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Pranav Anuj Karthik Ashish Modani Tarun Amit NMIMS 2009 Batch

Bharti Airtel
‡ Largest Private Integrated Telecom Company in India ‡ 3rd Largest Wireless Operator in the World ‡ Largest & Fastest Growing Wireless Operator in India ‡ Largest Telecom Company listed on Indian Stock Exchange
GROUP 7 2

Integrated Telecom Company
Wireless Services
± 2G/3G ± Rural Market

Enterprise Services
± Carrier ± Corporate

Telemedia Services
± Fixed Line ± Broadband ± DTH

Passive Infrastructure ± Bharti Infratel ± Indus Tower

GROUP 7

3

Financials Snapshot

Details Customers Revenue EBITDA Cash Profit Net Income

Q2 FY 09 Y-on-Y 79.99 mn 57.00% $ 1,942 mn 42.30% $ 796 mn 36.50% $ 673 mn 20.30% $ 441 mn 26.80%

GROUP 7

4

07 Long Term Debt-Equity Ratio 0.18 GROUP 7 5 .Industry Debt-Equity Ratio Long Term Debt-Equity Ratio ROCE (%) RONW (%) http://www.capitaline.29 0.88 -0.25 10.38 0.21 0.62 10.88 34.35 0.34 0.33 8.82 23.16 RONW (%) 39.com Key Ratios .43 3.36 0.27 http://www.6 0.96 0.5 0.76 0.04 31.07 6.Airtel Mar-08 Mar-07 Mar-06 Mar-05 Mar-04 Debt-Equity Ratio 0.24 9.com 2007 2006 2005 0.19 0.87 2004 2003 0.83 0.07 22.capitaline.5 0.03 ROCE (%) 34.54 0.Financial Snapshot .72 10.27 0.55 23.53 43.11 10.28 8.35 0.Ratios Key Ratios .3 0.76 0.

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

.Vision 2020 ‡ To build India's finest business conglomerate by 2020 ‡ Supporting education of underprivileged children through Bharti Foundation ‡ Strategic Intent: ± To create a conglomerate of the future by bringing about Big Transformations through Brave Actions.

We deliver what we promise and go out of our way to delight the customer with a little bit more .Mission ‡ We at Airtel always think in fresh and innovative ways about the needs of our customers and how we want them to feel.

innovate and energize new ideas with a strong passion and entrepreneurial spirit ‡ Openness and transparency .to adapt to the changing environment and evolving customer needs ‡ Making it Happen .with an innate desire to do good ‡ Creating Positive Impact with a desire to create a meaningful difference in society. .to do their best ‡ Being Flexible .Core Values ‡ Empowering People .by striving to change the status quo.

‡ To Diversify into new businesses in agriculture. financial services and retail business with world-class partners ‡ To lay the foundation for building a conglomerate of future .Objectives/Goals ‡ To undertake transformational projects that have a positive impact on the society and contribute to the nation building process.

B & C) ‡ Bharti Airtel Largest player with presence in 23 Circles GROUP 7 11 . A.4 Categories ( Metro.Indian Telecom Sector ‡ Fastest Growing Sector CAGR 22% (2002-07) ‡ Second Largest Telecom Market ± ± ± ± Lowest tariff charges in the world Wireless Subscribers 315.6 ‡ 23 Circles .4 Mn Teledensity 30.3 Mn Wireline Subscribers 38.

3 19.1 50 53 0 2002±03 2003±04 2004±05 2005±06 76 98.0 140.21 12 8 4 0 206 Telecom Subscriber Base 2006±07 2007±08 (as of June 2007) Teledensity GROUP 7 Teledensity (in percent) 250 Subscribers (in million) 24 12 .4 7.Why Mad Rush for Telecom ?? Large number of additions in telecom subscribers Low teledensity (depicting large untapped potential) Telecom Advantage 200 150 100 5.8 9.9 20 16 225.3 12.1 18.

Evolution of Telecom In India Department of Telecommunication (DoT) is the main body formulating laws and various regulations for the Indian telecom industry. TRAI. was established Calling Party Pays (CPP) was implemented INDIA 2003 Unified Access Licensing (UASL) regime was introduced Reference Interconnect order was issued National Telecom Policy (NTP) was formulated NTP-99 led to migration from highcost fixed license fee to low-cost revenue sharing regime FDI limit was increased from 49 to 74 percent Decision on 3G services (awaited) ILD International Long Distance GROUP 7 13 . BSNL was established by DoT ILD services was opened to competition Go-ahead to the CDMA technology 1994 1992 1997 1999 2000 2002 Internet telephony initiated Reduction of licence fees Number portability Intra-circle merger was proposed guidelines were established Attempted to (pending) boost Rural telephony 2004 2005 2006 Broadband policy 2004 was formulated targeting 20 million subscribers by 2010 2007 Private players were allowed in Value Added Services Independent regulator.

