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8/8/2019 24438667 Bharti Airtel Strategy
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Presented By: -Gaurav Aggarwal - 02Dhawal Kantawala - 12Yatin Mota - 19Hardik Shah - 29Anurag Surana - 31Jwalit Vyas - 33Suyash Gupta - 34
NMIMS- MBA Capital
Markets- 2008-2010
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GROUP 7 2
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
–
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GROUP 7 3
Why Mad Rush for Telecom ??
225.21
206140.3
98.47653
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 (as
of June
2007)
S u b s c r i b e r s ( i n
m i l l i o n )
0
4
8
1216
20
24
T e l e d e n s i t y ( i n p e r c e n t )
Telecom Subscriber Base Teledensity
Large number of
additions in telecom subscribers
Low teledensity
( depicting large untapped
) potential
Telecom
Advantage
. % C A G R
4 0 4
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GROUP 7 4
-Go ahead to the CDMA
technology
Private players were allowed in
Value AddedServices
National Telecom Policy
( )NTP wasformulated
1992
1994
1997
Independent,regulator
,TRAI wasestablished
-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
wasintroduced
Reference Interconnect
order wasissued
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 74percent
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 LongDistance
Evolution of Telecom In India
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GROUP 7 5
Telecom Ecosystem
ndian Telecom Industry Framework
I I
ireless lanning and
oordination( )PC
epartment ofTelecommunication s
elecomCommission
roup on elecom and IT
( - )oT IT
elecom Regulatory uthority of India
( )RAI
elecom Disputes ettlement and
ppellate Tribunal( )DSAT
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 regulatorybody
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
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GROUP 7 6
Bharti Airtel
• Largest Private Integrated TelecomCompany in India
•
• 3rd Largest Wireless Operator in theWorld
•• Largest & Fastest Growing Wireless
Operator in India•• Largest Telecom Company listed on
Indian Stock Exchange
•
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Vision 2010
• By 2010 Airtel will be the mostadmired 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 businessconglomerate by 2020
• Supporting education of underprivileged children throughBharti Foundation
• Strategic Intent:
– To create a conglomerate of thefuture by bringing about “Big
Transformations through BraveActions.”
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Mission
• “ We at Airtel always think in freshand innovative ways about theneeds of our customers and how
we want them to feel. We deliverwhat we promise and go out of ourway 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 tochange the status quo, innovate andenergize new ideas with a strongpassion and entrepreneurial spirit
• Openness and transparency - withan innate desire to do good
• Creating Positive Impact – with adesire to create a meaningfuldifference in society.
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Objectives/Goals
• To undertake transformationalprojects that have a positiveimpact on the society and
contribute to the nation buildingprocess.
• To Diversify into new businesses in
agriculture, financial services andretail business with world-classpartners
• To lay the foundation for building a“ ”
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GROUP 7 12
Regulatory Framework
Ø74% FDIInvestment
Ø
ØLack of Transparency inSpectrum &LicenseAllocation
ØØ3G Policy & MNP
still Pending
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GROUP 7 13
Declinging Tariff – Rising Revenue
: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 IncomeØ )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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Ø &Demand for VAS Broadband services Among YouthØØ %28 Urban PopulationØØRapid Urbanization
ØØRising Income levelØ
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
I t t d T l
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GROUP 7 17
Integrated TelecomCompany(Product Portfolio)
qWireless Services
– 2G/3G
– Rural Market
–q Telemedia
Services
– Fixed Line
– Broadband
– DTH
qEnterpriseServices
– Carrier
– Corporate –
qPassiveInfrastructure
– Bharti Infratel
– Indus Tower
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18
Bharti Airtel–Corporate structure
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GROUP 7 19
Wireless Market Share - India
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Soucre: TRAI 20
Geographical Presence India ...
