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(BAL), the market leader in the Indian telecommunication industry and its globalization strategy. BAL's telecom model was considered as the new model for telecom and effective for emerging markets like India, according to experts. BAL had established itself as a dominant player in India with its innovative business processes and strong brand, but was witnessing tapering growth because o f increasing competition and saturation of the more lucrative urban markets. While more and more players were eyeing the fast-growing Indian mobile market which was experiencing high growth, BAL put its sight on foreign shores The acquisition of Zain Group 's telecom business in fifteen African counties in 2010 gave it a footprint in the African continent. While concerns regarding whether BAL had overpaid for the deal remained, industry observers were keenly observing to see whether the company could replica te its successful telecom model in these developing and emerging markets. Africa posed an intriguing environment with different cultures, political forces and socio economic environment. After completing the deal, BAL was in the process of giving shape to its strategy for the African markets
Executive Summary
The fast track growth of the Indian telecom industry has made it a key contributor to India s progress. India adopted a phased approach for reforming the telecom sector right from the beginning. Privatisation was gradually introduced, first in value-added services, followed by cellular and basic services. An independent
1|Page LN GROUP OF INSTITUTE, SURAT
regulatory body, Telecom Regulatory Authority of India (TRAI), was established to deal with competition in a balanced manner. This gradual and thoughtful reform process in India has favoured industry growth. Today, there are more than 225 million telecom subscribers in India. Every month, 6-7 million new subscribers are added. Upcoming services such as 3G and WiMax will help to further augment the growth rate. Furthermore, the Indian economy is slated to sustain its 7-9 per cent growth rate in the near future. This is supported by the political stability that the country is experiencing currently. India s demographic outlook makes it one of the largest markets in the world. A conducive business environment is also created by a favourable regulatory regime. There exists enormous business potential for telecom companies on account of the country s low teledensity, which is close to 19 per cent presently. The Indian telecom industry is growing at the fastest pace in the world and India is projected to be the second largest telecom market globally by 2010.
INTODUCTION
Company Profile
Bharti Airtel Limited , commonly that known operates as Airtel, in 19 is an
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
2|Page LN GROUP OF INSTITUTE, SURAT
world with over 207.8 million subscribers across 19 countries at the end of 2010. It is the largest cellular service provider in India, with over 164.61 million subscribers at the end of 2011 April. Airtel is the 3rd largest incountry mobile operator by subscriber base, behind China Mobile and China Unicom.. Airtel also offers fixed line services and broadband 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. It is known for being the first mobile phone company in the world to outsource everything except marketing and sales and finance. Its network (base stations, microwave links, etc.) are maintained by Ericsson, Nokia Siemens Network and Huawei., business support by IBM and transmission towers by another company (Bharti Infratel Ltd. in India). Ericsson agreed for the first time, to be paid by the minute for installation and maintenance of their equipment rather than being paid up front. This enabled the company to provide pan-India phone call rates of Rs. 1/minute (U$0.02/minute). Call rates have come down much further. During the last financial year [2009-10], Bharti has roped in a strategic partner Alcatel-Lucent to manage the network infrastructure for the Telemedia Business.
Vision 2011
y Loved by more customers. y Targeted by top talent. y Benchmarked by more businesses . 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
Company background
Sunil Bharti Mittal founded the Bharti Group. In 1983, Sunil Mittal was into an agreement with Germany's Siemens to manufacture the company's pushbutton telephone models for the Indian market. In 1986, Sunil Bharti 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. This first-mover advantage allowed Sunil Mittal to expand his manufacturing capacity elsewhere in the telecommunications market. By the early 1990s, Sunil Mittal had also launched the country's first fax machines and its first cordless telephones. In 1992, Sunil Mittal won a bid to build a cellular phone network in Delhi. In 1995, Sunil Mittal inc orporated 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 Skycell 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 Hexacom and entered Rajasthan. In 2005, Bharti extended its network to Andaman and Nicobar.
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intensity of competition has paced up between domestic and foreign players, which as a result, has benefitted the end user. Increasing network coverage and competitive tariffs these are the two most prominent catalysts that are
Ceo s details
The board of directors of the company has an optimum mix of executive and non-executive directors, which consists of two executive and fourteen non-executive directors. The chairman and managing director, Mr. Sunil Bharti Mittal, is an executive director and the number of independent directors on the board is 50% o f the total board strength. The independence of a director is determined on the basis that such director does not have any material pecuniary relationship with the company, its promoters or its management, which may affect the independence of the judgment of a director. The board members possess requisite skills, experience and expertise required to take decisions, which are in the best interest of the company.
