FINANCIAL MANAGEMENT ASSIGNMENTSBHARTI AIRTEL LTD

2/3/2013VISHWESH KOUNDILYAPGEXP/004/2012

IIM RANCHI

INTRODUCTION AIRTEL is an Indian telecommunications company that operates in 19 countries across South Asia, Africa and the Channel Islands. It operates a GSM network in all countries, providing 2G or 3G services depending upon the country of operation. Airtel is the fifth largest telecom operator in the world with about 230.8 million subscribers across 19 countries. It is the largest cellular service provider in India, with over 169.18 million subscribers. Airtel is the 3rd largest in-country mobile operator by subscriber base, behind China Mobile and China Unicom.

Airtel is the largest provider of mobile telephony and second largest provider of fixed telephony in India, and is also a provider of broadband and subscription television services. It offers its telecom services under the Airtel brand and is headed by Sunil Bharti Mittal. Bharti Airtel is the first Indian telecom service provider to achieve this Cisco Gold Certification. To earn Gold Certification, Bharti Airtel had to meet rigorous standards for networking competency, service, support and customer satisfaction set forth by Cisco. The company also provides land-line telephone services and broadband Internet access (DSL) in over 96 cities in India. It also acts as a carrier for national and international long distance communication services. The company has a submarine cable landing station at Chennai, which connects the submarine cable connecting Chennai and Singapore.

The company is structured into four strategic business units - Mobile, Telemedia, Enterprise and Digital TV. The mobile business offers services in 18 countries across the Indian Subcontinent and Africa. The Telemedia business provides broadband, IPTV and telephone services in 89 Indian cities. The Digital TV business provides Direct-to-Home TV services across India. The Enterprise business provides end-to-end telecom solutions to corporate customers and national and international long distance services to telcos.

CMD’s (Founder) Profile:-

• Sunil Bharti Mittal

• He started his career at a young age of 18 after graduating from Punjab University in India and then he founded Bharti.

• Chairman & Managing Director since October 2001

• Today, he heads a successful enterprise, amongst the top 5 in India, with a market capitalization of over US$ 40 billion and employing over 30,000 people.

• He is an alumnus of Harvard Business School, USA.

• He has been conferred one of the highest civilian award – Padma Bhushan.

• He has been conferred the degree of Doctor of Science by the G B Pant University of Agriculture & Technology.

STRATEGIC BUSINESS UNIT OF AIRTEL

COMPETITORS

National Long Distance

• BSNL, RELIANCE, VSNL, VODAPHONE, TATA, IDEA

International Long Distance

• VSNL, RELIANCE , BSNL

Mobile services

Mobile and fixed wireless services

Airtel telemedia

Broadband, Telephone services & DTH

Enterprise services

End-to-end data and enterprise services to the corporate customers through its nationwide fiber optic backbone

BUSINESS PARTNERS

Outsourcing Deals Vendors/Partners Features/Advantages

Network outsourcing & maintenance

Ericssion

Nokia siemens network

Ease in network planning

Payments Linked to

-Usage & Network quality

- Service level agreement

Informational technology IBM Pricing & payment as a % of Revenue

Passive infrastructure Bharti Infratel

Indus Towers

Reduced capex spend

Increase focus on sharing passive Infrastructure

Call center outsourcing IBM Daksh

Mphasis

Hinduja TMT

Aegis BPO

Nortel

Enhanced & Consistent customer experience

Common platform across the group

INNOVATION

Bharti Group - Overview

SWOT AnalysisStrengths

- Largest cellular provider in India, also big share in broadband services Strategic Alliance with Sony-Ericsson, Nokia - and Sing Tel Has covered the entire Indian nation with its network- Has a good hold over Financial resources

Weaknesses

-Airtel does not has hold over infrastructure eg. own towers- MTN failure: lack of any real emerging market investment opportunity

Opportunities

-Still there is untapped market – local as well as other emerging marketsEmbarking joint venture to create a new independent tower company To change the revenue-per-minute model to pulse model

Threats

Entry of Foreign players in India with 3G tech. eg. AircelKnowledge and technology moved to one of its competitors- Vodafone

Strategic Decisions: Operations Front

Porter’s 5 Forces Analysis of Industry

Threats from Competitors: High

Large number of players in the Indian market poses a serious threat Average Revenue Per Unit (ARPU) in India is decreasing each year due to intense competition faced in the marketCut throat competition proving as advantage for CustomersLow Switching CostsNumber Portability option in near futureLack of differentiation among service providers

Customer Bargaining Power: High

Threat of Substitutes: High

Better services of International players entering India viz. Vodafone VOIP- Skype, Gtalk, Yahoo Messenger

Threat of New Entrants: Low

Huge License fees to be paid for entrySpectrum Availability and Regulatory IssuesHigh Setup Cost of InfrastructureRapidly changing technology

Suppliers Bargaining Power : Low

Suggestions to Increase Customer Base

Infrastructure Front

Challenge

Country wide expansion but requires huge investment to set their own towers Decisions Taken

Sharing of Towers (INDUS): - Rapidly increasing subscriber base- Emerging technology- Sharply rising site rentals- Need for denser coverage due to spectrum constraints- Regulatory and planning authorities- New Tower Restrictions

Infrastructure Front

Decisions taken Contd….