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21
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%
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22
Financial Snapshot - Ratios
Key Ratios - Airtel Mar-08Mar-07Mar-06Mar-05Mar-04Debt-Equity Ratio 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 -0.27http://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
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SWOT ANALYSIS
•
Strengths• Largest Telecom player in India – subscriberbase 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 inSriLanka
• High cash balance of $1bn
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SWOT ANALYSIS•Weakness• Tariff war at its peak• Increased competition due to new
licenses & issuance of cross overtechnology
• ARPU drop is a certainty, expect drop of about 20%
• Mobile Termination Charges reducedto .20 per min, indications towardszero MTC
• M & A regulations restrict attractivesynergies
• DTH – a big worry• Land Line & fixed line service are in a
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SWOT ANALYSIS
•Opportunity• Lot of scope in rural areas• Current Tele-Density – 37 is still low
among developing countries
• Low broadband penetration – companywell equipped to take business to nextlevel
• Fast extending IPLC market, only player
other than VSNL to have InternationalSubmarine cable network• Expected consolidation in industry in
medium term due to tariff wars
•
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SWOT ANALYSIS
• Threat• India centric - Major revenues from
India
• 93% revenues from Bharti Televentures, only 7% from othergroup companies
• Mobile Number Portability by Jan
2010 – impact on margins• Inability to obtain 3G spectrum in key
circle
• Revision of License fees
CG i f h i Ai l
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27
BCG Matrix for Bharti Airtel
Stars•Mobile Services•Bharti Infratel
?•Broad Band•Insurance•Retail•Fixed Line Services
Cows•
•
Dogs•DTH•
•
•
arket Share arket Share
LOWIGH
H
I
GH
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28
Porter’s 5 Forces
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29
1. Threat from Competition
– %ireless Market Top 4 garnering 75 arket share
HIGH
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30
Competitor Analysis
P Margin et Margin
Company -ep 07 -ep 08 -ep 072 -ep 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
&P Margins Net Profit Margins among Peers
:Source CMIE November 2008
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31
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
A R P U
( U S D
p e r m
o n t h
GSM CDMA
inutes of Usage per Month – obile
Services
*RPU in India – obile 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
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32
2. Customer Bargaining Power
ØLack of differentiation among Service
Providers
ØCut throat Competition
ØLow Switching Costs
ØNumber Portability will have –Ve Impact
ØBusinesses & Consumers
HIGH
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33
Market Scenario
Postpaid Vs Prepaid &Customers Market Share
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34
3. Suppliers Bargaining Power
LOW
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35
4. Threat of Substitutes
Ø Landline
Ø CDMA
Ø
Ø Video ConferencingØ
Ø VOIP - Skype, Gtalk, Yahoo Messenger
Ø e-Mail & Social Networking Websites
ROADBANDSERVICES
IMINISHING MARKET HIGH
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36
5. Threat of New Entrants
Ø Huge License Fees to be paid upfront & High gestation
period
Ø Entry of MVNOs & WiMAX operators
Ø Spectrum Availability & Regulatory Issues
Ø Infrastructure Setup Cost - High
Ø Rapidly changing technology
Ø
LOW
G E M t i C l ifi ti
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37
G E M a trix C la ssifica tio n
Strong
Medium Weak
usiness Strength
.00 .003367
.00
.67
.33
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GROUP 7 38
ØCurrent market shareØBrand imageØBrand equity
ØProduction capacityØCorporate imageØProfit margins relative to
competitorsØR & D performanceØManagerial personalØPromotional effectiveness
Ø
B u sin e ss S tre n g th
d l k
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39
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 requirements0.20 4.5 0.9
Total 1.0 4.0
Factors Underlying MarketAttractiveness
/Factors Underlying Market Biz
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40
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 BizStrength
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41
Airtel’s GE Matrix
Business Strengths
MarketA
ttrac tive
ness
Low
High
LowHigh
Attractive
ModerateAttractive
Unattractive
MobileAirtel
TeleMedia
.00 .003367
.00
.67
.33
Enterprise
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Airtel – Strategy
•MANTRA : Focus on CoreCompetencies and Outsource therest!
•
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Strategy
• Airtel partnered with leading playersin telecommunication playersacross the globe.
• It has managed to work with the bestof domain specialists globally andemerge as a world class entity.
• Partnerships include operationalcontracts with marquee vendorsand strategic investors rangingfrom private equity investors to
global telecom giants.
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Strategic partnerships/ Shareholders – Technology and Capital
• Warburg Pincus – a celebrated PEinvestor held a stake for asubstantial period of time and was
instrumental in providing Airtelsupport in its early stages.
• Vodafone was a strategic investor in
Airtel.• Temasek – the Singapore based
investor holds a considerable stake
in it.
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Outsourcing deals in 2004
• Ericsson was given the mandate toprovide, manage and maintain theequipment as well as provide
quality assurance in Airtel‘s then 13mobile circles.
• IBM was given the mandate to
handle the back officerequirements of Airtel’s presence inIndia
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Operational Strategies.
• Higher emphasis on ARPU/min – starkcontrast with other operators whoconcentrate on ARPU only.
• Aim to be become a one stop shop forall telecommunication services underthe Bharti umbrella.
• Exploring opportunities in internationalmarkets.
• Hived off tower infrastructure into aseparate entity.
•
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Performance till date
• Bharti Airtel has enjoyed an excellentrun ever since the telecom sectoropened.
• It has managed to hold on to itsleadership position inspite of thepresence of other players with deeppockets – Ambani’s, Tata’s, Birla’s
and Vodafone.• Has coped well with regulatory
changes.
• Continues to attract and delight
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Future Strategies
• Translate its expertise in Indian marketsto other emerging economies.
• This could call for acquisitions globally.
• Technology leadership is a must – Airtelmust ensure that its reliance on GSMtechnology does not render it
obsolete.• Indian market inspite of being theworlds largest is still not matured.Opportunities abound in the
hinterland which must be exploited.
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GROUP 7 49
Growth Factors
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GROUP 7 50
Road Map – Growth Path
VPN & VoIP
WiMAX
3G
2G/2.5G
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GROUP 7 51
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. MehtaInvesment 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
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THANK YOU !!