Industrial Unit Analysis

Parthiban.S RamaSubramanian.S Sabarish.V SenthilKumar.V Thirumurugan.S

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Evolution of the industry-Important Milestones

1851 1881 1883 1923 1932 First operational land lines were laid by the government near Calcutta (seatof British power) Telephone service introduced in India Merger with the postal system Formation of Indian Radio Telegraph Company (IRT) Merger of ETC and IRT into the Indian Radio and Cable Company (IRCC) Communication

1947

Nationalization of all foreign telecommunication companies to form the Posts, Telephone and Telegraph (PTT), a monopoly run by the government's Ministry of Communications
Department of Telecommunications (DOT) established, an exclusive provider of domestic and long-distance service that would be its own regulator (separate from the postal system) MTNL incorporated to provide fixed-line telephone services in Mumbai and New Delhi
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1985

1986

CONT
1986 VSNL incorporated to provide international telecom services

1991
1994

DoT invites bids from Indian companies for cellular licenses in the four metropolitan circles
Government announces the National Telecom Policy, opening up the basic service sector to private players SEP - Entry guidelines for basic services announced NOV - Licenses were issued to cellular operators in the four metros

1995 1995 1996

January - Tenders floated for basic operators as well as cellular operators in non-metro sectors. March - Paging services by private operators commence Licenses for 20 cellular circles issued

1997

Telecom Regulatory Authority of India established by government

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1998 1999 1999 ISP business opened up to operators other than DoT and VSNL Government announces NTP 1999 DoT announces Migration Package for existing operators licensing costs, subject to compliance with certain conditions TRAI issues the first tariff order and cuts domestic and international long distance telephony charges and DoT becomes a corporation, BSNL DoT allows basic operators to provide WLL services on a restricted basis. Opening of National Long Distance Service to competition and Fourth Cellular licenses issued

2000 2001 2001

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2002 Bharti starts cellular to cellular long distance services with sharp cuts in tariffs Feb. '02 - Government transfers control of VSNL to Tatas through sale of strategic holding April-02 - ILD sector opened to competition. End of VSNL monopoly. Government allows restricted IP Telephony May '02 - Bharti offers ILD services with sharp cuts in tariffs Sept. '02 - TRAI decides to 'forbear' from regulating cellular tariffs

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Indian Telecom

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Telecom Policy
Spectrum Allocation

GSM operators initially get 4.4 Mhz and get 10 Mhz when they have 10 lakh subscribers. In 2002, the cost of 4.4 Mhz of spectrum was Rs.1650 crores and in 2007 the cost remains same. The rule mandate that no company should have more than 6.2 Mhz, but Bharti, vodafone and BSNL have 10Mhz spectrum which will cost the nation Rs.7216 crore annually. FDI FDI is allowed 49%, but allowed up to consolidated amount of 74% with others such as NRIs, Financial Institutions.

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TYPES OF PLAYERS

STATE OWNED
PRIVATE INDIAN OWNED

BSNL & MTNL

Reliance infocomm, Tata Teleservices

FOREIGN INVESTED

Bharti Airtel , Vodafone Essar , Idea cellular, BPL Mobile, Escotel

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The top players in Telecom

1. 2. 3. 4. 5. 6. 7. Bharti Airtel Vodafone Essar BSNL MTNL Reliance Communications Tata TeleServices Idea Cellular Limited

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Areas of operation
Sl. No. 1 2 3 4 5 6 7 Service Provider BSNL Bharti Reliance Aircel* Vodafone Tata Teleservices IDEA*** Licensed Service areas All India (except Delhi & Mumbai) All India All India All India All India (except MP) All India (except Assam, NE, J&K) 13 (Delhi, Mumbai, Maharashtra, Gujarat, Andhra Pradesh, Kerala, Haryana, UPW, UP-E, Rajasthan, Madhya Pradesh, Himachal Pradesh, Bihar) 21 23 23 23 22 20 13 No. of Circles

8
9 10 11

BPL
MTNL HFCL Shyam Telelink

Mumbai
Delhi, Mumbai Punjab Rajasthan
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1
2 1 1

About - Airtel
Bharti Airtel Limited a group company of Bharti Enterprises, Indias leading integrated telecom services provider with an aggregate of over 77.24 million customers as of end of August 2008, consisting of 74.77 million mobile customers.

