Suzuki Motor Company of Japan for importing portable generators. Chattisgarh. Issue 1 . where he reinvented himself as a trader who sold imported stainless steel. establishing the basis of Bharti Enterprises. Mittal incorporated Bharti Telecom Limited (BTL) and his company became the first in India to offer push-button telephones under the brand ‘Beetel’. a short form for Mittal brothers9. Fortune. Though this business was good. When this business started flourishing. 1/22/2007. he was selling the gadgets to customers in India under the German-sounding brand name Mittbrau. a part of the prestigious Aditya Birla Group. Andhra Pradesh. History of Bharti Airtel Bharti was founded by Sunil Mittal in 1976 in his hometown of Ludhiana. Gujarat. He was a first generation entrepreneur who started his venture with a capital of about Rs. So he entered into a tie up with Siemens. IDEA Cellular's footprint in 2008 covered approximately 45% of India's population and over 50% of the potential telecom-market. he was already fascinated by the touch-tone phones that he came across in Taiwan. and Mittal could see that these sleek phones had a huge potential. It had tie-ups with over 448 international operators across 208 countries and was the first to introduce unique VAS services in India. He started by making crankshafts for local bicycle manufacturers.

was at a strategic inflection point. 155.8% from Bharti Telecom thereby making Bharti Telenet a 100% subsidiary of Bharti Tele-Ventures.. which lost 10 11 Wireless Wonder. formidable players entered the fray12. 00158259. In 2003. Issue 1 Bharti Airtel Limited Annual report 2006-07 12 Wireless Wonder. Despite this consolidation and continued growth. there was need for fast growth in the network infrastructure and people. 1/22/2007. Bharti Enterprises acquired control of JT mobiles. long distance and data services into Bharat Infotel Limited. 00158259. In the same year. the company began slowly expanding into other regions and in 1996. and extended cellular operations to Punjab. Chandler. In 1992.. To retain its market leadership. Mittal saw a huge opportunity and moved to London to learn more about this fledgling industry and to assemble a world-class tender offer10. Levinstein. in collaboration with French telecom major Vivendi. Bharti managed to win licenses in India's four largest cities. the competition in the market was rising with the entry of large Indian conglomerates and foreign players. It was at this point that he initiated his unique outsourcing deals where he outsourced the network and the IT and later the call centers through long term partnerships which proved to be one of the most critical drivers of Bharti Airtel’s growth. Even though it was unwilling to match the sky-high offers of competitors. Karnataka and Andhra Pradesh. But the company pulled up its socks and regained its position through its consolidation and branding efforts. the company acquired control of Spice Cell in Calcutta. Issue 1 . 155. the cellular operations of the organization was incorporated as Bharti Tele-Ventures Ltd (BTVL) for promoting investments in diversified telecom service projects and rolled out services under the Airtel brand in Delhi.20% equity interest of Telecom Italia in Bharti Telenet and 18. This resulted in Bharti's stock plunging to less than half its IPO price early in the year and the company was almost written off by all quarters. Exhibit 3 gives the mile stones in the history of Bharti Airtel. Vol. On 7th July 1995. While the market showed huge potential with the number of mobile subscribers almost doubling every year. the liberalization gave a new lease of life to the entrepreneurs. it became the largest private sector telecom operator in India. Italy. after a brief corporate restructuring. 1/22/2007. Starting from 2000. Growth story After beginning its operations in Delhi. Bharti sold a 20% equity interest to the private equity firm Warburg Pincus which chose it over its competitors as it was the only mobile company in India with a clear business model and used this capital inflow to finance its next stage of growth. But Mittal did not have the resources to meet the challenge of managing the breakneck growth. Clay. a company promoted by Telecom Italia. Bharti Enterprises went public in 2002. In 1999. Levinstein. Chandler. with the market leadership at a 20% share. In 2000. Bharti began to get licenses to operate in new circles and began to establish an All-India footprint while consolidating its position by buying up all the struggling competitors. Bharti acquired control of Skycell Communications in Chennai and in 2001. Joan L. Clay. Vol. when the telecom services business was opened up to private players and bids were welcomed for licenses to operate India's first mobile-phone networks. Fortune. Also the cellular phone operations were rebranded under the single Airtel brand. Bharti was not big by international standards. This dramatic start was dampened due to a series of legal battles by some rejected rivals and Bharti was able to start its operations only in Delhi. all the mobile operations were merged into Bharti Cellular Limited and all fixed line. the services were extended to Himachal Pradesh11. Bharti. Fortune. It wanted to consolidate its presence and become a permanent. and was listed on Bombay Stock Exchange (BSE) and National Stock Exchange (NSE). In the same year. Bharti Tele-Ventures. This proved to be a blessing for Bharti as the mobile phone service license in India was highly overvalued and the service proved to be costlier than what anyone had imagined. It raised $172 million in its initial public offering (IPO) and when it plowed its resources into bringing its assets up to speed. With this. The company was formed as a 80:20 joint venture between the Bharti Group through its subsidiary Bharti Telecom and STET International Netherlands NV.In 1991. It also acquired a 30. Joan L. sustainable business player in the market.

