Company Analysis of Bharti Airtel

Company Analysis of Bharti Airtel

Abstract

Company analysis is done to evaluate capability, stability, Market Share, Growth rate, Sustainability and profitability of a company. It is done through collection of secondary data from various resources available in the Internet. Company Analysis helps the people to know more about the company. The main objective of this study is to analyze the company position of Bharti Airtel from the public point of view. It is done through various information collected from Internet. There are various tools and techniques of financial analysis out of these techniques Investigator has used ratio analysis for the analysis of financial statements of Bharti Airtel based on the secondary data including balance sheet and profit and loss account . Investigator has calculated various types of liquidity ratio, activity ratio and profitability ratio which helped to analyze and interpret real profit and liquidity position of the company. Investigator has collected information regarding market growth and market share of Bharti Airtel in the market and the company has largest market share from subscriber and revenue based in the telecom sector and it is 4th Largest Telecom Company in the world

Keywords: financial Analysis, Evaluate Capability, Stability, Market Share, Growth rate, Sustainability and profitability

Mr. Boggarapu Nikhil Student, Master of Business Administration, KCT BS, Coimbatore.

Introduction Bharti Airtel Limited, commonly known asAirtel, is an IndiantelecommunicationsServices Company headquartered atNew Delhi, India. It operates in 20 countries across South Asia, Africa and theChannel Islands. Airtel hasGSM networkin all countries, providing2G,3Gand4Gservices depending upon the country of operation. Airtel is the world'sfourth largest mobile telecommunications company with over 261 million subscribers across 20 countries as of August 2012. It is thelargest cellular service providerin India, with 186.41 million subscribers as of October 2012. Airtel is the third largest in-country mobile operator by subscriber base, behindChina MobileandChina Unicom.Airtel is the largest provider ofmobile telephonyand second largest provider offixed telephonyin India, and is also a provider ofbroadbandand subscriptionservices. It offers its telecom services under theairtelbrand, and is headed by Sunil Bharti Mittal. Bharti Airtel is the first Indian telecom service provider to achieveCiscoGold Certification. 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 connectingChennai and Singapore.Sunil Bharti Mittal founded the Bharti Group. In 1983, Mittal was in an agreement with Germany's Siemens to manufacture push-button telephone models for the Indian market. In 1986, Mittal incorporated Bharti Telecom Limited (BTL), and his company became the first in India to offer push-button telephones, establishing the basis of Bharti Enterprises. By the early 1990s, Sunil Mittal had also launched the country's first fax machines and its first cordless telephones. In 1992, Mittal won a bid to build a cellular phone network in Delhi. In 1995, Mittal incorporated the cellular operations as Bharti Tele-Ventures and launched service in Delhi. In 1996, cellular service was extended to Himachal Pradesh. In 1999, Bharti Enterprises acquired control of JT Holdings, and extended cellular operations to Karnataka and Andhra Pradesh. In 2000, Bharti acquired control of Sky cell Communications, in Chennai. In 2001, the company acquired control of Spice Cell in Calcutta. Bharti Enterprises went public in 2002, and the company was listed on Bombay Stock Exchange and National Stock Exchange of India. In 2003, the cellular phone operations were rebranded under the single Airtel brand. In 2004, Bharti acquired control of Hexa com and entered Rajasthan. In 2005, Bharti extended its network to Andaman and Nicobar. This expansion allowed it to offer voice services all across India. In 2009, Airtel launched its first international mobile network in Sri Lanka. In 2010, Airtel acquired the African operations of the Kuwait basedZain Telecom. In March 2012, Airtel launched a mobile operation in Rwanda. Today, Airtel is the largest cellular service provider in India and the third largest in the world. Airtel operates in all telecom circles of India. Its network is present in 5,121 census towns and 457,053 non-census towns and villages, covering approximately 86.6% of the countrys population as of September 2012. Airtel is the 6thmost valued brand according to an annual survey conducted byBrand FinanceandThe Economic Timesin 2010.Organizational Structure

