SALES & DISTRIBUTION MANAGEMENT

A REPORT ON BHARTI AIRTEL

8/30/2010

UNDERSTANDING DISTRIBUTION ISSUES WITH AIRTEL

SUBMITTED BY: AMIT GANGWAR ARPITA SHARMA DIPESH VORA ISHWARYA B. MEHUL MEHTA SUMEET PALLAV SURUCHI SAXENA 09BSHYD0073 09BSHYD0166 09BSHYD0262 09BSHYD0326 09BSHYD0450 09BSHYD0877 09BSHYD0894

INDEX S TOPIC NO. 1) Company Profile 2) 3) 4) Product Portfolio Distribution Channels Selection of Channel Members
y Responsibility of Dealers

PAGE NUMBER 3 3 5 6

5) 6) 7) 8) 9)

Issues of Allocating Territories Channel Management Innovations in Channel Management Issues of Channel Conflict Potential Reasons for a Channel Conflict in Future

7 7 8 8 8 10

10) References

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Company Profile Bharti Airtel formerly known as Bharti Tele-Ventures LTD (BTVL) is the largest cellular service provider in India, with more than 124 million subscriptions as of February 2010.[ With this, Bharti is now the world's third-largest, single-country mobile operator and sixth-largest integrated telecom operator. As per the latest development, post acquiring of ZAIN, Bharti has become the 5th largest telecom operator globally in terms of subscriber base. Product Portfolio The company is structured into four strategic business units - Mobile, Telemedia, Enterprise and Digital TV. The mobile business offers services in 18 countries across the Indian Subcontinent and Africa. The four strategic business units is as follows

Mobile

Digital TV

TeleMedia

Enterprise

Mobile: The mobile business offers services in India and Sri Lanka Tele media : The Telemedia business provides broadband, IPTV and telephone services in 95 Indian cities Enterprise: The Enterprise business provides end-to-end telecom solutions to corporate customers and national and international long distance services to carriers. Digital TV: The Digital TV business provides Direct-to-Home TV services across India All these services are provided under the Airtel brand. Airtel provides a host of voice and data products and services, including high speed GPRS services. Airtel also offers a wide array of µpostpaid¶ and µprepaid¶ mobile offers, with a range of tariff plans that target different segments. A comprehensive range value- added, customized services are part of the unique package from Airtel. The company¶s product reflects a desire to constantly innovate. Some of these are

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reflected in the fact that Airtel was the first to develop a µsingle integrated billing system¶. Airtel¶s national high-speed optic fiber network currently spans over 113,326 R kms covering all the major cities in India. The company has two international landing stations in Chennai and Mumbai that connect two submarine cable systems - i2i to Singapore and SEA-ME-WE-4 to Europe The businesses at Bharti Airtel have been structures into three individual strategic business units. All these services are provided under the Airtel brand. It includes y Voice Services: Bharti Airtel became the first private fixed line service provider in India. It is now promoted under the Airtel brand. Recently, the govt. opened the fixed line industry to unlimited competition. Airtel has subsequently started providing fixed line services in the four circles of Delhi, Haryana, M.P., Karnataka, Tamil Nadu & UP (west). Airtel Enterprise services believe that these circles have high telecommunications potential, especially for carrying Voice & Data Traffic. These circles are strategically selected so as to provide synergies with Airtel¶s long distance network and Airtel¶s extensive mobile network y Voice- Product Profile: Airtel Enterprise Services telephone services go beyond basic telephony to offer users a whole host of value added services as well as premium add on. Few of the value added services offered are calling line identification, three party conferencing, dynamic lock, hunting numbers, and parallel ringing etc. Airtel Enterprise services and voice services provide free dial ±up internet access that is bundled along with telephone connection from Airtel. It¶s fast, reliable and gives unlimited internet access y Mobile service: In India, the company's mobile service is branded as Airtel. It has nationwide presence and is the market leader with a market share of 30.07% (as of May 2010). Airtel¶s mobile foot print extends across the country in 21 telecom circles. Its service standards compare with the very best in the world. It is one of the top 5 operators in the world, in terms of service and subscriber base. The company has several firsts to its credit  The first to launch full roaming service on pre paid in the country  The first one to launch 32K SIM card  The first in Asia to deploy the multi brand feature in a wireless network for efficient usage of spectrum  The first to receive the ISO 9001:2000 certification from British standards Institute.  Enterprise Services: Enterprise Services provides a broad portfolio of services to large Enterprise and Carrier customers. This division comprises of the Carrier and Corporate business unit. Enterprise Services is regarded as the trusted communications partner to India's leading organizations, helping them to meet the challenges of growth Satellite Services: Airtel Enterprise Services is a leading provider of broadband IP satellite services and DAMA/PAMA services in India. Their solutions support audio, video and voice applications on demand. The DTH service from Airtel, Direct to Home (DTH) enables viewers to receive broadcast signals into their home via a satellite dish. 

