SURA GANESH KUMARDIPANSHU AGARWALSAI ARJUNPRANJAL VERMABIBIN K PONNACHANNIKHILKUSHANK VARSHNEY

Case Study on Bharti Tele - Venture

“There are 50 million drivers in India. We want to sell a mobile(phone) to

every driver…”

SUNIL BHARTI MITAL(Chairman & group manageing director , Bharti Tele-Venture)

GLIMPSE :-

• India’s leading private telecommunication provider.

• He started company 1995 as a startup cellular provider and over the years Bharti has attracted the total of $1.2 billions in foreign equity.

• Its major partner as US Equity fund Warbung with ($293)Million stake and Singtel with ($650)Million stake.

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• Bharti Tele-Venture was having main focus on mobile telecom with 24.8% market share.

• Other areas – Fixed line national and international long distances and broad brand data servises

• Main competitors raised up were BSNL , TATA

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Era for Industry Libralization :-

• Liberalization hits India in1992• Approximately 300 foreign domestic

companies express interest with a motto of providing 1 phone line for every 100 persons.

• National Telecom policy 1994 outlined a plan - stimulate domestic private investment and FDI to cover huge amount of capital required.

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• Problems raised• Policy Came up – licensing policy• After that all put focus on becoming the 1st

cellular service providers for all classes…

Mobile Service Market

1st commercial cellular – 1995 and by 2003revenues reached upto 95 billion with a 61%increase by previous.Slow Take Off :-• Optimistic start up• Initially, people were using pagers, instead of cell

phones• Even the best performing companies struggled to

keep up with licenses payment

Consolidation

• It began in late 1990• Many services provider started bending for

their licenses in late 1990’s. • Lower market and operating cost which

allowed greater flexibility in developing tariff plan.

• Their aimed to increased competition with a plan to license additional operators.

Market Expansion

• Cellular tariffs dropped by over 90% in the two years

• Subscriber growth from 1.2 million in April 1999, to nearly 6.5 million subscribers by yearly 2002.

• Increased volume helped bring down cellular handsets prices from about Rs. 28000 in 1996 to as low as Rs. 2000 in 2002.

Cellular licensing Stages

• Metro – Delhi , Mumbai , Kolkata & Chennai• Circles – Rest of the countries (other parts)

- A,B,C analysis based on population densities

- A being the most potentially lucrative - C the least

Company Origins

• 1985 , Mittal took advantage of the government’s liberalization and begin manufacturing telephones in a joint venture with Siemens.

• Mittal took risk by signing the deal with Siemens for delivery of complete list of telephone components, even those government has not yet licensed

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• lack of funds kept Bharti from expanding in 1980’s

• 1992 , Bharti telecom did a secured partnership with compagnie general des Eaux of france , Emtel and mobile system international of UK , to make a joint bid in first round of cellular licensing.

Operation Launch

• Bharti cellular in Sept. 1995 was first company to launch cellular service in India.

• Call was free for inaugural month and setting regular rate per min at rs7.85

• March 1998, Bharti claimed 56% of Delhi market

• Mittal attributed company’s success to tight control and the single minded devotion to project and industry.

Early Parterships & Expansion• In 1996 $58 million deal signed with Italy’s state owned telecom

operator.• Equity investment of $250 million in Bharti by British Telecom• Relationship with BT provided benefit through vendors and

technological support• In 1995, Bharti won one fixed line & one additional circle license in

Madhya Pradesh• Mittal launched services to break the state monopoly over fixed line

services• Bharti launched new service in Himachal Pradesh with modest

investment of Rs. 300 million• Mittal was more interested in acquiring one basic service and four to

five cellular licences

Warburg Pincus&

SingTel

Warburg Pincus :-• Warburg Pincus invested $60 million in

exchange for 20% equity in Bharti ventures.• 2001 again contributed $200 same as for

expansion• Warburg Pincus said - Bharti had right

strategy, right team and right focus.

SingTel :-• Singtel invested $400 million acquiring STET’s

15% interest in Bharti ventures.• Singtel signed a $400 million deal after the

liberalization of long distance services.• Partnership with Singtel led to building up

under water cable network joining Chennai with Singapore.

• As Singtel entered as Bharti’s strategy partners as STET , BT were on the verge of exiting.

Expanding Operations

Acquisitions• J.T Mobile in Karnataka and Andhra Pradesh• Skycell, Chennai, Tamil Nadu• Spice Cell, KolkataGrowth• In a single year Bharti had grown into a full service

operator• Gained 8 additional cellular licenses in the 4th

operator bidding process at a cost of Rs.6.9 billion

Fundraising• An IPO(Initial Public Offering) of $171.5 million

on February 18, 2002

• International loans totaling $315 million in 2003.

$160.2 million from ABN Ambro $30 million from Nordic Investment Bank

Challenges and Opportunities

Bharti had to move from :-• Acquiring Business & license to market share• Implementing project to being operational.

Being 1st to launch mobile services

It had a lot of experience and capability to grow.

Launched a dozen of operations which shows long anticipated profits.

The challenge of competition started beginning

India was a huge market

There was lots of opportunities to grow and expand

Go To…

• http://economictimes.indiatimes.com/bharti-airtel-ltd/infocompanyhistory/companyid-2718.cms