Indian Telecom Industry

&
Bharti Airtel
Presented By – Group 8

1
Indian Telecom Industry
2
Size and Growth

• Industry Revenue ~ INR 39000 crore per quarter

(Hindu Business Line)
• Contributes directly to 1.5% of India’s GDP (2009
estimates) (Hindu Business Line)
• Revenue projected to grow at a CAGR of 12.9% from
2009-2013 (Gartner Report)

3
Size and Growth

4
Key Players in the market

5
Market Share of Key Players

6
Industry Drivers

• High Disposable Income

• Need for mobility and connectivity 24X7
• Government Initiatives
• Cost Reduction
• Reduced Cost of Handsets
• Availability of Smart Phones
• Subscription Bundling

7
Telecom Infrastructure

• Telecom Infrastructure extremely strong

• Third largest telecom industry in the world
• Fastest Growing Telecom Industry in the World
• Industry in the “Mature” Stage currently
• Services extremely varied segments with wide range
of services
• After liberalization by government, situation has
improved

8
Key Challenges
Revenue Growth
• 15 telecom operators in the country
• Lower tariff and high introductory offers 
• Tariff war 
• The revenue growth during the calendar year 2009 was just 12% as
compared to 22% during the previous year 2008.

Subscriber Growth
• Industry's focus shifted from customer market share (CMS) to revenue
market share (RMS)
• Multiplicity of SIM ownership has made the subscriber numbers
meaningless to gauge the strength of the business.
• Dual sim is contributing to 30%-35% of the new additions
• Low ARPU from the newly added subscribers
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Key Challenges (Contd.)
Profit margins
• Reducing the operating costs through business process outsourcing,
infrastructure sharing, IT outsourcing and revenue assurance.

Number of operators
• Total number of operator stands at 15
• With many operators operating at tariffs lower than cost, the eventual
consolidation of the operators is inevitable and expected very soon

Rural penetration
• Urban Market Highly saturated
• Rural tele-density is still under 25% with significant growth potential
• Low ARPU customers and high cost of maintaining the network at these places
• Challenge for the operators is to search for new cost effective ways to roll out
network in rural areas by choosing appropriate technology and leverage on the
use of available infrastructure to reduce cost and time of network roll out
10
Key Challenges (Contd.)

Re verification of mobile subscribers

• Instructions to all the operators to ensure proper address and identity proof for all
the subscribers particularly in the case of prepaid

Network
• Network roll-out a big challenge

TRAI directive on value added services

• All value added services can be offered to a customer only after receiving a
confirmatory SMS from him. This order was modified later which allowed the
subscription of VAS by pressing * and 9 on the handset thereby making double
electronic confirmation. 11
Regulatory Issues

• Spectrum Allocation
• 3G Allocation
• License Fee on Tower Firms
• Auction of New Licenses

12
Critical Success Factors

Infrastructure
Customer Value Added Buy In and
and Quality of
Service Services Tariffs
Connectivity
• Coverage • Turnaround • Reverse SMS • Activation
Range time for services, e.g. • Low entry cost
• Network grievances flight • Segment wise
maintenance • Billing information packages
• Technology Accuracy • Utility services • Add on
adoption stage • Loyalty (Electricity Bill packages
• Network programs payments) • Distribution
Availability • Payment • Ticket Booking Network
• Quality of Options (Movie, travel)
voice

13
Key Performance Indicators

Subscribers
• Total subscribers, Segmentation, Churn Per month, Subscriber per employee

Usage
• Minutes of Usage, Minutes carried per month ,%age airtime capacity
utilization, Number of calls, Average Call duration, Roaming Usage

Revenue
• ARPU, ARPM, Average Revenue per call, Average revenue per cell site,
Average revenue per employee

Coverage and Spread

• Towns covered, Population covered, Area covered, Globalization, Top 50%
user revenue, Top 50% site revenue 14
Key Performance Indicators

Quality
• Service performance, Network congestion, connection establishment, connection
maintenance, service quality, Network availability.

Financial and valuation

• EBIDTA,ROI,PAT,P/E

Spectrum Efficiency
• Subscribers/square km/MHz, Subscriber/square km(Urban), Spectrum per operator.