Wireless Planning and Coordination (WPC) Department of Telecommunications Handles spectrum allocation and management They undertake various research activities and monitor the quality of service provided in the Indian telecom industry.Telecom Ecosystem Indian Telecom Industry Framework Indian Government Bodies Independent Bodies They formulate various policies and pass laws to regulate the telecom industry in India. Telecom Regulatory Authority of India (TRAI) DoT Licensee and frequency management for telecom Independent regulatory body Telecom Commission Group on Telecom and IT (GoT-IT) Exclusive policy making body of DoT Telecom Disputes Settlement and Appellate Tribunal (TDSAT) Telecom disputes settlement body Handles ad hoc issues of the telecom industry GROUP 7 14 . They also provide various recommendations to improve the status of telecom operations in India.

Regulatory Framework  74% FDI Investment ADC Regulation  Lack of Transparency in Spectrum & License Allocation USO UASL  3G Policy & MNP still Pending GROUP 7 15 .

Declinging Tariff ² Rising Revenue Source: TRAI Report GROUP 7 16 .

Economic Factors GDP growth rate .Averaged around 7.9 % from 2002-2008 Rising Tele-density Target of 45% by 2010 Growing per capita income/disposable Income Rs 12000 in 2002 to Rs 33000 in 2008) Falling Handset Prices Moderate inflation levels which were prevalent during the past 7 years around 5-6% .

Changing Demographics Demand for VAS & Broadband services Among Youth 28 % Urban Population Rapid Urbanization Rising Income level Source: Mckinsey Report .

Tata 3G Value added services potential still to be tapped fully 2G/3G GSM Currently commands 70% of mobile subscribers in India 2G/3G VoIP Technology CDMA WIMAX .Technology CDMA Already there are big players in this segment Reliance .

Porter·s Generic Strategy GROUP 7 20 .

Porter·s 5 Forces Customer Bargaining Power Threat of New Entrants Threat from Competition Threat of Substitutes Supplier Bargaining Power GROUP 7 21 .

1. Threat from Competition Wireless Market Top 4 garnering 75% market share HIGH GROUP 7 22 .

00% 30.20% 6.10% 7.80% 23.60% 22.00% 20.30% 13.80% Best OP Margins & Net Profit Margins among Peers Company Sep-07 Bharti Rcom IDEA MTNL 43.00% 37.60% 26.90% Source: CMIE November 2008 GROUP 7 23 .50% 6.40% 23.00% Sep-083 19.90% 14.70% Sep-08 38.Competitor Analysis Competitor Analysis 40.00% 0.90% 32.00% 31.00% 10.00% Bharti Rcom IDEA MTNL OP Margin Net Margin Sep-072 26.

AMOU & ARPU Stats Minutes of Usage per Month Mobile Services USA 838 India 461 China 303 Despite a low teledensity of approximately 19 percent. is tapping a large market at the bottom of the pyramid by reducing tariffs. Russia 88 ARPU* in India Mobile Services ARPU (USD per month) 10 8 6 4 2 0 Q1 2006 Q2 2006 Q3 2006 GSM CDMA Q4 2006 Q1 2007 The declining ARPU implies that India Inc. This offers huge growth opportunity to telecom companies. GROUP 7 24 . India has the second highest minutes of usage per month. thereby. enhancing affordability.

2. Customer Bargaining Power  Lack of differentiation among Service Providers  Cut throat Competition  Low Switching Costs  Number Portability will have Ve Impact  Businesses & Consumers HIGH GROUP 7 25 .

Market Scenario Postpaid Vs Prepaid Customers & Market Share GROUP 7 26 .

Suppliers Bargaining Power LOW GROUP 7 27 .3.

Gtalk. Threat of Substitutes  Landline  CDMA  Video Conferencing BROADBAND SERVICES DIMINISHING MARKET HIGH  VOIP .Skype. Yahoo Messenger  e-Mail & Social Networking Websites GROUP 7 28 .4.

Threat of New Entrants  Huge License Fees to be paid upfront & High gestation period  Entry of MVNOs & WiMAX operators  Spectrum Availability & Regulatory Issues  Infrastructure Setup Cost .5.High  Rapidly changing technology LOW GROUP 7 29 .

22.SWOT Strengths ‡ Largest Telecom Player in India . Nokia .~80Mn.6% ‡ Strategic Alliance with other stakeholders in Bharti Airtel include Sony-Ericsson.and Sing Tel ‡ Pan India Presence ‡ Strong Financials Weakness ‡ Outsourcing of Core Systems ‡ Lack of emerging market investment opportunity Source: CMIE Report NOV 08 GROUP 7 30 .

SWOT Opportunities ‡ Bharti Infratel Cutting Down cost in Rural area ‡ Match Box Strategy Scale of Penetration ‡ Current Tele-Density 30.6 is still low among developing countries ‡ Low Broadband Penetration. Rural Telephoney Threats ‡ India centric Major revenues from India ‡ Falling ARPU & AMOU ‡ Intense Competition & Shortage of Bandwidth GROUP 7 31 .