managed data and Internet services. dial-up services. Bharti Airtel (UK) Ltd. and audio conference services.The Company’s mobile communication services include information services. Bharti Airtel became India’s largest integrated private operator based on the total customer base. Orissa. the company also incorporated Bharti Airtel (USA) Ltd. Jammu & Kashmir. Bharti. Refer to Exhibit 3 for the major milestones in the growth of the organization. Bharti Airtel (Hong kong) Ltd as a wholly owned subsidiaries of the company for providing international calling services and wholesale voice switching and data products in the respective countries13. Mobile Services . satellite services. virtual private networks. and prepaid and post paid services.4% of wireless market (as on September 30. the world’s largest mobile service provider. In 2006. This division comprises of the Carriers and Corporate Business units. In addition to being the largest GSM player in the country. It offered supply & installation of fixed-line telephones providing local. it joined the US$1 billion revenue club and also launched BlackBerry wireless solution in India. North East. it made a foray into the USA with the launch of Airtel CallHome service for Non resident Indians based there. and broadband services comprise integrated services digital every year until 2003. In 2005-06. Infotel Services which provided broadband & Telephone. In Jan 2008. The business also provided value added services such as intelligent network based advance management services. national & international long distance voice connectivity and broadband Internet access through DSL. Corporate business unit serves as the single point of contact for all data and telecommunication needs for large business customers and small and medium enterprises (SMEs) and provides end-to-end telecom solutions. special phone plus services.valuenotes. and Enterprise services which offered services to Carriers and other business customers (refer to Exhibit 4). The organization The company was structured into three strategic business units. the name Bharti Tele Ventures Ltd was changed to Bharti Airtel. leased line. it was also the largest wireless service provider in the country. unified messaging. representing an indirect economic interest in Bharti Airtel Limited and acquisition of direct interest in the company from Warburg Pincus LLC. such as voice services. In 2006-07. Bihar. it covers an addressable 59% of the total population of India. Vodafone. ring back tones and call forwarding among others.The company offers enterprise services. During 2005-2006. 13 http://www. the company launched its mobile operations in seven new circles of Assam. It also acquired control of Hexacom and entered Rajasthan. Uttar Pradesh (East) and West Bengal. short message. posted rising profits every year since then. national and international long distance viz. Carriers business unit was India's first private long distance communications service provider. and managed e-business services. Broadband & Telephone Services – The company’s telephone services include telephone services.pdf accessed on 6 Jan. offering a portfolio of wholesale services in data and voice domain with both national and international long distance services. became the first private service provider in the country to have an All-India footprint when it launched its services in Assam – the 23rd circle on April 13th 2005. and wireless fidelity networks. In 2005. 2008 . In April 2004. During 2007. Mobile Services which offered Global System for Mobile communication (GSM). 2007). virtual private automatic branch exchange networks. as well as wireless application protocol-enabled Internet access and roaming services. mobile services. Enterprise Services . In the year 2003-04. BTVL's two subsidiaries Bharti Cellular Ltd and Bharti Infotel Ltd were merged with the company. Bharti Airtel (Canada) Ltd. acquired 10% interest in the company by way of subscription of convertible debentures in Bharti Enterprises Limited. with a share of 23. toll free numbers.

Bharti Computer Centres was one of the key programs. It was also recognized as an organization that facilitated faster growth by providing its employees with high responsibilities early in their career as well as multiple avenues to reach the top14. which aimed at improving learning levels of underprivileged children. had actively sought the help of village panchayats to make the ventures it employed a competency based selection methodology to get the right talent in the organization. which were high-quality pre-primary and primary schools intended to provide quality education to poor. In addition. These various policies were intended to minimize the consumption of energy and optimize the use of material produced out of natural resources. 2008 . In order to retain its talent. In line with this talent focus.000 employees and always had a talent-oriented HR strategy that emphasized talented manpower as a key strength. Its foundation. Corporate Social Responsibility Bharti Airtel always looked at ways to contribute to the society and had its own foundation which works for several causes that help the society. It also provided computer exposure and training to disadvantaged youth in the communities. The company also partnered with other government schools and anganwadis to provide mid day meals for children and also offered several scholarships for higher education in many institutions. It managed to establish itself as a recruiter of choice across top business schools and engineering colleges across the country.” Thus the foundation created and supported programs that bring about sustainable changes. It used a comprehensive program called the "young leader" program through which the fresh talent pool with an innovative mindset. Mid-day-meal program of Bharti Foundation provided mid-day meals to underprivileged children in Vrindavan. predominantly in the field of education. which 14 15 Bharti Airtel Limited Annual report 2006-07 www. It also opened several Bharti Computer Centres and Bharti Libraries. the company emphasized on acquiring the right talent at all levels and in this endeavor. migrant underprivileged children in rural areas. the company used ESOPs. using computer-aided learning. The company had promoted active community involvement in the rural areas and owing to its belief in Public Private Partnership. Bharti Airtel formulated its policies and practices after due consideration of its CSR and had constantly showcased its social responsibility through its various initiatives which operated on the foundation of sound environmental especially to girl children. Bharti Scholarship Scheme was initiated to enable financially weak meritorious students pursue higher education. This program had set an impressive aim of establishing 1000 village-based schools. were brought in every year. the Bharti Foundation was established in 2000 with the vision “To help underprivileged children and young people of their country realize their potential. The foundation funded IIT Delhi to establish Bharti School of Telecommunication Technology and Management. Bharti Library and Activity Centres aim at improving basic reading ability and learning levels of children. The flagship program of the foundation was 'Satya Bharti Schools'. and Bharti Centre for Communication at IIT Bombay. The organization also used policies like Continuing Education Policy (CEP) which provided higher education opportunities to its employees who are keen on pursuing further education and Flexible Time Policy (FTP). in addition to which it lays great emphasis on development of leadership skills and on building employee motivation. This was done by leveraging its size to offer its talent the space and empowerment they need. accessed on 4 Feb. the organization also relied heavily on internal sourcing to fill up the talent requirements in an endeavor to prepare its people for greater responsibilities15.Talent focus The company employed more than 20.

