Presented By: -

Gaurav Aggarwal - 02
Dhawal Kantawala - 12
Yatin Mota - 19
Hardik Shah - 29
NMIMS- MBA Capital Anurag Surana - 31
Markets- 2008-2010 Jwalit Vyas - 33
Suyash Gupta - 34
Indian Telecom Sector
• Fastest Growing Sector – CAGR 22% (2002-08)
•
• Second Largest Telecom Market
– Lowest tariff charges in the world
– Wireless Subscribers – 315.3 Mn
– Wireline Subscribers – 38.4 Mn
– Teledensity – 30.6
–
• 23 Circles - 4 Categories ( Metro, A, B & C)
•
• Bharti Airtel – Largest player with presence in
23 Circles
– GROUP 7 2
Why Mad Rush for Telecom ??
Large number of Low teledensity Telecom
additions in telecom (depicting large untapped Advantage
subscribers potential)

A G R 4 0 .4 %
250 C 24

Teledensity (in percent)

Subscribers (in million)

18.3 19.9 20
200
12.8 16
150
9.1 12
225.21
100 7.0
206 8
5.1 140.3
50 98.4 4
53 76
0 0
2002–03 2003–04 2004–05 2005–06 2006–07 2007–08 (as
of June
2007)
Telecom Subscriber Base Teledensity

GROUP 7 3
 Evolution of Telecom In India
Department of Telecommunication (DoT) is the main body formulating
laws and various regulations for the Indian telecom industry.

ILD services was

BSNL was Number portability
opened to Intra-circle
Independent established was proposed
competition merger guidelines
Private regulator, by DoT Calling Party (pending )
players were TRAI, was were established
Pays (CPP) was Attempted to
allowed in established Go-ahead to implemented boost Rural
Value Added the CDMA telephony
Services technology
1994 1999 2002 2005 2007
2003 2004
INDIA

1992 2000 Internet Unified 2006

1997
telephony Access
initiated Licensing Broadband
(UASL) regime policy 2004
National was was Decision on 3G
Telecom Policy NTP-99 led to Reduction of introduced formulated— FDI limit was services
(NTP) was migration from licence fees Reference targeting 20 increased from (awaited )
formulated high-cost fixed Interconnect million 49 to 74
license fee to order was subscribers percent
low-cost revenue issued by 2010
sharing regime

ILD – International Long

Distance GROUP 7 4
Telecom Ecosystem
Indian Telecom Industry Framework

Indian Government Bodies Independent Bodies

They formulate various policies and

pass laws to regulate the telecom They undertake various research activities
industry in India. and monitor the quality of service
provided in the Indian telecom industry.
Wireless They also provide various recommendations
Planning and Handles spectrum to improve the status of telecom
Coordination allocation and operations in India.
( WPC ) management
DoT – Licensee and Telecom Regulatory
Department of Authority of India
Telecommunicati frequency management Independent regulatory
( TRAI ) body
ons for telecom

Telecom Disputes
Telecom Exclusive policy making Settlement and Telecom disputes
Commission body of DoT Appellate Tribunal settlement body
( TDSAT )
Group on Handles ad hoc
Telecom and IT issues of the
( GoT - IT )
telecom industry

GROUP 7 5
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 6
•
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.”
Mission
• “ We at Airtel always think in fresh
and innovative ways about the
needs of our customers and how
we want them to feel. We deliver
what we promise and go out of our
way to delight the customer with a
little bit more”
Core Values
• Empowering People - to do their best
• Being Flexible - to adapt to the
changing environment and evolving
customer needs
• Making it Happen - by striving to
change the status quo, innovate and
energize new ideas with a strong
passion and entrepreneurial spirit
• Openness and transparency - with
an innate desire to do good
• Creating Positive Impact – with a
desire to create a meaningful
difference in society.
Objectives/Goals
• To undertake transformational
projects that have a positive
impact on the society and
contribute to the nation building
process.
• To Diversify into new businesses in
agriculture, financial services and
retail business with world-class
partners
• To lay the foundation for building a
Regulatory Framework
Ø 74% FDI
Investment
Ø
Ø Lack of
Transparency in
Spectrum &
License
Allocation
Ø
Ø 3G Policy & MNP
GROUP 7 still Pending 12
 Declinging Tariff – Rising Revenue

Source: TRAI Report

GROUP 7 13
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

ØRs 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

ØDemand for VAS & Broadband

services Among Youth
Ø
Ø28 % Urban Population
Ø
ØRapid Urbanization
Ø
ØRising Income level
Ø

Source: Mckinsey Report

Technology
CDMA – Already there are
big players in this
segment Reliance , Tata

3G – Value added services

potential still to be
tapped fully

2G/3G – GSM Currently

commands 70% of mobile
subscribers in India
Integrated Telecom
Company(Product Portfolio)
q Wireless Services qEnterprise
– 2G/3G Services
– Rural Market – Carrier
– – Corporate
qTelemedia –
Services qPassive
– Fixed Line Infrastructure
– Broadband – Bharti Infratel
– DTH – Indus Tower

GROUP 7 17
Bharti Airtel–Corporate structure

18
Wireless Market Share - India

GROUP 7 19
Geographical Presence India ...