Airtel's initial organizational structure concentrated on the hierarchy of the operations inside the company as a whole. The structure depicted the corresponding operation/region of different in-charges and it didn't hold anyone responsible for each of its services. So, the company found it better to restructure its organizational chart. The transformed organizational structure has two distinct Customer Business Units (CBU) with clear focus onB2C(Business to Customer) andB2B(Business to Business) segments. Bharti Airtel's B2C business unit will comprehensively service the retail consumers, homes and small offices, by combining the erstwhile business units - Mobile, Tele media, Digital TV, and other emerging businesses (like M-commerce, M-health, M advertising etc.). The B2C organization will consist of Consumer Business and Market Operations.Review of LiteratureRachana Bajaj (2013)1 Financial analysis is done to evaluate capability, stability and profitability of a company. It is done through various financial ratios calculated from the financial statements of a company. Financial analysis helps investors to appraise whether they should invest in a particular company or not. The main objective of this study is to analyze the financial position of Bharti Airtel from the investors' point of view. It is done through various ratios calculated through financial statements of company for the period from 2005 to 2012. There are various tools and techniques of financial analysis out of these techniques Investigator has used ratio analysis for the analysis of financial statements of Bharti Airtel based on the secondary data including balance sheet and profit and loss account Investigator has calculated various types of liquidity ratio, activity ratio and profitability ratio which helped to analyze and interpret real profit and liquidity position of the company. Bharti Airtel has the largest market share from subscriber and revenue based in the telecom sector. In nutshell, it is found that investors can be benefitted in the long run by investing in the telecom industry because telecom industry is otherwise growing industry. Indian government is also providing various facilities in the development of telecom industry. Telecom commission has approved 100% FDI in telecom sector. And among the industry Bharti Airtel has the largest market share from subscriber and revenue based. Roma Mitra Debnath (2008)2 Technological modernization is increasingly viewed as a premeditated necessity in today's era of growth and prosperity for any country. Telecommunications has entered a new age of development with advanced technology and increased competition with established players. Financial Analysis of Bharti AirtelBenchmarking telecommunication service in India: An application of data envelopment analysis

The prime focus of the service providers is to create a loyal customer base by benchmarking their performances and retaining existing customers in order to benefit from their loyalty. The paper aims to address these issues. The results are insightful to the telecom policy planner as benchmark them in terms of their efficiency. It also identifies the inefficient service providers who can improve their efficiency by making the efficient providers as their role model. The paper also identifies some generic insights. Sharma, Alka Singh, Mandeep (2012)3 In Indian context, telecommunication has emerged as one of the fastest growing services, as it has witnessed phenomenal growth from 22.8 million subscribers in 1999 to 746.77 million by the end of November 2010 (Ministry of Finance, Govt. of India, 2011). However, despite this unparalleled growth, few critical issues have emerged which affect the growth in a negative manner. These are decreasing ARPU, undifferentiated services, increased competition, rapid evolution of technology and highly dynamic customers. The present study has been undertaken to analyse the customers' perception about the following aspects of key telecom providers the value added services (VAS), service quality, customer satisfaction and loyalty. The results suggest that value added services are perceived to be a strategic tool to differentiate service of one provider from the other. Further a comparative analysis of the leading service providers has been undertaken from customers perspective to understand the variations in satisfaction and loyalty levels of their customers. Subhasish Majumdar, Partha Pratim Bhattacharya (2014)4 in this paper, we have discussed Porter Five Forces model and presented mobile communication market scenario in India. Then we have analyzed the intensity of competitions among different mobile phone service providers. Different forces which may throw a challenge to the existing leader are thus found out. So far very little analysis is done on telecom sector using Porter five forces model. Analysis indicates that although to meet competition the top service provider is struggling hard but the presence of strong rivals has put a challenge. From above discussion, we may conclude that the presence of rivals is the main area that needs companys management serious attention. Company may follow the strategy of horizontal integration by taking the decision of merger or acquisition with any of its one or two rivals. The leader should offer special packagesBenchmarking telecommunication service in India: An application of data envelopment analysisPorter Five Forces Analysis of the Leading Mobile Cellular Telephony Service Provider in India