– ‘FieldFresh Foods Pvt. Ltd’ .were continuously monitored and improved upon. the stake of Bharti Enterprises in Airtel stands at 26%. In Jan 2008. These helped it surge ahead of the other service providers and retain its top slot in the industry.for global distribution of fresh fruits and vegetables grown in India to supermarkets in Europe. 00158259. the excellent customer service of Bharti and the expertise in logistics. The Bharti Foundation also received the prestigious Golden Peacock Award for CSR for 2007. Bharti Airtel entered into agreement with Microsoft to offer software and services for the Small and Medium business market in india. The technology alliances proved to be the key factor in the business strategy of Bharti Airtel.. Bharti also had a joint venture . Bharti Retail Private Limited was planning to open hundreds of stores over the next five years in formats ranging from supercenter to neighborhood market. It also had an agreement with Google to offer services on Airtel Mobile. In 1999 Mittal had sold an 18% stake in Bharti to Warburg Pincus for $294 million which Warburg unloaded. 1/22/2007. 2006. indicating that the company’s capability with respect to creating wealth for all its stakeholders was the highest. This rating was re-affirmed by CRISIL on April 20. Strategic Partnerships Many foreign players like SingTel.ciol. Sunil Mittal says We have a transparent relationship with our partners. and on a scale of 10 we are at 10. reaping a net gain of $1.e building their own strategy without external consultants. financial management. The company deployed the finest technology and operates state-of-the art networks using the services of its partners like accessed on 6 Feb. Bharti Retail Private Limited would be set up as Bharti’s wholly owned subsidiary. During 2003-04. 16 17 Wireless Wonder. Joan L. Singapore's state-owned telecommunications firm. Other Businesses Bharti had a joint venture with ELRo Holdings India Ltd. During 2006-07. 2008. while SingTel owns 31% of Bharti Airtel. Fortune. By freeing itself from managing technology. the company has used all its resources to focus on its core competencies – strategic management i.gidabyte. while adopting sound Corporate Governance practices. world leader in financial protection and wealth management. Walmart formally marked its entry into India by signing two agreements with Bharti‘Bharti AXA Life Insurance Company Ltd. Not just in terms of getting the best possible technology. Clay. Nokia and Siemens. Vol. had a stake in Bharti Airtel.with AXA.asp accessed on 6 Feb. Vodafone had acquired 10% of Bharti Airtel in 2006. This would enable them to leverage the strengths of both the sides. As per these agreements. and supplychain management of Walmart16. these partnerships also enabled Bharti to focus on core competencies. sourcing. These efforts have been widely recognized and won several laurels. in which Bharti would handle the front end and Walmart would take care of the back-end supply chain management. and British firm Vodafone. In August 2007.9 billion. Chandler. and working with regulation and regulators17. ‘Level 1’ rating by CRISIL. The company had an information technology alliance with IBM for the group-wide information technology requirements and with Nortel for call center technology requirements. It was on its way to transform India's underdeveloped retail market by partnering with Walmart. . 18 http://voicendata. people management (identifying. and predicted that investment in the venture will exceed $1 billion. mostly from early Bharti investor Warburg Pincus. Issue 1 http://www. 2008. We are transparent and honest in our dealings18. 155.’ . it was assigned highest Governance and Value Creation (GVC) rating viz. Levinstein. motivating and empowering talent).