Soucre: TRAI 20
 Financials Snapshot

Details Q2 FY 09 Y-on-Y
Customers 79.99 mn 57.00%
Revenue $ 1,942 mn 42.30%
EBITDA $ 796 mn 36.50%
Cash Profit $ 673 mn 20.30%
Net Income $ 441 mn 26.80%

21
Financial Snapshot - Ratios
Key Ratios -Ratio
Debt-Equity Airtel Mar-08Mar-07Mar-06Mar-05Mar-04
0.38 0.54 0.83 0.6 0.07
Long Term Debt-Equity Ratio 0.35 0.5 0.76 0.5 0.03
ROCE (%) 34.88 34.07 22.55 23.96 0.16
RONW (%) 39.53 43.04 31.82 23.88 -0.27
http://www.capitaline.com

Key Ratios - Industry 2007 2006 2005 2004 2003

Debt-Equity Ratio 0.35 0.21 0.27 0.34 0.36
Long Term Debt-Equity Ratio 0.3 0.19 0.24 0.29 0.33
ROCE (%) 9.72 10.28 8.25 8.43 3.07
RONW (%) 10.11 10.62 10.87 6.76 0.18
 http://www.capitaline.com

22
 SWOT ANALYSIS
Strengths
•

• Largest Telecom player in India – subscriber

base over 100mn
• Pan India Presence
• High Pat Margins – 24.8%
• Low debt on books – D/E of 0.3
• Good ARPU of RS 199
• Strategic Alliance with other stakeholders in
Bharti Airtel include Sony-Ericsson, Nokia -
and Sing Tel
• Experience of launching 3G services in
SriLanka
• High cash balance of $1bn
 SWOT ANALYSIS
Weakness
•

• Tariff war at its peak

• Increased competition due to new
licenses & issuance of cross over
technology
• ARPU drop is a certainty, expect drop of
about 20%
• Mobile Termination Charges reduced
to .20 per min, indications towards
zero MTC
• M & A regulations restrict attractive
synergies
• DTH – a big worry
• Land Line & fixed line service are in a
 SWOT ANALYSIS
Opportunity
•

• Lot of scope in rural areas

• Current Tele-Density – 37 is still low
among developing countries
• Low broadband penetration – company
well equipped to take business to next
level
• Fast extending IPLC market, only player
other than VSNL to have International
Submarine cable network
• Expected consolidation in industry in
medium term due to tariff wars
•
 SWOT ANALYSIS
Threat
•

• India centric - Major revenues from

India
• 93% revenues from Bharti
Televentures, only 7% from other
group companies
• Mobile Number Portability by Jan
2010 – impact on margins
• Inability to obtain 3G spectrum in key
circle
• Revision of License fees
 BCG Matrix for Bharti Airtel
Stars ?
HIGH

•Mobile Services •Broad Band

•Bharti Infratel •Insurance

•Retail

•Fixed Line Services

Cows Dogs
• DTH
•

•
•

•
LOW

HIGH LOW
Market Share 27
Porter’s 5 Forces

28
1. Threat from Competition
Wireless Market – Top 4 garnering 75 %
market share

HIGH

29
 Competitor Analysis

  OP Margin Net Margin

Company Sep - 07 Sep - 08 Sep - 072 Sep - 083
Bharti 43.00% 38.00% 26.40% 19.30%
t OP Margins & Net Profit Margins among Peers
Rcom 37.90% 31.60% 23.90% 13.20%
IDEA 32.80% 26.60% 14.10% 6.50%
MTNL 23.70% 22.90% 7.00% 6.80%

Source: CMIE November 2008

30
 AMOU & ARPU Stats
Minutes of Usage per Month – Mobile
Services
USA 838
Despite a low teledensity of approximately
19 percent, India has the second highest
India 461
minutes of usage per month. This offers huge
China
growth opportunity to telecom companies.
303

Russia 88

ARPU * in India – Mobile Services

10
ARPU (USD per month)

8
The declining ARPU implies that India Inc.
6
is tapping a large market at the bottom of
4
the pyramid by reducing tariffs; thereby,
2
enhancing affordability.
0
Q1 2006 Q2 2006 Q3 2006 Q4 2006 Q1 2007
GSM CDMA