Sunil
Bharti
Mittal
Sunil Bharti Mittal, Chairman and Managing Director of bharti airtel is the Founder, Chairman and CEO of Bharti Enterprises. Sunil has been awarded the Padma Bhushan, one of India s highest civilian awards. He is a member of the Board of Trustees of the Carnegie Endowment for International Peace. Sunil is also on the Indian Prime Minister s Council on Trade & Industry and
6|Page LN GROUP OF INSTITUTE, SURAT
the Telecom board of International Telecommunication Union (ITU), a leading UN Agency. He was the President of the Confederation of India n Industry in 2007-08 and was co-chairman of the World Economic Forum in 2007 at Davos. He is a member of several premier international bodies Leadership Council
of The Climate Group, Advisory Committee of NYSE Euronext Board of Directors, International Business Advisory Council for London as well as Rome. An Honorary Fellow of the Institution of Electronics and Telecommunication Engineers, Sunil has been conferred with the degree of Doctor of Laws (Honoris Causa) by the University of Leeds, UK and the degree of Doctor of Science (Honoris Causa) by the GB Pant University.
Strategies
PROMOTIONAL STRATEGY
Airtel to Touch Tomorrow with a new brand vision The Bharti Mobile promoted AirTel cellular service will go in for repositioning of its brand image. The new brand ethos is portrayed in two distinct fashions - the tag line "Touch Tomorrow", which underscores the leading theme for the new brand vision, followed by "The Good Life", which underscores a more caring, more customer centric organization. Aimed at reengineering
its image as just simply a cellular service provider to an all out information communications services provider, Touch Tomorrow is meant to embrace the new generation of mobile communication services and the changing scope of customer needs and aspirations that come along with it The new communication is about a new dimension in the cellular category that goes beyond the Internet, SMS, roaming, IVRS, etc but which engulfs the whole gamut of wireless digital broadband services that will constitute tomorrows cellular services. The new campaign is in two phases - the first of which will communicate overall brand philosophy and the second products and services. According to Mr. Jagdish Kini, Chief Operating Officer, Bharti Mobile Limited, Karnataka "We are adopting a new brand- 48 platform - Touch Tomorrow not only to reflect our corporate ethos but also business strategy". The new identity will have the logo in Red, Black and White colours along with lower case typography to convey warmth. AirTel will incorporate the latest branding in all of its communication and will soon be going in for an enhanced promotional drive to establish the brand's presence.
Differentiation Strategy
The differentiation strategy adopted by the firms needs to possess sufficient skills and abilities to differentiate the product from that of the competitors based on some attributes that allow the consumers to perceive the product as different from that of the competition. Firms that adopt the differentiation strategy successfully have access to advanced scientific research, a highly skilled labor force, effective customer communication strategies, etc.
Focus Strategy
A firm pursuing a focus strategy tends to serve a specific segment instead of catering to the entire market. This segment may be a special group of customers, a specific geographic area, or a particular product or service line. The customers will also be loyal to the company and therefore, the entry of a new competitor into that area becomes difficult. Airtel is focusing on the customers who is having more than Rs10000 monthly landline billing. Airtel is offeri ng landline services which consist of PRI (Primary Rated Interface).
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It is difficult to ascertain fully the employment potential of the telecom sector but the enormity of the opportunities can be gauged from the fact that there were 3.7 million Public Call Offices in December 2005 up from 2.3 million in December 2004.
Indian telecommunication Industry is one of the fastest growing telecom market in the world. The mobile sector has grown from around 10 million subscribers in 2002 to reach 150 million by early 2007 registering an average growth of over 90% yoy. The two major reasons that have fuelled this growth are low tariffs coupled with falling handset prices.
Surprisingly, CDMA market has increased it market share upto 30% thanks to Reliance Communication. However, across the globe, CDMA has been loosing out numbers to popular GSM technology, contrary to the scenario in India. The other reason that has tremendously helped the telecom Industry is the regulatory changes and reforms that have been pushed for last 10 years by successive Indian governments. According to Telecom Regulatory Authority of India (TRAI) the rate of market expansion would increase with further regulatory and structural reforms.
Even though the fixed line market share has been dropping consistently, the overall (fixed and mobile) subscribers has risen to more than 200 million by first quarter of 2007. The telecom reforms have allowed the foreign telecommunication companies to enter Indian market which has still got huge potential. International telecom companies like Vodafone have made entry into Indian market in a big way.
