Professional Documents
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DISTRIBUTION OF
AIRTEL
GROUP - 10
18P126 ANAGHA
18P147 KEERTI
18P157 RADHIKA
18P159 RAM PRASAD
18P176 VINIKET
About the Indian Telecommunications Industry
India has a vast telecom network, being the second largest in the world. The subscriber count
across India was 1183.51 Million subscribers, as of March 2019. Tele-density or the number of
telephone connections per 100 individuals has seen impressive growth over the last couple of
years. In FY07, the tele-density was 18.23%. In FY19, it is 90.11%.
The total number of internet subscribers at the end of 2018 was 604.21 Million. Thus, India has
the 2nd highest internet subscriber base in the world and is second in terms of app downloads as
well. Lately, there have been two primary drivers of growth in the telecom industry in India – first,
the ubiquity of smartphones at every price point and second, the sharp fall in data rates. India is
the largest mobile data consumer worldwide. Wireless data usage had a year-on-year growth of
119%, to 14283 Petabytes between September to December 2018.
The industry can be split into three categories – Mobile (Wireless), Fixed Line (Wireline) and
Internet Services. The wireless segment comprises 98.17% of all telephone subscriptions. The
share of Rural telephone subscribers has increased from 33.35% in FY11 to 43.46% in FY18.
Due to the huge growth in subscriber base, a need has been created for more infrastructure in
order to facilitate the coverage of wider areas. In order to focus on their core operations and to
cut costs, telecom companies have been classifying their tower assets into separate companies. For
example, Reliance Communications finalised a large deal to sell off its stake in Reliance Infratel,
for around $3.68 Billion.
Some of the trends that are being observed in the Indian telecommunications sector are:
Rural Expansion: The government is taking steps to increase rural tele-density by providing
subsidies. 43.98% of the total Indian telecom subscriber base is rural, as of February 2019.
Growth of BWA Technologies: Broadband Wireless Access technologies such as WiMAX and
LTE have been developed and have become industry norms in a short time frame.
Internet of Things: Telecom players are investing heavily in IoT networks, which would help in
data sharing and gathering. The government is also fuelling growth through smart city projects.
Fiber Optic Networks: Telecom players are looking to quickly expand their optical fibre
networks and offerings. Reliance Jio Infocomm is leading the race under its JioGigaFiber brand.
Consolidation: Large players are trying to increase synergies, cut costs and reduce cut-throat
competition via consolidation. Vodafone India and Idea’s merger was at the spotlight and Airtel
has been cleared to acquire Tata Teleservices’ mobile wing.
Rising Investments: Large players, both domestic and foreign are pumping in larger amounts of
money into the sector owing to the increased competition as well as demand growth amidst
technological trends. The National Digital Communications Policy 2018 envisages attracting
investments worth $100 Billion by 2022, in the Indian telecommunications sector.
Outsourcing Non-Core activities: It has become an industry standard to outsource activities
not directly associated to the provision of networks or data. Factory costs are reduced this way, as
tower businesses are usually signed off as a separate company, for example.
Major Players in the Indian Telecommunications industry are Airtel, Vodafone Idea, Jio, BSNL,
Reliance Communications, Aircel, Telenor, MTNL.
An overview of Airtel
5 C’s of Airtel
Company:
Bharti Airtel Limited is a global telecommunications behemoth, with operations in 20 countries,
primarily across Asia and Africa. The company headquarters is in New Delhi. It is rank 3 in India
in terms of number of subscribers and rank 2 globally (in terms of total number of subscribers
globally). In India, it offers 2G, 3G, 4G wireless services, DTH, broadband facilities, fixed line
services, mobile e-commerce as well as enterprise solutions. In other geographies it offers
2G,3G,4G as well as mobile e-commerce.
Business Divisions of Airtel are: Mobile Services (GSM), Telemedia Services (Broadband, Fixed
Line), Airtel Business (Large Enterprise, Government, SME solutions), Digital TV.
Airtel is the company that had started the trend of outsourcing all non-core activities in order
to cut costs amidst decreasing margins and increasing volumes. Now, it is an industry standard in
India and even globally, telecom players are adopting this business strategy.
Collaborators:
Equipment providers to Airtel are Huawei, Ericcson and Nokia Networks, while IBM handles
the IT support and requirements. Transmission towers are owned and maintained by joint venture
companies as well as subsidiaries of Bharti Airtel. Some of these companies are Indus Towers and
Bharti Infratel.
Airtel has also been involved in a decent number of strategic partnerships, involving mergers,
acquisitions as well as joint ventures. Some of the examples are Siemens, Vivendi, JT Holdings,
Hexacom, MTN Group, Alcatel-Lucent, Zain Telecom and Walmart.
