Download - Bharti 2airtel-1227851581611151-8
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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
2GROUP 7
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Integrated Telecom CompanyWireless Services
– 2G/3G– Rural Market
Telemedia Services– Fixed Line– Broadband– DTH
Enterprise Services– Carrier– Corporate
Passive Infrastructure– Bharti Infratel– Indus Tower
GROUP 7 3
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Financials Snapshot
4GROUP 7
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Financial Snapshot - Ratios
GROUP 7 5
Key Ratios - Airtel Mar-08 Mar-07 Mar-06 Mar-05 Mar-04Debt-Equity Ratio 0.38 0.54 0.83 0.6 0.07Long Term Debt-Equity Ratio 0.35 0.5 0.76 0.5 0.03ROCE (%) 34.88 34.07 22.55 23.96 0.16RONW (%) 39.53 43.04 31.82 23.88 -0.27 http://www.capitaline.com
Key Ratios - Industry 2007 2006 2005 2004 2003Debt-Equity Ratio 0.35 0.21 0.27 0.34 0.36Long Term Debt-Equity Ratio 0.3 0.19 0.24 0.29 0.33ROCE (%) 9.72 10.28 8.25 8.43 3.07RONW (%) 10.11 10.62 10.87 6.76 0.18
http://www.capitaline.com
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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
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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.”
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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”
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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.
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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 “conglomerate” of future
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Indian Telecom Sector• Fastest Growing Sector – CAGR 22% (2002-07)
• 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
11GROUP 7
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Why Mad Rush for Telecom ??
12
225.21206
140.398.4
7653
19.9
5.17.0
9.112.8
18.3
0
50
100
150
200
250
2002–03 2003–04 2004–05 2005–06 2006–07 2007–08 (asof June2007)
Sub
scrib
ers
(in m
illion
)
0
4
8
12
16
20
24
Tel
eden
sity
(in
per
cent
)
Telecom Subscriber Base Teledensity
Large number of additions in telecom subscribers
Low teledensity (depicting large untapped potential)
TelecomAdvantage
GROUP 7
CAGR 40.4%
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13
Go-ahead to the CDMA technology
IND
IA
Private players were allowed in Value Added Services
National Telecom Policy (NTP) was formulated
1992
1994
1997
Independent regulator, TRAI, was established
NTP-99 led to migration from high-cost fixed license fee to low-cost revenue sharing regime
1999
2000
2002
BSNL was established by DoT
ILD services was opened to competition
Internet telephony initiated
Reduction of licence fees
2003
Calling Party Pays (CPP) was implemented
Unified Access Licensing (UASL) regime was introduced
Reference Interconnect order was issued
2004
Intra-circle merger guidelines were established
Broadband policy 2004 was formulated—targeting 20 million subscribers by 2010
2005
FDI limit was increased from 49 to 74 percent
Attempted to boost Rural telephony
2006
Number portability was proposed (pending)
Decision on 3G services (awaited)
2007
Department of Telecommunication (DoT) is the main body formulating laws and various regulations for the Indian telecom industry.
ILD – International Long Distance
Evolution of Telecom In India
GROUP 7
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Telecom Ecosystem
14
Indian Telecom Industry FrameworkIndian Telecom Industry Framework
Indian Government Bodies Independent Bodies
Wireless Planning and Coordination (WPC)
Department of Telecommunications
Telecom Commission
Group on Telecom and IT (GoT-IT)
Telecom Regulatory Authority of India (TRAI)
Telecom Disputes Settlement and Appellate Tribunal (TDSAT)
Handles spectrum allocation and management
DoT – Licensee and frequency management for telecom
Exclusive policy making body of DoT
Handles ad hoc issues of the telecom industry
Independent regulatory body
Telecom disputes settlement body
They formulate various policies and pass laws to regulate the telecom industry in India.
They undertake various research activities and monitor the quality of service provided in the Indian telecom industry. They also provide various recommendations to improve the status of telecom operations in India.