15
 INR
INR per
per month
ARPU

16
Competitive Dynamics

• Competition exists across three main types of

companies
– Private Companies
– Foreign Invested
– Government Owned
• Telecom – A mature market
• Companies compete on 4 factors
– Network Quality
– Improved Data Services
– Product Offerings/Value Added Services
– Cost & Efficiency
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Competitive Dynamics -
Vodafone
• Strong international presence and brand recognition

• Controlling stake in emerging and strong growth markets like –

Turkey, Egypt, Romania, South Africa and India

• Strategic alliances – apple I phone, Verizon, Cingular

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Competitive Dynamics -
Reliance
• An arm of a ambitious, well funded and well connected Indian
business house

• Economies of scale from large subscriber base

• Expertise and business model that allows it to maintain ARPU’s and

profitability in spite of lower yield subscribers

• In house IT and technology development capability

19
IT Related Issues

• Converging Enterprise Portals to manage Information

• Balance High Quality Service with Operational Efficiency
• Manage high volume of new and existing subscribers
annually
• Integration issues between the Billing, CRM and other
systems
• System downtime affects the revenues of the provider

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Leaders in Implementing IT
TCS

In House IT

Wipro

IBM

Amdocs, IBM

Partnered with IBM for IT(profit sharing model)

In house IT, Amdocs

Amdocs, IBM(More than 12 countries) 21

Thought Leaders

Launched mobile phones at a staggering price

of Rs. 501

Introduced the per second billing that became

a pre requisite later for other players

Entered a shared infrastructure deal with TATA

Entered a shared infrastructure deal with

Reliance

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Thought Leaders (Contd.)

Hello Tunes, Missed call alerts, Music on Demand

Services, Easy Charge

Get paid for receiving calls

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Trends – Next Growth Avenue

• Rural Market Potential

– Pros
• Untapped market
• Churn rate is low
• Service Provider is net recipient of
termination charge
• Customers are relatively less prone to travel –
operator to save on roaming charges
– Cons
• Profitability is 7% to 10% lower than urban
• ARPU – is low in rural areas – High operating
Cost
• Inadequate grid power supply increases the
fuel cost 24
Trends – 3G

• A multitude of data related Services

– Mobile TV
– Location Surveillance
– Streaming Video on Demand
– Gaming etc.
– Video Telephony – Customer can watch and
talk simultaneously through Video Call
• Significant Capacity and Quality
Enhancement
• Will help to differentiate services

25
Trends – Mobile Network Portability

Large and
established service More impact in
Positive for new
providers will urban saturated
players
witness an increase markets
in their churn rate

26
Innovation – Past

• Evolving Technologies

• Subscriber Convenience Important

– SMS, VMS, Universal Access Numbering, Virtual Private Network,
Conferencing, Tele-voting

• Broadband Communication
– Global Call Centers, Medical Transcription, E-Governance and Video on
Demand

• Mobile Communication
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Innovation - Future

• Motes
– Small Monitoring Device with low power wireless sensor network,
which will be distributed and turn on radios only when they needed.
– Monitor our environment, our machines and even us and trigger
corrective actions as and when required

• Grid Computing and Grid Protocol

– Link almost anything: data bases, simulation and virtualization tools,
number crunching, power of computers
– Location of resources may not really matter

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 29
• Code division multiple access (CDMA) is a channel access method used by
various radio communication technologies
CDMA
• Global System for Mobile Communications. A European standard for digital GSM
mobile cellular networks
• Interactive voice response system allow caller to interact thro ugh voice menu
keypad to input and retrieve information. Eg of IVR is phone banking system,
IVR
movie ticket ordering by phone, etc.
• Average revenue per user defined as the total revenue divided by the number of ARPU
subscribers
• This is an automated message recorded by someone within your company to
greet callers and guide them to: Press  1 for Sales, 2 for Service, 3 for all other
Auto-Attendant
queries
• Voice over Internet Protocol - VoIP is a technology that allows you to make and
receive phone calls and faxes over the Internet instead of through the
VoIP
telephone network. Calls over the Internet to another VoIP user or site is free
• Calling Line Identity Presentation
On a digital display handset, you will be able to see the telephone number or
CLIP
name of the party calling you as soon as your handset starts to ring
Jargons
 30
• Product for product substitution: wireline, CDMA, GSM, VSAT, VoIP
• Investments in improvement of internet speed and bandwidth will provide avenues of communication Substitut
that will be force to be reckoned with es
• Minimal role of suppliers (Distribution Network) Suppliers
• Most telecom giants have strategic tie-ups with mobile handset suppliers
• Limited bargaining power for optical fiber and aluminum suppliers
• High Level of Awareness
Buyers
• Low switching costs between carriers
• All top players offer relatively similar products levels of after sales service
• New entrants like Tata Docomo offering low tariff rates eat into market share and start price war Potential
• Future threats will be in unexplored areas – 3G, VPN, international Long Distance Calls etc. Entrants
• Foreign players and MVNOs could make competition more intense
Industry
• Keep pace with constant innovation from its competitors to maintain steady and profitable growth Rivalry
Porter’s 5 Forces
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Company Background
• Launched in 1995 – Delhi and Himachal Market Share – Mobile Services
Pradesh
22% Bharti Airtel
42% Tata Telecom
• Bharti Telecom – Promoter company with Vodafone-Essar
45.3% stake 18% 18% Others

