Airtel Company Snapshot Bharti Airtel is Indias leading provider of GSM based mobile services with 96.7 Mn subscribers.

It is the first private telecom service provider with a footprint in all the 23 circles. It was incorporated in the year 1985 but rolled out the telecom services when the sector was opened to private sector in 1995. In the last decade the company has witnessed stupendous growth and has emerged as third largest telecom service provider in the world in terms of subscriber base. It is most profitable telecom company in India with annual profits of Rs 62 Bn on revenue of around Rs 258 Bn. The company has a market share of 24.7% in terms of the subscriber base. The businesses of Bharti Airtel have been structured into 3 individual strategic business units (SBU) mobile services, Airtel telemedia services and enterprise services. The mobile business provides mobile & fixed wireless services using GSM technology across 23 telecom circles while the Airtel Telemedia Services business offers broadband & telephone services in 95 cities and has recently launched India's best Direct-to-Home (DTH) service, Airtel digital TV. The Enterprise services provide end-to-end telecom solutions to corporate customers and national & international long distance services to carriers. Airtel has a high-speed optic fibre network currently spans over 55,000 kms and covering all the major cities in the country. Airtel employs 30000 employees and is the largest employer in the private telecom space. The organizations structure at Airtel consists of a President heading a business unit. Apart from them there are other regular divisions which are overseen by a director. All of them report directly to the CEO of the company. The entire distribution of the company is outsourced. Airtel has thousands of distributors and more than one million retail points. The companys idea is ensure that Airtel services should be available even at the smallest store in the country.

Winning Strategies

1. Innovative and low cost business model.

Airtel has to operate in a demanding price environment which has forced them to discover new and innovative ideas. In Europe, the wireless operators average monthly revenue id 40 Euros whereas in India it is 8 USD but still they are able to operate with 50 percent margin. Table: Comparison of ARPU of India with some global countries India 8 China 12 Australia 33 Singapore 32

ARPU

Having launched mobile service 10 years back, Airtel has been able to capture a significant portion of higher revenue generating subscriber base. However with the major cities already saturated and having a tele-density in excess of 80%, it is the tier 2 and rural areas which will provide the next big leap. Table: Airtel subscriber base break up across circles Circle Category Metro A circle B circle C circle Subscriber base (Mn) 12.4 36.2 31.9 16.2 % contribution 12.9 37.4 33.0 16.7

In India, Airtel has one of the highest ARPU in the industry. With a major chunk of high end customers in Metro and A circles will help to maintain ARPU above all India average. Table: Comparison of ARPU with other telecom players Airtel Vodafone Essar Reliance Comm ARPU 331 228 271

2. Innovative method adopted for capital equipment purchases and outsourcing all the IT needs to reduce overheads Bharti Airtel has adopted an innovative method for financing its equipment purchases. The company has built its entire network using vendor financing from the likes of IBM and Ericsson. Since the company could not have funded the massive network expansion from its own pockets they had to enter into such a deal. Also the company has outsourced all the IT needs to IBM and relieved itself of all the overhead costs associated with having its own captive IT division.

Caution:

1. Increase in competition in the domestic market due to entry to

global telecom companies With the renewed interest of global telcos to set-up operations in the fastest growing telecom markets in the world, the competition in the domestic market is set to intensify further. This would lead to the further decline of the ARPUs.
500 400 300 200 100 0 399 374

350 261 220

ARPU

2004

2005

2006

2007

2008

In the Indian telecom market the top 4 operators cater to 80% of the market. The entry of global telcos with deep pockets would result in a tariff was with the existing operators to gain market share. This would ultimately lead to further reduction in Indian telecom industry ARPU. Conclusion: The Indian telecom industry is growing at a robust pace and wireless subscribers contribute to this growth in a big way. With the growth in subscriber numbers expected at a CAGR of 22.5%, Bharti will continue to dominate the Indian telecom industry. On the back of its innovative business model Bharti will continue maintaining revenue leadership and improve its penetration and coverage. With the next push in the telecom market to come from rural industry, Bharti with its pan-India presence will be in a position to roll out its services efficiently in the rural areas. Even with the entry of global telecom companies, Bharti on account of being a dominant player in high revenue telecom circles will not be severely impacted.