Airtel Live and Ring back tones (Hello Tunes) which were all firsts in the country. customer service and continuous innovation in value-added services that would help expand its mobile customer base and drive up volumes. Siemens. He was a graduate of Punjab University and completed the owner/president management program at Harvard Business School in 199919. The Company launched 'Future Factory . Bharti Airtel had numerous innovations to its credit. Mittal to turn mentor at Bharti. In addition to his responsibilities at Bharti. University of Pennsylvania.businessweek. thus became the first telecom operator to offer Microsoft Windows mobile 5. Innovations Bharti's strong management team had continuously focused on innovating. the Indian Institute of Management. Recently. 2008. The Company's prime focus was on ensuring customer satisfaction through superior network quality. During 2005 the company introduced new products like BlackBerry wireless solution. He started to shift focus towards macro issues and on mentoring.Leadership of Mittal One of the main faces behind the cellular revolution in India. Sunil Bharti Mittal was the owner and the chairman and group managing director of Bharti Group. Global GSM Association. Indo-British Partnership (IBP). Hindu business. Also the company was the first to introduce Stock and Portfolio Tracker on the mobile in association with the Bombay Stock Exchange. At 50. Since the time he started his bicycle parts manufacturing business after graduating from Punjab University. He was the president of Confederation of Indian Industry (CII) and a member of the Prime minister's Council on Trade and Industry. the International Advisory Board of the Center for the Advanced Study of India (CASI).Centres of Innovation' to incubate pioneering 19 20 http://www. Lucknow. Singapore-India partnership foundation. Sunil Mittal was born in 1957 to Sat Paul and Lakshmi Mittal. For the numerous awards that he received. It entered into strategic partnerships with Google for setting new grounds in mobile search and with Microsoft. Sunil held several other leadership positions. refer to Exhibit 5. improving services offerings with a strong focus on the front-end activities and at the same time outsourced the non-core activities of the business. and the Indian Institute of Technology. the most pertinent being its path breaking partnerships with companies like Nokia. 2003 21 Bharti Airtel Ltd. International Business Council of the World Economic Forum. strategy and governance20. In addition.0 technology.htm accessed on 6 Feb. These deals became trend setters in the global telecommunication industry. Ericsson and IBM for its network planning. Capitaline Plus 22 Bharti Airtel Limited Annual report 2006-07 . He always had a hands-on approach towards his business which changed in 2007 when he took on his new role as the chairman and group managing director of Bharti Enterprises with the apex-level strategic reorganization of structure. the company and the GSM Association had launched the Global money transfer pilot project in India which would enable 25 million Indians abroad to remit money to India through their mobile phones22. Harvard Business School India advisory board. During the year 2005. the Company introduced new and innovative products that were received well in the market and enabled the Company to maintain its leadership position despite competitive pressures. Oct 08. supply & management and IT requirements respectively21. Manoj Kohli who was groomed personally by Sunil Mittal assumed office as the CEO. the company was a pioneer in bringing many new and innovative services to the market. He served on several boards including the Board of Standard Chartered PLC. his life had revolved around his business.

2003 http://www. The rationale for signing icons like Sachin Tendulkar and Shahrukh khan was based on the studies which showed that Shahrukh Khan's core values of being a self made actor with his success and glamour and Sachin Tendulkar's dedication. Some of its innovative advertisements which captured the imagination of the country were the Airtel Showdown campaign featuring the icons Sachin Tendulkar and Shahrukh 23 24 Tendulkar. Later. Bharti Airtel bagged several awards for marketing and brand excellence as well as for distribution and service excellence over the last few years. 2007 25 Airtel drops Tendulkar as brand ambassador. 2006 . Kareena Kapoor. Rahman melody. R. which had set a world record with over 4 million single ringtone downloads. This was a prestigious award that recognized outstanding performance by companies and brands from across the world in the telecommunications industry. It always went for high visibility advertising. R.indiantelevision. starting from cricket icon like Sachin Tendulkar to renowned music composer A. the Bharti Airtel was adjudged the "World Communications Best Brand of the Year". but all with a common theme running across. The company went for a variety of advertising using different brand ambassadors. Also their nationwide appeal was a key factor which was in line with the presence of Bharti Airtel’s services across the length and breadth of the nation. Oct 08. Hence the key factor in zeroing in on the brand ambassadors was the extent to which there was a fit between the core values of the brand and the personality of the ambassador. It also introduced in the same year. It also emerged as ‘The Second most trusted Brand' in the most trusted Brand 2007 survey conducted by The Economic Times (ET) Brand Equity. anywhere and in any applications. the brand ended its association with Sachin Tendulkar which was seen as a reflection of his falling rating based on his performance on field25. Rahman to cine stars like Shahrukh Khan. In the year 2003. their other brand ambassador Shahrukh khan was signed on. Bharti Airtel always used an advertising strategy that concentrated more on its brand and its values than its products and services. The company also used stars like Madhavan and Kareena Kapoor for its campaigns for brief periods. Airtel's brand Ambassador. It always sought brand ambassadors who communicate the right brand equity. Bharti Airtel was acclaimed for its innovative campaigns in accordance with the changing times with different themes. targeting a variety of customer segments. which was to make mobile communications a way of life and on enabling customers to make their point in the most expressive way anytime. national and regional campaigns. Brand characteristics Bharti Airtel always had a brand focused approach and it even puts forth its services as ways towards dissolving global boundaries and to enable people to stay connected. These factors also brought out very clearly in most of its campaigns. Sachin Tendulkar was signed as their brand ambassador and they unveiled a new brand campaign `Express Yourself' to communicate Airtel’s vision. In the year 2004. innocence and performance acted as drivers of self-identification amongst the masses24. its brand campaign featuring the signature A. resulting in coherence between the organization’s values and its communication and also in its communication itself. accessed on 5 Jan. emphasis on customer value. The Future Factory was conceptualized with the purpose of developing applications to cater to the needs of customer segments across the entire spectrum. It also adopted combinations of functional and symbolic campaigns. Press trust of India. trust and human bonding and its pioneering role.htm. Madhavan etc. Some of the main factors that the organization brings out about itself through its advertising are its patriotism through its India-focus and Indianness. Hindu November 02. In the year 2006.