31
2. Customer Bargaining Power
Ø Lack of differentiation among Service
HIGH
Providers
Ø Cut throat Competition
Ø Low Switching Costs
Ø Number Portability will have –Ve Impact
Ø Businesses & Consumers

32
Market Scenario

Postpaid Vs Prepaid Customers & Market Share

33
3. Suppliers Bargaining Power
LOW

34
4. Threat of Substitutes
Ø Landline DIMINISHING MARKET HIGH
Ø CDMA
Ø
Ø Video Conferencing
Ø BROADBAND
SERVICES
Ø VOIP - Skype, Gtalk, Yahoo Messenger
Ø e-Mail & Social Networking Websites

35
5. Threat of New Entrants
Ø Huge License Fees to be paid upfront & High gestation
period
Ø Entry of MVNOs & WiMAX operators LOW

Ø Spectrum Availability & Regulatory Issues

Ø Infrastructure Setup Cost - High
Ø Rapidly changing technology
Ø

36
 G E M a trix C la ssifica tio n
Business Strength
Medium Weak
Strong 5 . 00
High
Attractiveness

3 . 67
Medium
Market

2 . 33
Low

5 . 00 3 . 67 2 . 33 1 . 00
37
B u sin e ss S tre n g th

Ø Current market share

Ø Brand image
Ø Brand equity
Ø Production capacity
Ø Corporate image
Ø Profit margins relative to
competitors
Ø R & D performance
Ø Managerial personal
Ø Promotional effectiveness
Ø GROUP 7 38
 Factors Underlying Market
Attractiveness
Factors Weight Rating Value =
(1 –5) (Weight * Rating)
Resource availability 0.20 3.5 0.7

Overall market size 0.15 4 0.6

Annual Market growth rate 0.20 4 0.8

Profitability 0.15 4 0.6

Competitive intensity 0.10 4 0.4

Technological requirements 0.20 4.5 0.9

Total 1.0 4.0

39
Factors Underlying Market/Biz
Strength
Factors Weight Rating Value =
(1 –5) (Weight * Rating)

Market share 0.15 5 0.75

New product development 0.10 3.5 0.35

Brand Image 0.10 4 0.40

Sales force 0.15 3 0.45

Pricing 0.15 3 0.45

Distribution capacity 0.10 4.5 0.45

Product quality 0.10 4.5 0.45

R&D Performance 0.15 3 0.45

Total 1.0 3.75

40
Airtel’s GE Matrix
High Business Strengths Low

High 5 . 00
Attractive
Market Attractiveness

Airtel Enterpri
Mobile se

3 . 67

Moderate
TeleMedi
a Attractive
2 . 33

Unattractive

Low
5 . 00 3 . 67 2 . 33 1 . 00 41
Airtel – Strategy
MANTRA : Focus on Core
•

Competencies and Outsource the

rest!
•
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.
Strategic partnerships/ Shareholders –
Technology and Capital
• 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.
• Vodafone was a strategic investor in
Airtel.
• Temasek – the Singapore based
investor holds a considerable stake
in it.
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
Operational Strategies.
• Higher emphasis on ARPU/min – stark
contrast with other operators who
concentrate on ARPU only.
• Aim to be become a one stop shop for
all telecommunication services under
the Bharti umbrella.
• Exploring opportunities in international
markets.
• Hived off tower infrastructure into a
separate entity.
•
Performance till date
• Bharti Airtel has enjoyed an excellent
run ever since the telecom sector
opened.
• It has managed to hold on to its
leadership position inspite of the
presence of other players with deep
pockets – Ambani’s, Tata’s, Birla’s
and Vodafone.
• Has coped well with regulatory
changes.
• Continues to attract and delight
Future Strategies
• Translate its expertise in Indian markets
to other emerging economies.
• This could call for acquisitions globally.
• Technology leadership is a must – Airtel
must ensure that its reliance on GSM
technology does not render it
obsolete.
• Indian market inspite of being the
worlds largest is still not matured.
Opportunities abound in the
hinterland which must be exploited.
Growth Factors

GROUP 7 49
Road Map – Growth Path

VPN & VoIP

WiMAX

3G

2G/2.5G

GROUP 7 50
References
• Bharti Airtel, Annual Report -2009
• Investors presentation, Bharti Airtel Limited,
November 2009
• Telecommunication Services, Indian Industry: A
Monthly Review, CMIE – November 2009
• Analyst Report – Bharti Airtel, Asit C. Mehta
Invesment Intermediates Ltd.
• Telecommunication Sector Report – March 2009,
CRISIL
• Capitaline Database http://capitaline.com
• Indian Telecommunication Sector - August 2008,
IBEF Report
• “Next Big Spenders – Indian Middle Class”,
Businessweek GROUP 7 51
THANK YOU !!

GROUP 7 52