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Satellite services include PAMA/DAMA, BIT- internet, VPN, Satellite based IPLC for redundancy reasons  Managed data & internet services: Airtel Enterprise Services provides a comprehensive suite of data technologies which support all types of networks and ensure that their customers can migrate their network to the future seamlessly. Managed Data & internet Services include MPLS, ATM, FR, Internet, IPLC, Leased lines, Customized solutions, International Managed Services, Metro Ethernet Managed e- Business Services: Airtel Enterprise Services offers an internationally benchmarked, carrier class hosting, storage and business continuity services. Managed eBusiness includes CO-lo: Dedicated and share, BCR services, Web hosting. 

Distribution Channel: Airtel has a wide & effectively spread channel structure all over India. The channel structure is simple and effective. Complications are kept out in order to make the overall process very effective and efficient.

Distribution Channel
Under the Company

DSA
(Direct Selling Associates) CSA (Corporate Selling Associates)

FSA
(Franchisee Selling Associates)/

ARC
(AIRTEL Relationship Centre)

t. The above figure illustrates the channel structure at a regional level. This has been generally scaled down for better understanding of the structure. TERRITOTY MANAGER The distributors include one who handles 1) Provisioning 2) Documents 3) Operation back up 4) Field sales executives.

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SELECTION OF CHANNEL MEMBERS/DEALERS Airtel follows a strict policy in selection of the dealers, and therefore it is necessary to fulfill the following pre- requisites to be eligible to become a dealer: 1) The dealers should have a sound financial background. The financial capability of a dealer is solely depended on the discretion of the company officials. 2) The dealers should have a good market reputation, since the dealers help the customers in forming the first impression a customer has about the company. 3) The dealer should have a good previous track record, i.e of timely payments, no criminal background etc. 4) The dealers should have good market penetration. The company¶s ability to gain maximum customers in this era of competition solely depends on the penetration the dealers have in the market. 5) The last criterion of dealer¶s selection for Airtel is the area the dealers cover. This would include different geographical areas which are covered by a dealer.

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Responsibilities and functions of the dealers: Airtel believes in ³Customer Loyalty´ and thus Airtel expects that their dealers apart from selling paint products should perform the following functions for better customer relations¶ management: 1) Sales promotion through regular promotional schemes, road shows, campaigns etc. the expenses incurred by the dealers is shared by the company only if these activities are for promotion of the company and not of the dealer. 2) Recruitment- done under the guidance of certain Airtel officials 3) Training and development of manpower with company assistance 4) Servicing according to the size of orders 5) Customer relation management 6) Promote other products of the company The dealer should be in regular touch with the customer, keep taking his feedback and ensure maximum customer satisfaction. The dealer should also try and convince the customer to try newer products of the company. Issues of allocating territories: Presently the territory are divided into circles like Delhi circle, Andhra Pradesh, Karnataka, Chennai, Himachal Pradesh, Kolkatta Circle are to name a few. A multi dimensional marketing and sales team builds both direct and indirect sales channels. Regional organizations are responsible for the definition of the sales and marketing strategies, and plans for their respective territories. Each region also provides significant inputs and reviews of the corporate strategic sales, marketing and product direction. Bharti Airtel uses second degree and third degree distribution network. These two systems are in place for altogether different markets. There is confusion in the roles of the members of the channel. The territory and the degree of distribution network are done only on the basis of whether the market is urban and rural. The distinction between the same isn¶t clearly defined which is causing confusion among the channel. There are differences between the offers that are offered to retailers in different areas. They vary based on the territory. Allocation of a rural distributors or urban distributors is perplexing. Channel Management at Airtel: Since Airtel has an intensive distribution network, proper channel management becomes an indispensable part of the system. One of the major issues encountered in the channel management is channel conflict. Channel conflict is behavior by a channel member that is in opposition to its channel counterparts. It is opponent centered and direct, in which the goal or object sought is controlled by the counterpart.