Its belief in partnerships was reflected in its positioning as an enabler and in some of the catchy slogans.indiantelevision. a very comprehensive business intelligence and data warehousing capability were also introduced to Bharti which helped it understand better the market segmentation and customer usage pattern. Strategy Bharti's strength was grounded in its brand management. highly competitive. In addition. ‘Let's Talk Leadership. This model of outsourcing became the oft-quoted example of IBM’s “On Demand” model of customer relationship and for its business transformation outsourcing (BTO) which IBM was seen to be promoting aggressively as the future of the partnerships. and ARPU (the average monthly revenue per customer unit) had fallen by 50% in three years as telecom providers fought to capture new subscribers27.S. for using IBM’s expertise in implementing IT systems that will enable it to launch differentiated services in its 26 27 http://www. December 4 . Bharti Airtel went in outsourcing the build and management of its telecom and IT network to its key telecom network equipment vendors. There were seven major operators in the Indian telecommunications market: Bharti. The company also signed a managed capacity expansion contract with Ericsson to provide managed services and expanded its GSM/GPRS network into rural India in 15 circles. Operators needed 2. strive for dominance and build a brand". it took upon itself the task of managing the brand and customers and in creating and marketing new telecom services. IBM. and to its IT equipment vendor. Reliance. And by this time. BSNL. and the transition upward from 2G represented a major capital investment challenge for any telecom operator. There were also several strong regional mobile operators. when it went in for its unique outsourcing partnerships with the top firms of the world. With industry consolidation. Thus after having roped in the best-inbusiness technology providers. and MTNL. Bharti strengthened partnership with IBM further in November 2007.htm. which was Exhibited prominently in the website. Mobile rates were as low as three to four U. the Indian mobile market had grown to be highly attractive with the number of Indians taking up mobile services was growing exponentially. Building Partnerships’. The brand focus of the company can be understood from the chairman's quote "refine your processes. Thus it was able to upgrade its technical infrastructure by having IBM handle functions like rollout of an ERP system and improving its intranet. the focus was switching from having a national footprint to having the ability to provide value-added services. which had the look of a Hollywood period film26. accessed on 5 Jan. These strengths were based on the turnaround process that the company initiated in 2002-03.Khan which proudly announced that Airtel was the largest GSM provider in the country and its latest television commercial to promote Google Search on Airtel Live. It had a 25% market share of the total Indian mobile market and 6 million mobile subscribers. 2007 . By 2003. Tata. cents per minute. by signing a new agreement estimated at US$ 150 million. By passing on its entire IT system to IBM. To achieve the objectives of sustainable business model and differentiation. 2008 Strategic Outsourcing at Bharti Airtel Limited. and at the same time. ‘Building Telecom. HBR. and Siemens. Bharti Airtel adopted a sustainable business model which enabled it to scale up to serve the growing market and also differentiate its services to tackle the competition. people management and customer management capabilities. such as Spice and BPL. Nokia.5G or 3G technologies to provide those services. Ericsson. Bharti obtained licenses for mobile operations in 15 out of the total 23 circles. the company promoted in order to cement its relationship with all stakeholders: ‘With You’. Bharti not only benefited from getting a robust IT platform to handle scale but also drew a lot of value from IBM expertise in expanding its business capabilities across the board. These partnerships form the core of the strategy of Bharti Airtel. Idea Cellular.

Thus there were many initial glitches in reconciling these two diverse objectives. October 15. IBM was quite the opposite and thus while Bharti looked at the deal to enable it to respond better in a high-intensity environment. which was reflected even in the model of payment which was based on a predetermined percentage of Bharti’s revenues rather than for services based on hours worked or some other standard method. This would also be geared towards helping to leverage the current channels of Bharti Airtel to deliver new services. The employees were skeptical about their future owing to their attachment to Bharti Airtel and the cultural differences between the two organizations. as based on this deal. Another important issue was the transfer of personnel from the IT and infrastructure teams to the partner thrust areas of DTH and IPTV. this kind of an arrangement provided the company adequate strength to tackle them effectively. The first outlined the network design and installation and the second concerned the maintenance and running of the network once it was installed. This required a great deal of internal communication to clarify the limits of the agreement with IBM and the process that would be used to handle requests. which were built by those vendors back to them to manage and told them that it would only pay for traffic that came out of the networks29. 2007 Profile: Sunil Bharti Mittal. At the start of the implementation of the deal. as Bharti grew and demands on its service providers expanded. IBM looked at it as long term arrangement wherein the objective was to generate a world class infrastructure. in order that they are aligned to the common goal of revenue maximization. Another chief difficulty was due to the different objectives of the partners from the deal which stemmed from the vastly diverse cultures at the two organizations. but the discussions between the partners helped in sorting this to a great extent. Bharti Airtel even involved its partners in its internal strategy meetings. BusinessWeek. with an option to return to Bharti Airtel if they were not satisfied with their new workplace. Another factor that helped in improved engagement and trust was the long term nature of the arrangements—12 years with Ericsson and NSN and 10 years with IBM. the management at Bharti had to contend with the high internal expectations from the deal as suddenly IT requests were pouring in from every office. 2007 29 28 . A critical factor that has aided the success of this arrangement was the nature of engagement. October 15. Thus the vendors had to be partners in true sense to Bharti Airtel as their fortunes were closely associated with that of Airtel. To take due care of this. These deals turned out to be a model for business partnerships and several Fortune 500 companies contacted the top Bharti: A case study in how to manage outsourcing. Bharti Airtel was the first telecom company in the world that handed over its network operations over to third parties. their compensation would increase in lock step31. The scale of the success of the deal can be understood by the vast business opportunities that it opened up for companies like Ericsson and NSN. The level of trust that underlies the deal was the foundation on which the deal stands. Though the deal proved to be a great success in terms of enabling Bharti Airtel scale up to achieve the required capacity and in helping its partners realize sufficient benefits in terms of the revenues and a new model which brought them many additional deals and businesses. Financial Times. It gave its networks. Considering the uncertainties like the frequent changes in the telecom policy. BusinessWeek. Though outsourcing the traditional information technology was not a radical departure from the normal outsourcing practice. Nov 27. albeit to world leaders like Nokia and Ericsson28. both added close to 150 similar clients across the world between themselves. While Bharti had its start-up culture. it was not without its share of difficulties. the deal had a clause which provided the employees till two years after the deal. 2006 30 a unit of traffic intensity in a telephone system 31 Bharti: A case study in how to manage outsourcing. That way. Bharti’s arrangement with the telecom vendors was made on the basis of installed erlang30 capacity and was structured in two parts.