Problem IdentificationFor several years running, Sunil Bharti Mittal-promoted Bharti Airtel has been the undisputed leader in the Indian telecom market. As of March 31, 2013, it had 188.19 million wireless subscribers and 21.69 per cent market share. The operators rapid rise from the time it began as a small company offering mobile services in Delhi only, in 1995 is symbolic of the strong growth witnessed in the Indian telecom industry. Today, the company offers mobile voice and data, fixed line, 3G, national and international long distance, IPTV and direct-to-home (DTH) services. It also manages 82,083 tower sites through Bharti Infratel and Indus Towers. In 2012, Bharti Airtel raced ahead of its rivals to offer 4G services in the country. These services were launched on long term evolution-time division duplexing networks, making India one of the first countries to commercially offer 4G services through this platform. As per industry estimates, Bharti Airtel currently has over 3,200 4G users. Going forward, analysts expect significant activity in the 4G space, especially with the entry of Reliance Jio Infocomm in this market. Bharti is currently the only operator to provide high-bandwidth 4G services in four circles Bengaluru, Chandigarh, Kolkata and Pune. Globally, the company operates in 20 countries: 17 African countries besides India, Sri Lanka and Bangladesh. It is the worlds fifth largest telecom operator in terms of subscribers. Business Week has ranked Bharti Airtel among the six best performing technology companies in the world. Bharti has made large infrastructure investments over the past decade and a half, and currently owns a 171,610 route km optic fiber network across India. Its global infrastructure includes over 225,000 route km of networks, covering 50 countries and five continents. Industry analysts attribute Bharti Airtels swift success to Mittals business astuteness and strong support from his core team. According to the former managing director of a telecom firm, In the formative years of the telecom sector, Mittals perspective was sharper than that of others. He was able to grab opportunities that he saw while others dithered. Also, Mittals outsourcing and minutes factory business model, which has driven low-cost mobile telephony in the country, is well known. However, the past four years have been rough for the operator with its financial performance witnessing a major slide. During 2012-13, it registered a net profit of Rs 22.75 billion, the lowest in seven years. This marked a decrease of about 50 per cent from Rs 42.59 billion in 2011-12. Its earnings before interest, taxes, depreciation and amortization margin, though still high, declined from 33.2 per cent in 2011-12 to 31 per cent in 2012-13. The companys market capitalization declined from Rs. 1,279 billion to Rs 1,108 billion during this period. The biggest challenge for the company is servicing its debt, which stood at Rs 638.39 billion as of March 31, 2013. This debt was raised largely to fund the $9 billion acquisition of Zains African operations in 2010. The financial pressure is expected to increase in the coming years as the operator needs funds to pay the one-time spectrum fee and to renew its licenses for the Delhi and Kolkata circles in November 2014. While the company has obtained a stay order from the Delhi High Court on the Rs 52 billion one-time payment for spectrum held beyond 4.4 MHz, it will need to participate in an auction for license extension in the two circles as the government has rejected its application for automatic renewal. Borrowing additional funds is not prudent for the operator. Besides, its funding options have become limited as it already has a huge debt on its books. In this scenario, reviewing its existing business strategy and tapping new revenue streams are the only way forward for the company.Key concernsThe major challenges faced by Bharti Airtel in the past two years include hyper competition, a difficult regulatory environment, falling margins and a decline in almost all operational metrics. The entry of new players in the market in 2008 led to a price war and incumbents like Bharti were forced to offer services at rock-bottom prices. While low-cost mobile services resulted in subscriber growth, the operating margins slid significantly. The cut-throat competition in the last two to three years has impacted incumbent players, says a senior research analyst at Kotak Securities. As a corrective measure, all operators hiked 2G tariffs in 2012. This has helped companies like Bharti improve their margins to some extent. In addition, acquiring 3G and broadband wireless access (BWA) spectrum in 2010 turned out to be a costly affair for the operator it spent Rs 122.95 billion on acquiring 3G spectrum in 13 circles and another Rs 33.14 billion for BWA airwaves in four circles. These investments have not paid off as 3G service uptake has been below expectations, while the 4G ecosystem is yet to mature.MethodologySources of DataThe study is primarily based on secondary data. The required data have been collected from carious websites and relevant data available in the Internet.Sampling FrameworkAnnual Reports of the company has taken into consideration and has analyzed the companies over a period of yearsInterpretationSWOT Analysis

Challenging Model

Revenue Market ShareSource: TRAI

The above chart explains the revenue market share of Telecom Companies in India for the year 2014. BSNL+MTNL has a market share of 7%, Aircel has a market share of 5%, Bharti Airtel has a market share of 30%,Vodafone has a market share of 23%,Idea has a market share of 15%, Tata DoCoMo has a market share of 9%. Reliance has a market share of 8% and others has a market share of 3%.Subscribers Market ShareSource: TRAI

The above chart explains the subscribers market share of Telecom Companies in the year 2041.Bharti Airtel has a market share of 23%, Vodafone has a market share of 18%, Idea has a Market share of 15%, Reliance has a market share of 13%, BSNL has a market share of 11%, Tata DoCoMo has a market share of 7%, Aircel has a Market Share of 8% and others has a market share of 6%.