Currently the Indian Telecommunication market is valued at around $100 billion (Rupees 400,000 crore). Two telecom players dominate this market Bharti Airtel with 27% market share and Reliance Communication with 20% along with other players like BSNL (Bharat Sanchar Nigam Limited) and AT&T. One segment of the market that has been puzzling is broadband Internet. Despite the manner in which the countrys Internet market has been
booming, India s move into high-speed broadband Internet access has been distinctly slow. And, while there appea rs to be considerable enthusiasm amongst the population for the Internet itself, this has not been reflected in broadband subscription numbers. In 2006 India witnessed a good surge in broadband users with the total subscriber base in the country expanding by almost 200% to just over 2 million by years end . Despite this surge, broadband penetration in India still remains around only
0.2%;broadband services still account for only 25% of the total Internet subscriber base, still in itself comparatively low. The Ministry of Communications and Information Technology (MCIT) is has very aggressive plans to increase the pace of growth, targeting 250 million telephone subscribers by end-2007 and 500 million by 2010. Most of the expansion in subscribers is set to occu r in rural India. India s rural telephone density has been languishing at around 1.9%;
So, if 70% of total population is rural, the scope for growth in this Industry is unprecedented.
Competitors
Top Bharti Airtel Limited Competitors
company Hindalco, industrial giant Aditya Birla Nuvo, and the minority controlled IDEA Cellular.
y
Bharat Sanchar Nigam Ltd. Bharat Sanchar Nigam Limited (BSNL) keeps
most of India talking. The country's largest landline company provides local exchange access and domestic long-distance services through a network of more than 46 million access lines covering most of India. (It does not provide service in Delhi and Mumbai.) Serving business and individual customers, it also offers GSM and CDMA-based wireless communications, satellite service, telegraph, data and Internet services, and managed network services. Cellular service CellOne has 55 million subscribers on a mostly 2G network. BSNL is one of two state-controlled telcos in India, along with Mahanagar Telephone Nigam Limited (MTNL), which serves Delhi and Mumbai.
Reliance
Communications
has
IP-enabled
connectivity
infrastructure
comprising over 150,000 kilo meters of fiber-optic cable systems in India, the US, Europe, Middle East, and the Asia Pacific region.
Sales Turnover Bharti Airtel Idea Cellular Reliance Comm Tata Comm TataTeleservice MTNL Tulip Telecom Nu Tek India Goldstone Infra 38,015.80 15,389.00 11,989.19 3,409.00 3,128.24 3,841.21 2,350.66 256.83 68.46
Net Profit
Total Assets
Bharti Airtel needed to maximize its future flexibility and growth potential by adopting a business-driven framework for integration, allowing it to implement and deliver new services rapidly. With competition intensify ing in the Indian telecom services market, Bharti Airtel needed to find a way to focus on developing new services that could set it apart from the competition and strengthen its customer relationships.
Indian Communication Industry has a flourishing future in its value -added services market. The pre-set target of the 11th plan from FY 2007 - 12 is to provide 600 million cellular phone connectivity aided by an investment of USD 74 billion.
Moreover, it is estimated that by the FY 2012 the profits generated by Indian Communication Industry will touch USD 55 billion against the current USD 31 billion.
billion in 2007 to double the size of its ne twork and cover 50% of India's population, up from 40% currently. Manoj Kohli, MD of Bharti Airtel mentioned at a conference in Management Development Institute, Gurgaon on December 13, 2007 the objectives, We should be able serve any location where a match box is sold ; We would reduce the price to one cent per minute . It aims to establish a presence in all 5,200 census towns and over 500,000 villages across India by 2010, covering 95% of the country s total population34. The Cellular Operators Association of India (COAI) reported that significant growth opportunities existed in rural areas, where penetration remained around 1%, while worthwhile growth prospects also remained in urban areas, where penetration was running at 40%. Bharti intends to reac h new customers in rural areas, and aims to cover 75% of India's largely rural population35. It also aims at servicing the rural market to stay ahead of the increasing competition.. The company s strategic focus was on further strengthening the Airtel brand through best-in-class customer service, backed by wide national distribution and the direction in the broadbad & telephone business was to focus on the cities with high revenue potential36. Bharti was all set to establish itself in the emerging Broadcasting segment by launching its direct-to-home television service (DTH) and TV over the internet (IPTV) in 200837. The company also planned to expand its telecom operations internationally in select markets and in line with this, was expected to start its first international operations in Srilanka to provide 2G and 3G mobile services wireless operations by March 2008. The future looks very promising and the company looks all set to establish itself as one of the leading players in the world telecommunication industry arena. Will it be able to continue the remarkable growth it has shown in the past? And what are the challenges in maintaining or bettering its past performance? (Exhibit 7 gives the consolidated results for the period 2004 -7). Manoj Kohli, the CEO of Bharti AirTel says catering to the demands of the three screens, the mobile screen, the television and the computer screen will be the major challenge facing him.