The Road Ahead Bharti Airtel was the only integrated telecom player with a predominant emphasis on mobile telephony. 19 Oct 2007. 2008 http://www. “We should be able serve any location where a match box is sold”. Well.200 census towns and over backed by wide national distribution and the direction in the broadband & telephone business was to focus on the cities with high revenue potential36. 2008 37 Bharti Airtel Ltd. 33 . 19 Oct 2007. Sunil Mittal was surprisingly Indian in his expectation from Bharti Airtel. NSN. Capitaline Plus 38 Meet the lord of the rings Sunil Mittal. Having already overtaken China to become the fastest-growing market. covering 95% of the country’s total population34.businessweek. Bharti was all set to establish itself in the emerging Broadcasting segment by launching its direct-to-home television service (DTH) and TV over the internet (IPTV) in 200837. “We would reduce the price to one cent per minute”. the CEO of Bharti AirTel says catering to the demands of the three screens. It aims to establish a presence in all 5. 39 Meet the lord of the rings Sunil accessed on 5th January. Manoj Kohli. Economic Times. It was also featured on the cover page of the Wall Street Journal as an Indian company that pioneered a phenomenon of “reverse outsourcing”. where penetration was running at 40%. Refer to Exhibit 6 for the list of awards that Bharti Airtel has been honored with. Manoj Kohli. It also aims at servicing the rural market to stay ahead of the increasing competition. the television and the computer screen will be the major challenge facing him38. Economic Times. The company planned to get the lion’s share of this market and hence made considerable investments in Network expansion. targeted by top talent and benchmarked by more business32. The company’s strategic focus was on further strengthening the Airtel brand through best-in-class customer service. where penetration remained around 1%. Will it be able to continue the remarkable growth it has shown in the past? And what are the challenges in maintaining or bettering its past performance? (Exhibit 7 gives the consolidated results for the period 2004-7). Gurgaon on December 13.htm 34 Bharti Airtel Limited Annual report 2006-07 35 Bharti Airtel Limited Annual report 2006-07 36 www.000 villages across India by 2010. and aims to cover 75% of India's largely rural population35. The company also planned to expand its telecom operations internationally in select markets and in line with this. Bharti intends to reach new customers in rural areas. I would like it to be a hybrid of two great companies. Bharti should represent the innate goodness of the house of Tatas with the speed of Reliance. MD of Bharti Airtel mentioned at a conference in Management Development Institute. while worthwhile growth prospects also remained in urban areas. around $2 billion in 2007 to double the size of its network and cover 50% of India's population. up from 40% currently33. Ericsson and IBM to know more about their successful outsourcing partnerships. The Cellular Operators Association of India (COAI) reported that significant growth opportunities existed in rural areas. with only 20% mobile penetration. The future looks very promising and the company looks all set to establish itself as one of the leading players in the world telecommunication industry arena. It has a vision to be the most admired brand in India by 2010 on three accounts-loved by more customers.bhartiairtel. was expected to start its first international operations in Srilanka to provide 2G and 3G mobile services wireless operations by March 2008. the mobile of Bharti.39 32 www.bhartiairtel. 2007 the accessed on 5th January. the Indian mobile telephony market was poised for greater growth.

