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

GROUP 7

Bharti Airtel
Largest Private Integrated Telecom Company in India 3rd Largest Wireless Operator in the World Largest & Fastest Growing Wireless Operator in India Largest Telecom Company listed on Indian Stock Exchange
GROUP 7 3

Vision 2010
By 2010 Airtel will be the most admired brand in India:
Loved by more customers Targeted by top talent Benchmarked by more businesses

Vision 2020
To build India's finest business conglomerate by 2020 Supporting education of underprivileged children through Bharti Foundation Strategic Intent:
To create a conglomerate of the future by bringing about Big Transformations through Brave Actions.

Mission
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

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 to change the status quo, innovate and energize new ideas with a strong passion and entrepreneurial spirit Openness and transparency - with an innate desire to do good Creating Positive Impact with a desire to create a meaningful difference in society.

Objectives/Goals
To undertake transformational projects that have a positive impact on the society and contribute to the nation building process. To Diversify into new businesses in agriculture, financial services and retail business with world-class partners To lay the foundation for building a conglomerate of future

Changing Demographics
Demand for VAS & Broadband services Among Youth 28 % Urban Population Rapid Urbanization Rising Income level

Source: Mckinsey Report

Technology
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
2G/3G

VoIP

Technology

CDMA

WIMAX

Integrated Telecom Company(Product Portfolio)

Wireless Services
2G/3G Rural Market

Enterprise Services
Carrier Corporate

Telemedia Services
Fixed Line Broadband DTH

Passive Infrastructure Bharti Infratel Indus Tower

GROUP 7

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Geographical Presence India ...

Soucre: TRAI

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SWOT ANALYSIS
Strengths Largest Telecom player in India subscriber base 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 in SriLanka High cash balance of $1bn

Weakness Tariff war at its peak Increased competition due to new licenses & issuance of cross over technology ARPU drop is a certainty, expect drop of about 20% Mobile Termination Charges reduced to .20 per min, indications towards zero MTC M & A regulations restrict attractive synergies DTH a big worry Land Line & fixed line service are in a matured stage

SWOT ANALYSIS

SWOT ANALYSIS
Opportunity Lot of scope in rural areas Current Tele-Density 37 is still low among developing countries Low broadband penetration company well equipped to take business to next level Fast extending IPLC market, only player other than VSNL to have International Submarine cable network Expected consolidation in industry in medium term due to tariff wars

SWOT ANALYSIS
Threat India centric - Major revenues from India 93% revenues from Bharti Televentures, only 7% from other group companies Mobile Number Portability by Jan 2010 impact on margins Inability to obtain 3G spectrum in key circle Revision of License fees Revision of spectrum usage charges

Porters 5 Forces
Customer Bargaining Power

Threat of New Entrants

Threat from Competition

Threat of Substitutes

Supplier Bargaining Power

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1. Threat from Competition

Wireless Market Top 4 garnering 75% market share

HIGH

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Competitor Analysis
Competitor Analysis
40.00% 30.00% 20.00% 10.00% 0.00% Bharti Rcom IDEA MTNL

OP Margin

Net Margin Sep-072 26.40% 23.90% 14.10% 7.00% Sep-083 19.30% 13.20% 6.50% 6.80%

Best OP Margins & Net Profit Margins among Peers

Company Sep-07 Bharti Rcom IDEA MTNL 43.00% 37.90% 32.80% 23.70%

Sep-08 38.00% 31.60% 26.60% 22.90%

Source: CMIE November 2008

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AMOU & ARPU Stats

Minutes of Usage per Month Mobile Services
USA
838

India

461

China

303

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.