BCG Matrix for Bharti Airtel Stars Mobile Services ? Retail Insurance DTH & IPTV Broad Band Cows Dogs Fixed Line Services LOW HIGH GROUP 7 LOW 32 .

67 Medium 2.67 GROUP 7 2.33 1.00 33 .00 Market Attractiveness 3.00 3.33 Low 5.GE Matrix Classification Business Strength Strong High Medium Weak 5.

Business Strength  Current market share  Brand image  Brand equity  Production capacity  Corporate image  Profit margins relative to competitors  R & D performance  Managerial personal  Promotional effectiveness GROUP 7 34 .

6 0.0 GROUP 7 35 .20 1.20 0.7 0.6 0.8 0.Factors Underlying Market Attractiveness Factors Resource availability Overall market size Annual Market growth rate Profitability Competitive intensity Technological requirements Total Weight 0.5 Value = (Weight * Rating) 0.15 0.0 Rating (1 5) 3.5 4 4 4 4 4.10 0.9 4.15 0.4 0.20 0.

10 0.10 0.15 0.15 1.45 0.45 0.45 0.15 0.15 0.Factors Underlying Market/Biz Strength Factors Weight Rating (1 5) 5 3.75 0.0 GROUP 7 .45 3.5 4.45 0.75 36 Market share New product development Brand Image Sales force Pricing Distribution capacity Product quality R&D Performance Total 0.5 4 3 3 4.40 0.10 0.35 0.5 3 Value = (Weight * Rating) 0.10 0.

33 1.Airtel·s GE Matrix High High Business Strengths Airtel Mobile Enterprise Low 5.00 37 .00 2.67 GROUP 7 Low 5.33 Unattractive 3.00 Attractive Market Attractiveness 3.67 TeleMedia Moderate Attractive 2.

Airtel ² Strategy MANTRA : Focus on Core Competencies and Outsource the rest! Product Innovation Pricing Core Competencies VAS Marketing and Branding .

.Strategy ‡ Airtel partnered with leading players in telecommunication players across the globe. ‡ It has managed to work with the best of domain specialists globally and emerge as a world class entity. ‡ Partnerships include operational contracts with marquee vendors and strategic investors ranging from private equity investors to global telecom giants.

‡ Warburg Pincus a celebrated PE investor held a stake for a substantial period of time and was instrumental in providing Airtel support in its early stages. ‡ Was also affiliated with Singapore Telecom. ‡ Vodafone was a strategic investor in Airtel. ‡ Temasek the Singapore based investor holds a considerable stake in it. Strategic partnerships/ Shareholders ² Technology and Capital .

Outsourcing deals in 2004 ‡ Ericsson was given the mandate to provide. manage and maintain the equipment as well as provide quality assurance in Airtel s then 13 mobile circles. ‡ IBM was given the mandate to handle the back office requirements of Airtel s presence in India .

‡ Hived off tower infrastructure into a separate entity. ‡ Higher emphasis on ARPU/min stark contrast with other operators who concentrate on ARPU only. ‡ Exploring opportunities in international markets.Operational Strategies. ‡ Aim to be become a one stop shop for all telecommunication services under the Bharti umbrella. .

.Performance till date ‡ Bharti Airtel has enjoyed an excellent run ever since the telecom sector opened. Birla s and Vodafone. ‡ Has coped well with regulatory changes. ‡ Continues to attract and delight customers. ‡ It has managed to hold on to its leadership position inspite of the presence of other players with deep pockets Ambani s. Tata s.

. ‡ This could call for acquisitions globally. ‡ Indian market inspite of being the worlds largest is still not matured.Future Strategies ‡ Translate its expertise in Indian markets to other emerging economies. Opportunities abound in the hinterland which must be exploited. ‡ Technology leadership is a must Airtel must ensure that its reliance on GSM technology does not render it obsolete.

Growth Factors Infrastructure Sharing Rural Telephony Growth Factors Managed Services Enterprise Telecom GROUP 7 45 .

5G GROUP 7 46 .Road Map ² Growth Path VPN & VoIP WiMAX 3G 2G/2.

Airtel .Strategy Product Innovation Pricing Core Competencies VAS Marketing and Branding MANTRA : Focus on Core Competencies and Outsource the rest! .

com ‡ Indian Telecommunication Sector . Annual Report -2008 ‡ Investors presentation. November 2008 ‡ Telecommunication Services. ‡ Telecommunication Sector Report March 2008.August 2007. Businessweek GROUP 7 48 . Indian Industry: A Monthly Review. Bharti Airtel Limited.References ‡ Bharti Airtel. Asit C. Mehta Invesment Intermediates Ltd. CRISIL ‡ Capitaline Database http://capitaline. CMIE November 2008 ‡ Analyst Report Bharti Airtel. IBEF Report ‡ Next Big Spenders Indian Middle Class .

THANK YOU !! GROUP 7 49 .

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