29 9.54 0.htm . 503.12 1.50 9. 100 105.71 21.10 228. 700 37.25 17.66 1.20 4.74 21.95 1.coai. 480. 070. 900 58. 430.41 14. 219. 107.16 40.09 17.86 32. 378. 599. 135 Annual growth 35% 49% 94% 76% 91% 110% 70% 57% 80% 63% 40 41 http://www. 2008 .29 500 5. accessed on 4 Feb. 600 1.11 0. 900 10.94 % 24.24 0. 991. 400 3.05 9.63 39.html. 000 172.00 Exhibit 1b: Number of GSM subscribers and the year-on-year growth rates 41 Year 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 (Dec) Subscribers 794. 2008 http://www.80 2. 200 1.42 3.Exhibit 1: Indian Cellular Industry Exhibit 1a: Market share as of 31-12-200740 Organizaiton Airtel(GSM) Reliance (CDMA + GSM) Vodafone Essar(GSM) BSNL(GSM) Tata (CDMA) IDEA(GSM) Aircel(GSM) Spice(GSM) MTNL(GSM) BPL(GSM) HFCL (CDMA) Shyam (CDMA) Total No of Subscribers in million 55.india-cellular. 478. 400 21.04 100. accessed on 4 Feb.

accessed on 4 Feb. Punjab Punjab Rajasthan No. Madhya Pradesh & West Bengal Corresponds to Bihar. Himachal Pradesh.63 36. of service areas 4 5 Region/Circle Mumbai. Rajastan. Circles C Total 6 23 18.92 10. Gujarat. Jammu & Kashmir.pdf. Maharashtra. 2007 Licensed service areas All India (except Delhi & Mumbai) All India All India All India All India Select circles Mumbai Delhi.92 Market share 18% 35. & Andaman and Nicobar Islands Subscribers (million) 2008 http://www. of circles 21 23 23 22 20 13 1 2 2 1 1 42 43 http://www. Karnataka & Tamil Nadu Corresponds to Uttar Pradesh. 2008 . Punjab. Mumbai Karnataka.31 183. Kerala.trai. Delhi.0% 100% Exhibit 1d: Licenses per cellular service provider (CDMA &GSM)43 Service provider* BSNL Reliance Aircel Vodafone Tata Teleservices IDEA BPL MTNL Spice communications HFCL Shyam Telelink *as on 31 March. Haryana. Calcutta & Chennai Corresponds to Andra Pradesh.8% Metros Circles A Circles B 8 66.Exhibit 1c: Mobile subscribers and market share by region/circle (as on June 2007)42 Circle No.06 65. accessed on 4 North East Assam.

e governance and employment generation 1995 1997 1999 2000 2004 44 http://www.pdf accessed on 4 Feb. under a fixed license fee regime for 10 years. 19 more telecom circles get mobile licenses In August 1995 Kolkata became the first metro in India to have a cellular network Telecom Regulatory Authority of India (TRAI) was set up to provide effective regulatory framework and protect consumer interests through fair competition The National Telecom Policy was announced with additional emphasis on balance between universal service to uncovered areas and high level services to meet countries economy Amendment of TRAI Act to overcome implementation difficulties Bharat Sanchar Nigam Ltd (BSNL) created as a public sector unit from the department of telecommunications to operate telephony services across the country except Mumbai and Delhi Broadband policy was announced recognizing the potential of broad band services influence on GDP growth and societal transformation through tele medicine. Mumbai. Government began to offer licenses for the metros It was to be a duopoly with not more than two licensed cellular operators in each telecom circle.coai.Exhibit 2: Reforms in the Indian mobile telephone industry44 Year 1854 1914 1950 1985 1986 1989 1992 1994 Event Telegraph facilities were opened up for public with the opening of a separate department of the government Postal department and the telegraph department were merged during World War I 196 telephone exchanges were absorbed from princely states with installed capacity of 13362 lines and 11296 working connections Two separate departments for post and telecommunications were created (DoP and DoT) Departmental reorganization with secondary switching areas as basic units Bombay (Mumbai) and Delhi telephones were separated to form Mahanagar Telephone Nigam Ltd (MTNL) Telecom Commission constituted Telecommunication sector in India liberalized and private sector is allowed to participate The National Telecom Policy was announced with the objective of universal service coverage across the country. 2008 . Chennai and Kolkata. and Indian Telecom History Vol I tele education.

within just 143 months of start of operations 2007 . its stock plunges to less than half its IPO price and the company gets almost written off A brief corporate restructuring was done to group all the operations under two divisions .20% equity interest of Telecom Italia in Bharti Telenet and 18. Bharti Airtel (Canada) Ltd. acquires direct and indirect economic interest in Bharti Airtel The name ‘Bharti Televentures’ changed to Bharti Airtel Forays into the USA with the launch of Airtel CallHome service for Non resident Indians based there Incorporates Bharti Airtel (USA) Ltd. becoming the first in India to offer push-button telephones under the brand ‘Beetel’ Sunil Mittal launches country's first fax machines and its first cordless telephones.Bharti Cellular Limited and Bharat Infotel Limited. Also rebranding of all cellular operations under a single brand ‘Airtel’ Joins the US$1 billion revenue club BTVL's two subsidiaries Bharti Cellular Ltd and Bharti Infotel Ltd merged with the company. Bharti bids for a license for India's first mobile phone business in collaboration with Vivendi Bharti Tele-Ventures Ltd. Bharti Airtel (Hong Kong) Ltd as a wholly owned subsidiaries of the company for providing international calling services and wholesale voice switching and data products in those countries Bharti Airtel becomes the fastest private telecom company in the world to reach the landmark of 50 million customers in a single country.Exhibit 3: Major milestones in the history of Bharti Airtel Year 1976 1982 1984 1986 1991 1992 1995 1996 1999 1999 1999 1999 2000 2001 2002 2003 200304 2004 2005 200506 2006 200607 2007 Milestone Bharti founded in Ludhiana to make crankshafts for local bicycle manufacturers Bharti begins import of portable generators as the India agency for Suzuki Motors of Japan Bharti goes in for nationwide distribution & the GoI bans the import of generators Bharti Telecom Limited (BTL) gets incorporated. Acquires control of JT mobiles Extends cellular operations to Punjab. Bharti Airtel (UK) Ltd. With the entry of formidable players.8% from Bharti Telecom thereby making Bharti Telenet a 100% subsidiary of Bhati Tele-Ventures. the world’s largest mobile service provider. Becomes the first telecom company to have an all India mobile footprint Vodafone. Bharti goes public and gets listed on BSE and NSE. Bharti acquires control of Skycell Communications Acquires control of Spice Cell in Calcutta. (BTVL)) gets incorporated and services commence in Delhi Extends the services to Himachal Pradesh Bharti sells 20% equity interest to the private equity firm Warburg Pincus and uses this capital inflow to finance its next stage of growth. Karnataka and Andhra Pradesh and becomes the largest private sector telecom operator in India Acquires a 30.