Spectrum PositionSource: TRAI, Department of Telecom, Company Filings

Acquired 115 MHz of 20 year liberalized spectrum positions Enhanced long term deployment flexibility Prime Spectrum to Lead Data Growth Story in Feb 2014 auctions Secured pan India 4G footprint- widest broadband footprint in India, which provides ability to build robust network and enhance leadership position in the fast growing data segment Company plans to roll-out high speed 4G networks in various circles using FD-LTE technology in the 1800 MHz band besides its existing TD-LTE rollout in the 2300 MHz band, giving it a pan-India 4G footprint. Bharti Already holds 3G and 4G spectrum in 21 telecom circles. Bharti has rolled out 3G and 4G services with over 8 million 3G customers

Investment Highlights

ConclusionIn nutshell, it is found that investors can be benefitted in the long run by investing in the telecom industry because telecom industry is otherwise growing industry. Indian government is also providing various facilities in the development of telecom industry. Telecom commission has approved 100% FDI in telecom sector. And among the industry BHARTI AIRTEL has the largest market share from subscriber and revenue based.

ReferencesMisra, A., & Anil, K. (2007). ECONOMIC VALUE ADDED (EVA) AS THE MOST SIGNIFICANT MEASURE OF FINANCIAL PERFORMANCE: A STUDY OF SELECT INDIAN FIRMS.Journal of International Business & Economics,7(1).Nigam, V., Thakur, T., Sethi, V. K., & Singh, R. P. (2012). Benchmarking of Indian mobile telecom operators using DEA with sensitivity analysis. Benchmarking: An International Journal,19(2), 219-238.Majumdar, S., & Bhattacharya, P. P. (2014). Porter Five Forces Analysis of the Leading Mobile Cellular Telephony Service Provider in India.Singh, K., & Sukhija, S. (2010). A Study of Profitability Performance of Telecommunication Companies in India.Available at SSRN 1613084.Ramadoss, G. (2013). Customer satisfaction of Telecom services in Tamil Nadu, India.International Journal on Global Business Management and Research, 77.Upadhyaya, R. C., & Sharma, V. (2001). Customer Satisfaction with Network Performance of BSNL and AIRTEL Operating In Gwalior Division (MP).

AnnexureBalance Sheet of Bharti Airtel------------------- in Rs. Cr. -------------------