Customers:
Airtel had historically been the number one service provider in terms of customer base for a couple
of years. Retention rates had also been stellar, usually above 98%. However, the situation has
changed quite a bit over the past 5 years.
After the Jio revolution, subscription numbers have stagnated and have even started dropping over
the last few quarters for Airtel. While Jio has added over 300 Million subscribers in its 3-year tenure
and is the only large gainer (The only other gainer has been BSNL, marginally, with 0.2 million
new subscribers in the last quarter), Airtel has been the biggest loser in terms of subscription
numbers, even though the customer base has been going up.
In terms of B2B clients, Airtel is growing steadily, however. Airtel Business, as the company calls
it, is its B2B wing. Bharti’s top management says that Airtel Business is the growth engine for the
company as a whole. Some of the growth areas are cloud, data centres, IoT, security and managed
services. Customer base as well as revenue is on a steady growth pace, much more stable than B2C.
Climate
The telecom industry in India can broadly be divided into three eras. The first one was up to 1980,
pre-liberalization. The second one was from 1981 to 2016, the era of growth, foreign direct
investment and privatisation. The third era is from 2016 to now. It is one of consolidation, price
wars and a new form of currency, data. Only the second era and the third are relevant from the
point of view of understanding the climate and competitors from this project’s point of view.
In the liberalization era, the Indian Government was trying to grapple with the booming demand
for telecom services with privatization in order to ensure better reach and service quality while not
emptying out the treasury. TRAI was set up in 1997 which significantly reduced the influence of
the government in policy making. Government cut its stake in public players and this set up a
gateway for foreign investors to enter as well. Call costs were greatly reduced, and the mobile
revolution happened in the 2000, where most households started having a mobile handset. Margins
were much higher for telecom companies and a few big players were the market dominators.
The Jio revolution in 2016 changed the landscape of the industry. Tariff rates as well as data
charges fell significantly, leading to a revamp of the economics of many players in the industry.
Smaller players either left or were acquired by bigger players. The bigger players themselves
consolidated in order to ensure streamlined operations, cost-cutting and less competition. Some
big players like Aircel and Reliance Communications had to shut shop or reduce some of its
operations as well. Amidst all this ruckus, Jio was solely following a price skimming approach and
gained more than 300 million subscribers in just 3 years. Now, only four players remain.
Competitors
Being the Market leader in Indian telecom market with a market share of all India mobile
subscribers at 23.4%, Airtel has set-up a multi-regional marketing and sales team that is responsible
for building two types of sales channels –
The 23 circles have been divided into regions or territories and the Regional organizations are
responsible for the designing the sales & marketing strategies for their respective areas.
Airtel has a network of personnel who take care of marketing and sales plans of their regions by
capitalizing on the opportunities in their geographic region. These teams build both direct
customer relationships as well as indirect channels (through handset manufacturer, Network
Solutions Provider, etc.)
The distribution strategy of Airtel includes second- and third-degree distribution network. As
shown below, Airtel makes transactions only with Urban Distributors (UDs) and Rural Supers
(RS). These transactions generally are invoices of SIMs, GSM Pay Phones etc.
Airtel
Urban
Rural Supers
Distributors
Rural
Retailers
Distributors
Retailers
• Second Degree network suits the urban areas well since these areas are usually densely
populated and have very high demands for Airtel’s products and services. It becomes
important for the company to supply the products and services as quickly as possible. As
the distributor (UD) gets the products directly from Airtel, therefore, the products, services
and promotional materials can reach the retailers in shorter span of time.
• Third degree distribution suits the sparsely (or less densely) populated areas, where retailers
are spread over large geographical areas. Due to less demand for company’s products and
lack of proper infrastructure in rural areas, Airtel has established a three-level distribution
network
Sales Force
These are the manpower of distributors. They are referred to as Field Officer Sales (FOS). They
sell SIM, RCVs, Easy Balance etc. on behalf of the distributor to all retailers assigned to his beat.
Responsibilities of FOS:
Urban Distributors:
Known as UD, they distribute products, easy balance, services and promotion material to retailers
in their designated (urban) areas of a district. They are responsible for achieving targets of SIM
activation and recharge without encroaching on other territories.
The retailers’ Lapu SIMs are mapped to the corresponding FOS’ SIM which is mapped to the
particular UD SIM. The flow of Easy balance starts at the UD SIM and ends at the Lapu SIMs
through the FOS SIMs. The UD gets certain discount on his SIM’s billing and has to pass a
certain percentage of this discount to the retailers. They make DD payments to the company for
primary sales twice a week.
• Distribution of SIM, Easy Recharge, PEF, RCV, GSM Pay Phones, FOS SIM, Lapu SIM
according to the retailers’ requirement within its territory only.
• Activation of customer SIMs within its territory after proper checking of POI, POA and
error free PEF.