Russia

88

ARPU* in India
ARPU (USD per month) 10 8 6 4 2 0 Q1 2006 Q2 2006

Mobile Services

The declining ARPU implies that India Inc. is tapping a large market at the bottom of the pyramid by reducing tariffs; thereby, enhancing affordability.
Q3 2006 GSM CDMA Q4 2006 Q1 2007

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2. Customer Bargaining Power

 Lack of differentiation among Service Providers  Cut throat Competition  Low Switching Costs  Number Portability will have Ve Impact  Businesses & Consumers
HIGH

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Market Scenario
Postpaid Vs Prepaid Customers & Market Share

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3. Suppliers Bargaining Power

LOW

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4. Threat of Substitutes
 Landline  CDMA  Video Conferencing
BROADBAND SERVICES
DIMINISHING MARKET HIGH

 VOIP - Skype, Gtalk, Yahoo Messenger  e-Mail & Social Networking Websites

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5. Threat of New Entrants

 Huge License Fees to be paid upfront & High gestation

period
 Entry of MVNOs & WiMAX operators  Spectrum Availability & Regulatory Issues  Infrastructure Setup Cost - High  Rapidly changing technology
LOW

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Business Strength
 Current market share  Brand image  Brand equity  Production capacity  Corporate image  Profit margins relative to competitors  R & D performance  Managerial personal  Promotional effectiveness
GROUP 7 26

Factors Underlying Market Attractiveness

Factors
Resource availability Overall market size Annual Market growth rate Profitability Competitive intensity Technological requirements
Total

Weight
0.20 0.15 0.20 0.15 0.10 0.20 1.0

Rating (1 5)
3.5 4 4 4 4 4.5

Value = (Weight * Rating)

0.7 0.6 0.8 0.6 0.4 0.9 4.0

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Factors Underlying Market/Biz Strength

Factors Weight Rating (1 5)
5 3.5 4 3 3 4.5 4.5 3

Value = (Weight * Rating)

0.75 0.35 0.40 0.45 0.45 0.45 0.45 0.45 3.75
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Market share New product development Brand Image Sales force Pricing Distribution capacity Product quality R&D Performance
Total

0.15 0.10 0.10 0.15 0.15 0.10 0.10 0.15 1.0

Airtel Strategy
MANTRA : Focus on Core Competencies and Outsource the rest!
Product Innovation

Pricing

Core Competencies

VAS

Marketing and Branding

Strategy
Airtel partnered with leading players in telecommunication players across the globe. It has managed to work with the best of domain specialists globally and emerge as a world class entity. Partnerships include operational contracts with marquee vendors and strategic investors ranging from private equity investors to global telecom giants.

Strategic partnerships/ Shareholders Technology and Capital

Warburg Pincus a celebrated PE investor held a stake for a substantial period of time and was instrumental in providing Airtel support in its early stages. Vodafone was a strategic investor in Airtel. Temasek the Singapore based investor holds a considerable stake in it. Was also affiliated with Singapore Telecom.

Outsourcing deals in 2004

Ericsson was given the mandate to provide, manage and maintain the equipment as well as provide quality assurance in Airtel s then 13 mobile circles. IBM was given the mandate to handle the back office requirements of Airtel s presence in India

Operational Strategies.
Higher emphasis on ARPU/min stark contrast with other operators who concentrate on ARPU only. Aim to be become a one stop shop for all telecommunication services under the Bharti umbrella. Exploring opportunities in international markets. Hived off tower infrastructure into a separate entity.

Performance till date

Bharti Airtel has enjoyed an excellent run ever since the telecom sector opened. It has managed to hold on to its leadership position inspite of the presence of other players with deep pockets Ambani s, Tata s, Birla s and Vodafone. Has coped well with regulatory changes. Continues to attract and delight customers.

Future Strategies
Translate its expertise in Indian markets to other emerging economies. This could call for acquisitions globally. Technology leadership is a must Airtel must ensure that its reliance on GSM technology does not render it obsolete. Indian market inspite of being the worlds largest is still not matured. Opportunities abound in the hinterland which must be exploited.

Growth Factors
Infrastructure Sharing

Rural Telephony

Growth Factors

Managed Services

Enterprise Telecom

GROUP 7

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Road Map Growth Path

VPN & VoIP

WiMAX

3G

2G/2.5G

GROUP 7

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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. Mehta Invesment 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
GROUP 7 38

THANK YOU !!

GROUP 7

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