India’ `Best Asian Telecom CEO' at the Telecom Asia Awards 2005 Ernst & Young ‘Entrepreneur of the Year’ ‘Dataquest IT Man of the Year 2002’ Business India “Businessman of the Year – 2002” .Exhibit 4: Airtel structure Airtel Infotel Services Mobile Services (GSM) Enterprise Services Broadband & Telephone Long Distance Carriers Corporate Exhibit 5: Awards and recognition to Sunil Mittal Year 2006 2006 2006 2005 2005 2004 2002 2002 Award ‘Asian Businessman of the Year’ by the Fortune Magazine ‘CEO of the year 2005’ at the Frost and Sullivan Asia Pacific ICT Awards ‘Telecom Person of the Year’ by Voice & Data Institutional Investor ‘Best CEO.

and managing customer knowledge abilities 'Mobile Operator of the Year. India Award'. 2005' by Frost & Sullivan ‘India’s Best managed company in 2005 by Asia Money Was featured in the Forbes’ ‘400 list of the Best Big Companies’ and was ranked 2nd among the 'Best Managed Companies' in India 2005 2005 2005 2005 2005 2005 2005 2005 2005 2005 . in Asia's Best Companies 2005 poll conducted by Finance Asia 'Indian Mobile Operator of the Year 2005' by Asian Mobile News Became the top-most Telecom Company and was featured amongst the top three companies across the sectors in the ET 500 'Market Leadership Award for Managed WAN Services Market. which rated Indian organizations against a framework of eight key knowledge performance dimensions.Exhibit 6: Awards and recognition to Bharti Airtel Year 2007 2006 2006-07 2006 2006 2006 2006 2006 2006 Award Ranked third globally in ‘The Infotech 100’ list for best returns to the shareholders by the BusinessWeek Magazine ‘Best Indian Carrier’ in the Telecom Asia awards 2006 ‘Wireless Service Provider of the year’ and 'Competitive Service Provider of the year 2006' by Frost & Sullivan Asia Pacific ‘Competitive Service Provider of the year award’ in the Telecom Asia Awards 2006 ‘Most Preferred Cellular Service Provider Award’ in the telecom category at the CNBC Awaaz Consumer Awards 2006 ‘MIS Asia II Excellence Award 2006’ for Best Knowledge Management ‘Most Customer Responsive Telecom Company in India’ by the AvayaEconomic Times Global Connect Awards 2006 ‘The Nasscom IT Innovation Award’ for the Business Model Innovation for 2006 In the Indian MAKE study. Bharti Airtel was recognized for its organizational learning. 'Best Indian Carrier' in the Telecom Asia Awards “Avaya GlobalConnect Customer Responsiveness Awards. 2005” for Best Customer Service in the telecom sector Forbes Global 2000 leading companies in the world for the year 2005 ‘Best GSM Carrier in Asia’ Ranked 2nd among the 'Best Managed Company' in India. 'Best GSM carrier in Asia' in the Telecom Asia Awards 2005.

6 0.3 40.66 28 18 37.2 23 0.7 0.6 18.7 37.48 29.4 0.45 37.5 21.3 45 Bharti Airtel Limited Annual report 2006-07 .89 11.3 19.Exhibit 7: Financials Customer Statistics45 Total Customer Base (000s) Mobile Services (000s) Broadband and Telephone Services (000s) 2004 7141 6504 637 2005 11842 10984 857 2006 20926 19579 1347 2007 39013 37141 1871 30-Jun-07 44676 42704 1972 CONSOLIDATED FINANCIALS AS PER US GAAP Revenue (INR Million) EBITDA (INR Million) Cash profit from operations (INR Million) Income before income taxes (INR Million) Net income (INR Million) 48320 15968 13588 5976 5076 80028 116215 185196 30128 28132 16604 14978 43374 40862 25366 22567 74508 73070 48860 42571 59046 24466 26218 18901 15116 KEY RATIOS EBITDA Margin (%) Net Profit Margin (%) Net Debt to funded Equity ratio (times) Return to stockholders equity (%) Return on capital employed (%) 33 10.4 28.8 29.4 25.7 9.5 0.22 40.2 41.

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