• Singtel share - 31.95%

• Airtel customer base as of 2010 – 127 million Customer base - mobile services ('000)
140000
• Revenue – Rs 418,295 million 120000

100000
• Profit after tax up by 17% – Rs 91631 million 80000
127619
60000
93923
40000 61985
20000 37141
10984 19579
0 32
2004-05 2005-06 2006-07 2007-08 2008-09 2009-10
Customer Loyalty – Airtel
Way
• Winning customers through loyalty programs

• Pioneer in:
– Providing electronic recharge for mobile phones
– Life-time prepaid service
– Innovations such as – Bollywood movie premiers, music services, ringtones

• Tie up with banks to offer reward points

– Airtel, ICICI and HP collaborated to launch ‘Airtel rewards credit cards’

33
IT at Airtel
• 2005 – Bharti Airtel assesses a need to update IT systems
to a superior, scalable architecture
• Identifies a need to streamline business processes
• Enlists IBM’s service to build flexible, robust, scalable and
secure architecture
• IT employed in
– End-to-End Business Transformation
– Application Management
– Platform Integration
– Analytics

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Business Model Positioning

Dynamic

Mass
Innovation
Customization
Product

Mass Continuous
Static

Production Improvement

Static Dynamic
Process 35
Business Model

• Business alliances
– Outsourcing all non core competencies
– Strategic Profit Sharing Alliances with IBM, Nokia, Ericsson, Nortel
– Passive Network Sharing (Indus Towers, Infratel)

• Types of services (Revenue Generating Avenues)

– Mobile Services
– Enterprise Services
– Passive Infrastructure Services
– Tele-media

• Possible Areas of expansion
– Handsets Manufacturing
– Open Standards/Cloud Infrastructure
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Competitive Strategy Analysis

Cost
Leadership Differentiation Focus
• Manages costs and • Provides free • Focuses on certain
resources digital EPABX with segments as well
efficiently free leased lines to raise market
entry barriers
• Sales volume • Good call center
increase due to service, local • Provides
lower prices language support landline/internet
services to specific
• Development geographic areas
programs with
Premier B Schools

37
Differentiating Factors
• Newer offerings, lower prices, quality service – stay at least 6 months ahead of
competitors

• Leverages strengths of strategic and financial partners – Singtel, New York Life
insurance

• Emphasis on human resource development to achieve operational efficiency

• Heavy emphasis on CSR activities

• Operates in 23 circles – appx 92% Indian mobile users lie in 15 circles

• Strong brand name and reputation of quality service provider

• Innovative brand campaigns – Youtopia, Touch tomorrow, Magic 38

Differentiating Factors
(Contd.)
• Tie up with companies to deliver cards at doorsteps

• Leveraging technology to beef up distribution channels

• Special services for high value customers – instant single point

access for all queries

• Excellent distribution network and coverage

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Key Performance Indicators

Parameters Units Dec-09 Dec-08

Consolidated      
Customers 000s 121853 88270
Employees No 18201 25553
Mobile Services     
Customers   118884 85651
Pre-paid customers % 95.3 93.5
Post-paid customers % 4.7 6.5
Bharti's mobile subscribers market share % 22.7 24.7
Average Revenue Per User (ARPU) Rs 230 324
Average Rate Per Minute (ARPM) Rs 0.52 0.64
Average Minutes of Use Per User Minutes 446 505
Post-paid Voluntary Churn % 1 1.1
Post-paid Company Initiated Churn % 0.9 1.2
Pre- paid Churn % 6.5 2.9
SMS Revenue % 6 4.1
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Value Chain

Platform Device Network Content

End User
Provider Manufacturer Operator Provider

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S.W.O.T.

STRENGTHS WEAKNESSES
• Integrated • Decreasing ARPU
Operations
• Brand Value • Bharti Enterprises
• Partnerships with
: Weak Corporate
significant players
• Innovation Center
Structure

OPPORTUNITIES THREATS
• Low Penetration • Fierce Competition
Rates • Regulatory Issues
• New Services like • Growth by
DTH, IPTV Acquisition affected
• Expanding by Slowdown
International
Footprint

42
Future Outlook

• Expand to Other Emerging Economies

• Continuously Upgrade IT Infrastructure ( capitalize
on IBM)
• Use Analytics to leverage on the growth happening
in networks arena
• Test waters of Manufacturing

43
Thank
You
44
References

• http://rmchaturvedi.com
• http://www.stockmarketsreview.com/
• http://www.telecomindiaonline.com
• http://www.airtel.in
• http://www-03.ibm.com/press/us/en/pressrelease/32505.wss
• http://smartinvestor.in/BSCMS/PDF/bharti_280110_01.pdf
• http://www.ibef.org/industry/telecommunications.aspx
• http://www.dot.gov.in/osp/Brochure/Brochure.htm
• http://www.trai.gov.in

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