- Nokia-Siemens as service partner- Huawei Technologies to manage Airtel’s core network- Ericsson to design, plan, deploy and optimize Airtel’s GSM network- IBM to transform its processes and take on the management of its IT infrastructure.

Benefits

- Ability to process 1.5 million new customers per month - Optimization of business processes through flexible, standardized integration framework - Outsourcing of technology enables Airtel to focus resources on growing the business - Tie ups enables Airtel to avoid major increases in capital expenditures

Technology Front

3G

- Spectrum and licensing- Infrastructure- Pricing - User Conversion- 4G?

Mobile Number Portability

IPTV

Strategic Decisions- HR Front

Problems

Most of Youngsters leaving within 2 years of joining Tata Telecom largest talent competitor – 28% of people joining them

Strategies

Revamping of PMS- employee to decide Flexi-benefits, increased TakehomeRotation policy: Atul Bindal- Telemedia to Telecom Business; Creation of new position of Deputy CEO; Sanjay Kapoor- Mobile to Telemedia & DTH

Suggested Strategies

Inclusion of Sub-ordinates in PMS Proper timing of Bonus and Incentive

Strategic Decisions- International Front

Key Trends

2007 ( Year of iPhone) – 2008 ( Touch Phones) Mobile Industry- more than 1 Trillion USD : 80% services & 20% infrastructure 50% worldwide penetration- 4 B worldwide ( 600 M China & 330 M Ind) 3G penetration ( Japan – 85%); Mobile Web penetration- 25%

Developed Economies- European Union- European telecom sector- major contributor in economy- Highly concentrated: 4 players capturing 61%- Favours Infrastructure Competition

Trends to Watch out for Airtel- Developed Economies

Consolidation in Sector: European operators achieved acquisitions through overseas instead of Regional consolidation Convergence in Sector: Mobile & Services platforms merging Go out with Locally responsive International Strategy

International Front Contd.. Developing Econ.

Differentiating Factors

- Growing middle class income- Small premium segment- Increasing rate of Urbanization- Young population compared to most developed nations

Key Trends to Watch out for Airtel- Developing Economies

- Make Broadband assessible to everyone- Look out for Government subsidized deployments- Korean Govt. offsets 50bn US$ to subsidy fibre; Govt. tax incentives

International Front Contd.. Developing Econ.

Recent Developments of Airtel

- Announcement of online desktop for broadband- started in 95 countries- Australian Japan Cable and Airtel partnership- offer services in future - Overseas Recharge Service- Recharge available online in 150 money ex.- Looking out for merger with MTN; Started Operations in Sri Lanka

Proposed Airtel Strategy

- Should go for Polycentric Approach- while costly may serve - Should look out Merger and Acquisitions - Look out for 3 things while short listing developing countries- political stability, regulatory aspect and easy licensing- Go to Disruptive Innovation/ Innovating strategies eg. TataDoCoMo

Strategic Decisions: Marketing FrontChanging Strategy Timeline

Marketing Mix

ProductAirtel Pre-paidAirtel Post-paidBlackberry Wireless HandheldValue Added Services (VAS)PriceCustomer based pricing strategies.Flexible pricing mechanism Controlled by TRAI.PlaceIt has wide and extensive presence even in the remotest areasAirtel Customer Care Touch Points Distributors like : Paan shops, grocery stores, chemists, outlet etcPromotionLarge scale print and video advertising.Big celebrities like SRK and Sachin are roped in to endorse the product.In 2002 Airtel got its Signature tune from A.R. Rehman, this signature tune is perhaps the most downloaded tune in India.Provides innovations such as Bollywood movie premiers, music services such as ring back tones & many more.

SWOT AnalysisStrengths

Market share.Pan India Footprint.The only operator in India other than VSNL having international submarine cables.Customer care.Promotions.

Weaknesses

Price Competition from BSNL and MTNLLosing lead on technical expertise. Opportunities

The fast extending IPLC market. Latest technology and low-cost advantage. Growth of mobile phone users.Untapped Rural Market.

Threats

Market Maturity in basic telephony segment.

Marketing Front- Future Perspective

SegmentationLong Term OutlookProduct InnovationQuality StrategyHeavy Advertising & Media PioneerEffective Sales PromotionCompetitive ToughnessCustomer care New tariff plans.More value added services.Increase in visibility and coverage The AirTel - AirTel advantageNew innovative packagesMore of the e-factor

Further Suggestions

Tele-density UtilisationIndia (1.29), US (60.73)CAGR of 23.44% is required to reach network that of US Partnership in developing economies Technology Leadership Constantly evolving Value Added Services