16 | P a g e LN GROUP OF INSTITUTE, SURAT
Annexure
Statistics (Sales report, financial statements, etc) Balance Sheet of Bharti Airtel ------------ in Rs. Cr. ---------Mar '08 12 mths Total Share Capital Equity Share Capital Share Application Money Preference Share Capital Reserves Revaluation Reserves Networth Secured Loans Unsecured Loans Total Debt Total Liabilities 1,897.91 1,897.91 57.63 0.00 18,283.82 2.13 20,241.49 52.42 6,517.92 6,570.34 26,811.83 Mar '08 12 mths Gross Block Less: Accum. Depreciation Net Block 28,115.65 9,085.00 19,030.65 Mar '09 12 mths 1,898.24 1,898.24 116.22 0.00 25,627.38 2.13 27,643.97 51.73 7,661.92 7,713.65 35,357.62 Mar '09 12 mths 37,266.70 12,253.34 25,013.36 Mar '10 12 mths 1,898.77 1,898.77 186.09 0.00 34,650.19 2.13 36,737.18 39.43 4,999.49 5,038.92 41,776.10 Mar '10 12 mths 44,212.53 16,187.56 28,024.97
Capital Work in Progress Investments Inventories Sundry Debtors Cash and Bank Balance Total Current Assets Loans and Advances Fixed Deposits Total CA, Loans & Advances Deffered Credit Current Liabilities Provisions Total CL & Provisions Net Current Assets Miscellaneous Expenses Total Assets Contingent Liabilities Book Value (Rs)
2,751.08 10,952.85 56.86 2,776.46 200.86 3,034.18 5,103.13 302.08 8,439.39 0.00 12,400.38 1,961.95 14,362.33 -5,922.94 0.20 26,811.84 7,140.59 106.34
2,566.67 11,777.76 62.15 2,550.05 153.44 2,765.64 5,602.83 2,098.16 10,466.63 0.00 13,832.49 634.40 14,466.89 -4,000.26 0.09 35,357.62 4,104.25 145.01
1,594.74 15,773.32 27.24 2,104.98 54.89 2,187.11 6,276.12 761.86 9,225.09 0.00 12,183.25 658.75 12,842.00 -3,616.91 0.00 41,776.12 3,921.50 96.24
------------ in Rs. Cr. ------------Mar '08 12 mths Mar '09 12 mths 34,048.32 0.00 34,048.32 -1,261.75 5.29 32,791.86 286.94 0.00 1,397.54 8,627.13 9,385.68 1,409.89 -269.25 20,837.93 Mar '09 12 mths 13,215.68 11,953.93 434.16 11,519.77 Mar '10 12 mths 35,609.54 0.00 35,609.54 1,118.46 -34.91 36,693.09 278.72 0.00 1,401.66 11,882.41 6,856.42 1,482.39 -293.31 21,608.29 Mar '10 12 mths 13,966.34 15,084.80 283.35 14,801.45
Sales Turnover Excise Duty Net Sales Other Income Stock Adjustments Total Income Raw Materials Power & Fuel Cost Employee Cost Other Manufacturing Expenses Selling and Admin Expenses Miscellaneous Expenses Preoperative Exp Capitalised Total Expenses
25,761.11 0.00 25,761.11 104.04 9.05 25,874.20 42.90 0.00 1,297.88 7,339.01 5,892.50 535.46 0.00 15,107.75 Mar '08 12 mths
Depreciation Other Written Off Profit Before Tax Extra-ordinary items PBT (Post Extra-ord Items) Tax Reported Net Profit Total Value Addition Preference Dividend Equity Dividend Corporate Dividend Tax Shares in issue (lakhs) Earning Per Share (Rs) Equity Dividend (%) Book Value (Rs)
3,166.58 266.07 6,940.37 -60.67 6,879.70 632.43 6,244.19 15,064.84 0.00 0.00 0.00 18,979.07 32.90 0.00 106.34
3,206.28 178.82 8,134.67 -46.15 8,088.52 321.78 7,743.84 20,551.00 0.00 379.65 64.52 18,982.40 40.79 20.00 145.01
3,890.08 207.84 10,703.53 -50.78 10,652.75 1,177.87 9,426.15 21,329.56 0.00 379.79 64.55 37,975.30 24.82 20.00 96.24
------------- in Rs. Cr. ------------Mar '08 12 mths Mar '09 12 mths 8161.54 Mar '10 12 mths 10699.25
6972.54
Net Cash From Operating Activities Net Cash (used Investing Activities in)/from
10459.85 -11648.41
11853.15 -10894.38
12692.63 -10601.66
Net Cash (used in)/from Financing 898.03 Activities Net (decrease)/increase In Cash and -290.53 Cash Equivalents Opening Cash & Cash Equivalents Closing Cash & Cash Equivalents 793.47 502.94
-672.00
-2539.32
Bibliography
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