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Channel conflicts, that mainly result from competing goals of the channel members, different perceptions of reality, clashes over domains i.e. intra and multi-channel competition, roles unclarity, expectations divergence, relationship disharmony etc. To avoid these conflicts, Airtel has adopted a Second and Third Degree Distribution network Second Degree distribution network: Company makes invoice of SIMs, PEFs, GSM Pay Phones, RCVs of various denominations chiefly Rs.10, Rs 30 and Rs. 60 to only Urban Distributors and Rural Super Distributors. Easy balance is also transferred to only Urban Distributors (UDs) and Rural Supers (RS). Urban distributors distribute the above items to retailers according to the demand and transfer easy balance to retailer through FOS (Field Sales Officer) SIM. This is more suitable for the urban market where demand is obscurely driven. Third degree distribution network: RS distributes the above items to Rural Distributors commonly known as RDs and transfers easy balance into Rural Distributors SIM. Rural Distributor then distribute the above items among the retailer according to the demand of it and transfer easy balance to retailer through FOS SIM from easy balance of Distributor SIM. This three level distribution is used to reach to sub urban and rural areas since there is lesser popular density and large geographical spread that has to be catered to. Innovations in Channel Management: y With the drastic improvement in technology, a centralized system can be set up in order to reduce the number of channel members and the problems accompanying them. This may lead to improvement in the communication among the channel members. y Reduction of the number of methods through which a retailer can recharge his SIM in order to do recharge/ give service to the end customer. This method would help facilitate better communication as well as improved monitoring of the business. ISSUES OF CHANNEL CONFLICT Due to lack in channel innovation these are the conflicts that are arising in the channel. The following also has a list of problems faced due to this conflict y Problem of service gap: Cases have been found where the retailer has run out of its recharging balance and the balance has not been refilled by the distributor timely. This may be caused because of the time lag or because of the no credit policy of the distributor. This however leads to some loss to the company as the customer has to return back without recharging. This also weakens the company¶s image in the eyes of the customer as retailer here acts as the face of the company. Competition: Due to large number of players, now the retailer has to keep competitor products as well. However they are unwilling to make extra investment and reduce the share of each existing company to accommodate the competitor products. Non-availabilty of particular offers: There have been instances where the company has announced new offers. However those are not available at the retailer¶s outlet. This may

y

y

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y

y

happen due to lag in information passage from the company to the retailer. This situation is seen especially in the rural areas where number of retailers is less compared to urban areas. This may lead to loss of potential customers and ultimately unrest among the retailers. Retailers selling SIM Cards at a cost lesser than the MRP: Big retailers who purchase the SIM Cards in bulk sell the SIM Cards at a cost lower than the MRP. They use the economy of scale achieved through bulk purchase, reduce money from their commission and pass on the difference to the end customer. Thus they are able to sell the SIM Cards at a lower cost then the competing retailer. This leads to unequal sell by the various retailers. Old SIM Cards not replaced in time: Once some offer is over, the SIM Cards which hold that offer has to be taken back by the distributor and replaced by new SIM Cards. However there have been instances where the distributor is late on completing this activity. This leads to inventory accumulation at the retailer¶s shop which the retailer cannot sell.

POTENTIAL REASONS FOR A CHANNEL CONFLICT IN FUTURE: Rural expansion may turn out to be margin dilutive Rural expansion has not been margin dilutive so far despite aggressive rural network Rollouts, but maintaining operating margins would require a continued focus on managing costs. While network costs are higher in rural areas, rural channels (marketing & distribution costs, dealer commissions) are not expensive. This has helped in keeping costs low and maintenance of margins for now. The Impact of MNP Introduction of Mobile number portability (MNP) is expected to be neutral to marginally positive; management at Airtel is confident of maintaining/improving market share postMNP. Post-paid customer retention will be key (~6% of subscriber base generating ~20% of revenues) through better value proposition and continued focus on QoS. Impact of MNP may not be as significant for the prepaid segment (~94% of subscriber base) given the existing low switching costs and already high churn rate in this segment. Thus the introduction of MNP can lead to a major change in the dynamics of the telecom industry and will require a higher degree of co-ordination and communication between the channel members. If one fails to do so, it might result in a channel conflict that will lead to a substantial decrease in sales. The Arrival of 3G Technology Management does not expect the incremental capex for 3G to be substantial, given that it will be an overlay on the existing 2G infrastructure. 3G rollout is expected to be phased; metro/tier 1 locations are likely to be the initial potential markets for 3G. The introduction of 3G technology will cause a major change in the dynamics of the telecom industry and might become a reason for channel conflicts unless cautious measures are taken to avoid the same.

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References y y y y y y y y Marketing Channel Management by Russell W. Mccalley Marketing Channels by Annie T. Couglan www.airtel.com www.tmcnet.com www.gtms-inc.com http://www.ossnewsreview.com/telecom-oss/advanced-sales-and-distribution-channelmanagement-stimulates-growth/ Distributors in Hyderabad and Chennai Ms. Shikha Solanki, Assistant Marketing Manager, Services Department, Airtel Office, Okhla, New Delhi- 20

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