Bharti Airtel is structured into three strategic business units

Mobile services, Telemedia services and Enterprise services. The mobile business provides mobile & fixed wireless services using GSM technology across 23 telecom circles. The company primarily operates in India, Headquarters - New Delhi Employees - 25,543 people (as on March 08)
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It has set a target of 125 million subscribers by 2010 Prepaid customers account for 88.5% of Bhartis total subscriber base, an increase from 82.7% a year ago

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Mile Stones of Bharti Airtel

Bharti Airtel was established as Bharti Tele-Ventures, in 1995. The company offered its initial public offering in 2002. During 2004, the company delisted its shares from the Delhi Stock Exchange. It continued to trade on the National Stock Exchange and the Mumbai Stock Exchange. Vodafone acquired a 10% stake in Bharti Tele-Ventures for around $1.5 billion, in 2005. Bharti Tele-Ventures renamed itself to Bharti Airtel Limited, in 2006. In September 2007, the company signed a managed networks deal for its Sri Lanka operations with Huawei Technologies Company, a leader in providing next generation telecommunications network solutions for operators around the world. In October 2007, Bharti Airtel and Indian Institute of Technology (IIT) Delhi announced their plans to establish the Bharti-IIT Delhi Telecom Centre of Excellence.
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In March 2008, the company launched Airtel CallHome service for calls made from US to India. In the same month, Guernsey Airtel, a subsidiary of the Bharti Group, launched its mobile services in Guernsey (Channel Islands, Europe). The company offered products and services under the Airtel-Vodafone brand to customers on the Island.

Also in the same month, Airtel Telemedia Services, a private broadband and telephone service provider, launched airtellive.com, an all-in-one internet portal for Airtel customers.
Airtel launched its Iphone in august 2008. Airtel successfully tested 3G services in Delhi, Mumbai and Bangalore and are waiting for the spectrum to be allocated.
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Bharti Enterprises

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Bharti Airtel

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Objectives
By 2010 Airtel will be the most admired brand in India: Loved by more customers. Targeted by top talent. Benchmarked by most businesses.

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Subsidiaries of Bharati
(i) (ii) (iii) (iv) (v) (vi) (vii) (viii) (ix) (x) (xi) (xii) Bharti Hexacom Limited Bharti Comtel Limited Bharti Aquanet Limited Satcom Broadband Equipment Limited Bharti Broadband Limited Bharti Infratel Limited Bharti Telemedia Limited Bharti Airtel (UK) Limited Bharti Airtel (Canada) Limited Bharti Airtel (Hongkong) Limited Bharti Airtel (USA) Limited and Bharti Airtel Lanka (Private) Limited

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Subscriber Base - Airtel

The Airtel subscriber base according to COAI - Cellular Operator Association of India as of May 2008 was: Punjab - 3,239,200 Delhi - 4,055,704 Haryana - 1,067,990 Mumbai - 2,468,016 Uttar Pradesh (West) - 1,624,001 Chennai - 1,823,532 Uttar Pradesh (East) - 3,897,278 Kolkata - 1,852,838 Rajasthan - 4,242,006 Maharashtra & Goa - 4,345,945 Madhya Pradesh - 3,084,776 Gujarat - 3,004,824 West Bengal Andhra Pradesh - 6,516,332 & Andaman and Nicobar - 2,106,163 Karnataka - 7,316,500 Himachal Pradesh - 809,829 Tamil Nadu - 4,218,705 Bihar - 4,912,900 Kerala - 1,703,298 Orissa - 1,911,070 Assam - 939,746 North Eastern States - 585,213 Jammu & Kashmir - 1,100,069