• Collection of PEFs and other documents from retailers and sending them to respective
Circle Head Quarter.
• Distribution of promotional materials among the retailers according to the allocation of
TM/ZSM, received from company.
• Maintaining distributor health report, secondary details regarding retailers, SIM activation
details and stock of RCVs and Easy Recharge for 10 days.
• Proper circulation of communication from the company to retailers.
• Escalation of retailers’ claims and complaints to TM/ZSM.
Rural Supers:
These are the rural counterparts of UDs. Their roles and responsibilities are similar to the
UDs. However, being part of a third degree distribution channel, they have certain
conditions and some added responsibilities.
One Rural Super (RS) can have a maximum of 12 Rural Distributors (RD) under him and
he may have a maximum turnover of Rs. 1 crore. This is to limit the bargaining power of
the RS and to exercise more control over the rural distribution channel.
• All responsibilities of UD
• Collection of money for invoices to RDs and ensuring adequate supply to RDs.
• Have to maintain required stock of RCVs and recharge for 7 days.
Rural Distributors:
They are known as RDs and are located at blocks and towns as compared to the UDs and RSs
who are located at District HQ. There has to be an RD for every population block of 5000. Their
roles and responsibilities are the same as the UD.
Retailers:
Retailers are strategically located shops from where customers can buy products and services e.g.
mobile handset shops, phone booths, convenience stores etc. Retailers get a 3% margin by way of
discounts on all its sales. This discount is extended by the RD/UDs. Select retailers get Lapu SIMs
mapped to their respective FOS for Easy Recharge facilities. Other retailers are provided with
RCVs.
Responsibilities of retailers:
• Fill error free PEFs and verification of supporting copy for POI and POA of the customer
with originals before activating the SIM.
• Proper utilization and display of promotional materials.
• Proper communication about the schemes, new offers and benefits to customers.
• Selling products and services to customer at right price.
• Serving the customers’ requirements with the available stocks of SIM, RCV and easy
balance etc. and
• Not creating artificial shortages.
• Purchasing RCVs, SIMs and Easy Balance from respective distributor’s FOS only.
Responsibilities of CSD
Mainly two important issues are being faced by the company in their sales and distribution system.
These are:
• Problem of service gap: Cases have been there 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.
• Data collection at the POS is difficult (e.g. GPS, stocks, trade actions, satisfaction
surveys). Without proper systems, data quality is poor and it is extremely difficult to
measure the activity, productivity and integrity of agents and distributors.
• Insights from headquarters are rarely used by the salesforce on the field: information
is kept in different layers of management and field salesforce does not benefit from the
right prioritization to organize its visits.
• Very few organizations manage to track the impact of the actions they run at the POS,
be it through new recruitment, trade marketing actions, stock replenishment or new
assortment initiative.
Recommendations
In order to counter the challenges faced by Airtel, the following measures are recommended. These
measures have been arrived at by benchmarking best practices in the industry, and a rigorous
analysis of the situation at hand. The measures are:
• The problem of service gap specifically can be addressed if unavailability of all kinds of
products at any point of time is minimized through better forecasts or analysis of past
demand of the products in the area. Retailers should be motivated to sell every type of
product if possible and with a mixture of combination.
• A dedicated hotline only for retailers and field salesforce could be introduced. This will
create a way for the retailer to give suggestions, complaint and feedback of any campaign
directly to the management, while allowing retailers to have ready contact with a POC
which could ensure that the insights from the senior management are employed more
often.
• Non-store retailing should be given just as much importance as store retailing. Uniformity
of presence of the products on both online and offline channels should be ensured.
Innovative thinking in alternative retailing should be given with priority.
• Motivational activities and effective sales training of field sales executives should be given.
If it is not possible for the company to give monetary motivation at a large scale because
of the considerable cost involved perhaps company can give nonmonetary incentives to
FSEs in a cost-effective way and can get more output.
• To expand coverage into rural regions, sharing of passive infrastructure services with
competitors such as Vodafone (42 percent ownership) and Idea (16 percent ownership)
through its joint venture, Indus Towers can be considered. Sharing the infrastructure cost
and usage between multiple operators could help Bharti Airtel to reduce its operating and
capital expenses.
• Bharti Airtel also formed a joint venture with the Indian Farmers Fertilizer Cooperative
Limited (IFFCO). Its joint venture, IFFCO Kisan Sanchar, uses IFFCO’s wide rural
presence (present in 80 percent of Indian villages) and appeal among the rural agricultural
community to market and distribute Bharti’s products.
• The Bharti Airtel Service Centers that have been set up in villages to address customer
queries and complaints as well as act as sales and distribution points can also be used as
POCs to collect and keep track of data and metrics relevant to the company. These centers
employ local people and offer sales and customer services using local dialects.
References