Mar '14Mar '13Mar '12Mar '11Mar '10

12 Mths12 mths12 mths12 mths12 mths

Sources Of Funds

Total Share Capital1,998.701,898.801,898.801,898.801,898.77

Equity Share Capital1,998.701,898.801,898.801,898.801,898.77

Share Application Money0.000.000.000.00186.09

Preference Share Capital0.000.000.000.000.00

Reserves64,729.3052,247.4047,530.8042,212.8034,650.19

Revaluation Reserves0.000.000.000.002.13

Networth66,728.0054,146.2049,429.6044,111.6036,737.18

Secured Loans1.40-1,236.502.9017.1039.43

Unsecured Loans8,521.3014,216.3014,126.5010,216.004,999.49

Total Debt8,522.7012,979.8014,129.4010,233.105,038.92

Total Liabilities75,250.7067,126.0063,559.0054,344.7041,776.10

Mar '14Mar '13Mar '12Mar '11Mar '10

12 mths12 mths12 mths12 mths12 mths

Application Of Funds

Gross Block73,949.2071,911.8063,885.4059,457.9044,212.53

Less: Accum. Depreciation34,071.0028,729.2023,444.6018,757.2016,187.56

Net Block39,878.2043,182.6040,440.8040,700.7028,024.97

Capital Work in Progress1,244.201,030.804,466.506,479.201,594.74

Investments34,523.9028,199.1012,337.8011,813.0015,773.32

Inventories1.102.1032.1034.4027.24

Sundry Debtors2,165.502,246.802,134.501,461.902,104.98

Cash and Bank Balance446.00362.70481.20133.2054.89

Total Current Assets2,612.602,611.602,647.801,629.502,187.11

Loans and Advances19,945.2012,859.1020,430.8010,960.207,072.42

Fixed Deposits0.000.000.000.00761.86

Total CA, Loans & Advances22,557.8015,470.7023,078.6012,589.7010,021.39

Deffered Credit0.000.000.000.000.00

Current Liabilities21,798.6020,061.7016,067.2016,610.3012,979.55

Provisions1,154.80695.50697.50627.60658.75

Total CL & Provisions22,953.4020,757.2016,764.7017,237.9013,638.30

Net Current Assets-395.60-5,286.506,313.90-4,648.20-3,616.91

Miscellaneous Expenses0.000.000.000.000.00

Total Assets75,250.7067,126.0063,559.0054,344.7041,776.12

Contingent Liabilities87,232.10123,273.008,261.106,852.103,921.50

Book Value (Rs)166.93142.58130.16116.1696.24

Mar '14Mar '13Mar '12Mar '11Mar '10

12 mths12 mths12 mths12 mths12 mths

Sources Of Funds

Total Share Capital1,964.501,898.801,898.801,898.801,898.77

Equity Share Capital1,964.501,898.801,898.801,898.801,898.77

Share Application Money0.000.000.000.000.00

Preference Share Capital0.000.000.000.000.00

Init. Contribution Settler0.000.000.000.000.00

Preference Share Application Money0.000.000.000.000.00

Employee Stock Opiton0.000.000.000.00261.96

Reserves57,791.5048,422.9048,712.5046,868.0037,716.06

Revaluation Reserves0.000.000.000.002.13

Networth59,756.0050,321.7050,611.3048,766.8039,878.92

Secured Loans11,586.9013,286.7012,089.307,670.504,958.43

Unsecured Loans64,308.9059,674.1056,933.9048,979.605,329.71

Total Debt75,895.8072,960.8069,023.2056,650.1010,288.14

Minority Interest4,210.204,088.602,769.502,856.302,855.53

Policy Holders Funds0.000.000.000.000.00

Group Share in Joint Venture0.000.000.000.000.00

Total Liabilities139,862.00127,371.10122,404.00108,273.2053,022.59

Mar '14Mar '13Mar '12Mar '11Mar '10

12 mths12 mths12 mths12 mths12 mths

Application Of Funds

Gross Block198,569.30186,681.80133,582.10128,874.3072,116.34

Less: Accum. Depreciation57,954.8049,758.000.000.0021,267.28

Net Block140,614.50136,923.80133,582.10128,874.3050,849.06

Capital Work in Progress0.000.000.000.002,435.94

Investments15,530.806,769.301,815.60622.405,162.07

Inventories142.20110.90130.80213.9048.39

Sundry Debtors6,244.106,643.006,373.505,492.903,182.48

Cash and Bank Balance4,980.801,729.502,030.00883.901,010.74

Total Current Assets11,367.108,483.408,534.306,590.704,241.61

Loans and Advances15,664.8015,146.7013,129.6010,345.405,653.23

Fixed Deposits0.000.000.0073.601,567.90

Total CA, Loans & Advances27,031.9023,630.1021,663.9017,009.7011,462.74

Deffered Credit0.000.000.000.000.00

Current Liabilities42,138.3038,713.8033,804.6038,115.2015,573.92

Provisions1,176.901,238.30853.00118.001,313.29

Total CL & Provisions43,315.2039,952.1034,657.6038,233.2016,887.21

Net Current Assets-16,283.30-16,322.00-12,993.70-21,223.50-5,424.47

Minority Interest0.000.000.000.000.00

Group Share in Joint Venture0.000.000.000.000.00

Miscellaneous Expenses0.000.000.000.000.00

Total Assets139,862.00127,371.10122,404.00108,273.2053,022.60

Contingent Liabilities38,098.2021,932.1021,526.6016,509.404,863.86

Book Value (Rs)149.40132.51133.27128.42104.32