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Customer base

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Growth in cutomer base

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Business Partners

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Partners role
Services Partners/Vendors Ericsson and Nokia Mobile services 1. 2. 3. 4. Telemedia & Enterprise services IBM Daksh, Hinduja TMT, TeleTech Mphasis Call center operations Role Network Equipment partners

Siemens Nortel

Equipment suppliers

IT Requirements

IBM
Nortel

Group wide technology req

Call center tech req

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Other Alliances
In 2007 ,Bharti Airtel has entered into following major agreements and alliances:

With Microsoft to offer software and services for the Small and Medium Business (SMB) market in India.
As part of the agreement, Airtel will bring Google search to the Airtel Live mobile WAP portal. Google will also incorporate advertising through its Mobile Ads product on the Airtel Live mobile portal; A three-year contract with Nokia at an estimated value of US$ 400 mn to expand its managed GSM/ GPRS/EDGE networks in eight Airtel circles and deploy a pan India WAP solution across its networks;
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The company has a strategic alliance with SingTel. The investment made by SingTel is one of the largest investments made in the world outside Singapore, in the company.

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Porters Five force model for the Industry

Threat of new entrants : In 2002, the cost of 4.4 Mhz of spectrum was Rs.1650 crores and in 2007 the cost remains same.

Six new licences were given this year.

Threat of Substitute Products: Wimax allows VOIP which may be threat in future since ISP can operate it with low cost. Barriers to entry High capital investments, older and well-established players who have a nation wide network, license fee, continuously evolving technology and falling tariffs.
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CONT
Bargaining power of suppliers Improved competitive scenario and commoditisation of telecom services has led to reduced bargaining power for services providers. Bargaining power of customers A wide variety of choices available to customers both in fixed as well as mobile telephony has resulted in increased bargaining power for the customers. Competition The entry of fourth cellular player and commencement of WLL services has resulted in intense competition in the bigger cities. Reducing tariffs will hurt the new entrants, as they will be unable to recover their high capital investments.

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SWOT Analysis:
Strength: Operation in 23 circle in the country Higest no of towers (Around 80,000) by airtel 22 million subscribers ahead of its nearest competitors. Weakness: Too much dependence on domestic market. Opportunities: A strong economy and a growing market: The Indian telecommunication industry is amongst the fastest growing telecom markets in the world and Higher per capita income and appetite for increased consumption is resulting in a greater-than-proportionate impetus for telecom growth. As an ISP, Bharti can roll out VOIP services if WiMax texhnology is rolled out.

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CONT
Threats: Dip in ARPU.

Increased competition may reduce market share and/or revenue

Mobile Number portability may result in switch over of customers to competitors.

Taxation(30% of revenue).
Vodafone has the advantage in 3G services than Airtel since it has experience of running the 3G service in other countries.

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Financial Analysis

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Share holding pattern

Share Holding patterns Promoters MFs , FIs & Banks FIIs Others % 66.5 5.7 23.6 4.2

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Revenues and Profits

INR in millions (march 08) Revenues Operating Profit Net Profit 270,249.3 76,455 67,008

Increase in % from 2007 45.9% 55.1% 57.4%

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Market Share

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Market Data
52-week range (INR) : 1,149 / 688 Share in issue (mn) : 1,898.0 Makcap (INR bn/USD mn): 1,517/34,805 Avg. Daily vol. BSE (000) : 3,898.5

As on 23/aug/08
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Economies of scale and efficient working capital management helped boost profit margin
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Companys policy of retaining entire profits helps in keeping the D/E low despite surging loan book
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Better controls helped check bad debt losses

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Increasing subscriber base caused higher fixed asset turnover ratio

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Economies of scale help reduce the percentage cost of advertisement expenditure

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Thank You

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