GROUP 7
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Regulatory Framework
74% FDI Investment
Lack of Transparency in Spectrum & License Allocation
3G Policy & MNP still Pending
GROUP 7 15
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Declinging Tariff – Rising Revenue
GROUP 7 16
Source: TRAI Report
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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%
Economic Factors
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Demand for VAS & Broadband services Among Youth
28 % Urban Population
Rapid Urbanization
Rising Income level
Changing Demographics
Source: Mckinsey Report
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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
Technology
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Porter’s Generic Strategy
20GROUP 7
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Porter’s 5 Forces
21GROUP 7
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1. Threat from CompetitionWireless Market – Top 4 garnering 75% market share
22GROUP 7
HIGH
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Competitor Analysis
OP Margin Net Margin
Company Sep-07 Sep-08 Sep-072 Sep-083
Bharti 43.00% 38.00% 26.40% 19.30%
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%
23GROUP 7
Best OP Margins & Net Profit Margins
among Peers
Source: CMIE November 2008
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AMOU & ARPU Stats
838
461
303
88Russia
China
India
USA
0
2
4
6
8
10
Q1 2006 Q2 2006 Q3 2006 Q4 2006 Q1 2007
AR
PU
(U
SD
per
mon
th)
GSM CDMA
Minutes of Usage per Month – Mobile Services
ARPU* in India – Mobile Services
Despite a low teledensity of approximately 19 percent, India has the second highest minutes of usage per month. This offers huge growth opportunity to telecom companies.
The declining ARPU implies that India Inc. is tapping a large market at the bottom of the pyramid by reducing tariffs; thereby, enhancing affordability.
24GROUP 7
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2. Customer Bargaining Power Lack of differentiation among
Service Providers
Cut throat Competition
Low Switching Costs
Number Portability will have –Ve
Impact
Businesses & Consumers
25GROUP 7
HIGH
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Market Scenario
GROUP 7 26
Postpaid Vs Prepaid Customers & Market Share
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3. Suppliers Bargaining Power
27GROUP 7
LOW
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4. Threat of Substitutes
Landline CDMA
Video Conferencing
VOIP - Skype, Gtalk, Yahoo Messenger e-Mail & Social Networking Websites
28GROUP 7
BROADBAND SERVICES
DIMINISHING MARKET HIGH
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5. 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 - High
Rapidly changing technology
29GROUP 7
LOW
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SWOT
Strengths• Largest Telecom Player in
India - ~80Mn, 22.6%• Strategic Alliance with other
stakeholders in Bharti Airtel include Sony-Ericsson, Nokia - and Sing Tel
• Pan India Presence• Strong Financials
Weakness• Outsourcing of Core
Systems• Lack of emerging market
investment opportunity
Source: CMIE Report NOV 08
30GROUP 7
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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
31GROUP 7
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BCG Matrix for Bharti Airtel
LOWHIGH
HIG
HLO
W
32GROUP 7
Mobile Services
DTH & IPTV
Broad Band
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GE Matrix Classification M
arke
t Att
racti
vene
ss
Strong Medium Weak
Low
Med
ium
Hig
hBusiness Strength
5.00 1.002.333.67
5.00
3.67
2.33
33GROUP 7
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Factors Weight Rating(1 –5)
Value =(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
Factors Underlying Market Attractiveness
35GROUP 7
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Factors Weight Rating(1 –5)
Value =(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
Factors Underlying Market/Biz Strength
36GROUP 7
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Airtel’s GE Matrix
Business Strengths
Mar
ket
Att
ract
iven
ess
Low
High
LowHigh
Attractive
Moderate Attractive
Unattractive
Mobile Airtel
TeleMedia
5.00 1.002.333.67
5.00
3.67
2.33
Enterprise
37GROUP 7
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Airtel – Strategy
MANTRA : Focus on Core Competencies and Outsource the rest!
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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.
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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.• Was also affiliated with Singapore Telecom.
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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
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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.
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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 customers.
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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.
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Growth Factors
GROUP 7 45
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Road Map – Growth Path
GROUP 7 46
VPN & VoIP
WiMAX
3G
2G/2.5G
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Airtel - Strategy
MANTRA : Focus on Core Competencies and Outsource the rest!
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References• Bharti Airtel, Annual Report -2008• Investors presentation, Bharti Airtel Limited, November
2008• Telecommunication Services, Indian Industry: A Monthly
Review, CMIE – November 2008• Analyst Report – Bharti Airtel, Asit C. Mehta Invesment
Intermediates Ltd.• Telecommunication Sector Report – March 2008, CRISIL • Capitaline Database http://capitaline.com• Indian Telecommunication Sector - August 2007, IBEF
Report• “Next Big Spenders – Indian Middle Class”, Businessweek
GROUP 7 48
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THANK YOU !!
GROUP 7 49