airtel final
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Bharti Airtel limited and the Indian Telecom Sector
Presented By:
Aakriti Anand Hashmita Sidhu Manish Gulati Shivani Saluja Vinkie Chawla
•
Aiming High
The Mission and the Vision
Mobile Telephony In India
• Mobile Telephony Revolution started in 1994 when DoT and GoI issued licences to private players
• Boom in the industry started when govt. introduced revenue sharing method in 1999.
• Universal service telecom license was introduced in 2004 to have single control over GSM and CDMA operators
• As of Jan.2008, 86% of the telecom subscribers were mobile subscribers in India.
No. 1 in Mobile Industry Growth
• Mobile subscribers base grew from 10 Million in 2002 to 150 million in 2007 with a YoY growth rate of 90%.
• India overtook china as the fastest growing mobile market in world in year 2007.
• The penetration in rural market is increasing year over year and expected to fetch even more suscribers.
GROUP 7 5
BAL: Quick Facts
• The Subscribers mark of more than 140 million as of july 2010
• World’s Fifth largest having presence in 19 countries
• Market share of 31.18% in India
• Airtel Provides GSM services in 23 telecom circles across India
• Bharti airtel added 2.6 Million customer in the month of July 2010 itself.
GRUP 7 6
BAL: From Scrap to Star
• From Bicycle parts to Mobile Service Provider.
• Sunil Mittal established equipment manufacturing under the name Bharti Telecom Limited in 1980.
• Entry in telecom industry was made on 7th july 1995 when it launched its cellular services in Delhi
• The telecom Business was initially run under the name Bharti Tele ventures.
• Airtel set many benchmarks in Indiam Mobile industry.
• It Acquired various other telecom operators accross country to expand its business
GROUP 7 7
Airtel: We are the Leaders
• It Acquired various other telecom operators accross country to expand its business.
• BTV went in for IPO in 2002
• BTV worked on innovations, adoption of new technologies to maintain competitive advantage
• It strated offering VAS and GPRS services in 2004.
• BTV was renamed into BAL i.e. Bharti Airtel Limited in 2006.
• As of March 2007, BAL total revenue was Rs. 185.2 billion with profit at Rs.42.57 Billion.
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GROUP 7 9
Some analysts have opined that BAL’s business model was the new model for telecom as the global telecom operators move towards emerging markets with the developed markets in the west approaching saturation . Discuss what according to you were the reasons for the leadership position that BAL enjoyed in the mobile telecom sector in India?
QUESTION 1
Czar of Indian Telecom
Differentiating itself - customer delight & cost-effective business model
Building a Strong BrandInnovation in sales, marketing & customer service
Adopted innovative promotional strategies-celebrities
“Express Yourself “ Campaign- 2003
Airtel- one of the biggest advertisers in India
Total Expenditure- 12..55 bil
Business Model innovation
Outsourcing its network deployment, IT services & customer contact centers
Utilized different payment models
Success of model
Operational services, low-cost services
Main competition- BSNL
through
Thus,
how
ResultsDominant position in the market
Market leader operating in all circles
Best performing company- Shareholder performer index
Business Week ranked BAL 3rd – Shareholder return
Awards
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GROUP 7 15
“Best Indian Emerging Market Carrier”- Telecom Asia Awards 2007
“2005 Indian Mobile Operator of the year”- Asian Mobile News
CMD-Mittal – “ CEO of the Year”
Nasscom IT Innovation Award –Business Model adopted
Ranked among top innovative infotech companies
Discuss the challenges BAL had to face in view of the entry of new players into the GSM mobile telecom services and the entry of global firms into the Indian telecom market.
QUESTION 2
KEY COMPETITORS
GROUP 7 1717
Basic Services Operators
BSNL
MTNL
Reliance
TTSL
GSM Services Operators
Airtel
Vodafone
Idea
Reliance
TTSL
BSNL
CDMA Services Operators
Reliance
Internet Services Operators
BSNL
MTNL
Reliance
TTSL
BSNL
Airtel
TTSL – Tata Teleservices Ltd.
Mobile services
BSNL – Bharat Sanchar Nigam Ltd.
MTNL – Mahanagar Telecom Nigam Ltd.
Airtel
Geographical Presence
GROUP 7 18
Rural – Urban Subscriber Base
GROUP 7 19
WIRELESS MARKET SHARE
20
GSM & CDMA
GROUP 7 21
INTERNATIONAL MARKETRank Company Name Subscribers
1 China Mobile 522 Mln
2 Vodafone Group 333 Mln
3 Telefonica 202 Mln
4 AmericaMovil 201 Mln
5 Telenor Group 172 Mln
6 Deutsche Telecom 151 Mln
7 China Unicom 148 Mln
8 TeliaSonera 148 Mln
9 France Telecom 133 Mln
10 Bharti Airtel 125 Mln
11 MTN Group 116 Mln
12 Mobile Telesystems 102 Mln
13 Reliance Communications 100 Mln
14 Orascom Telecom 93 Mln
15 AT&T 85 Mln
22
Zain’s 42 Million subscribers in 15 African countries now coming under Bharti’s Umbrella – The Total Subscriber base of Bharti Airtel goes to 167 million Subscribers, which puts it firmly in 5th position
INITIAL CHALLENGESVodafone’s entry in Indian telecom market posed 1st real threat to BAL’s supremacy.
Vodafone planned to invest $ 2 billion to establish and introduce new 3G technologies.
Vodafone’s application of allocation of spectrum to expand from 16 to 23 telecom circles.
Vodafone entry increased competition and better services to customer.
GoI’s approval to companies to provide both GSM & CDMA.
Entry of new players like Reliance and Tata in GSM.
New player expected to break oligopoly on market.
Due to competition slashing down of tariff rates which were already lowest in the world. Steady fall in BAL’s ARPU.
BAL did not have plans to start CDMA.
GoI plan to allow more players to enter to reduce rates.
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INITIAL CHALLENGES
CURRENT CHALLENEGES : THREATS
GROUP 7 25
Due to price war , APRU is falling and further deterioration will lead to significant decline in top line growth.
Capacity constraint may hamper the expected growth in Mobile segment.
MNP will become reality in 2010, it will add further pressure to operator to retain the existing customer.
Bharti Airtel could also be the target for the takeover vision of other global telecommunications players that wish to move into the Indian market.
GROUP 7 26
CURRENT CHALLENEGES:WEAKNESSES
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% - Finding alternative source of revenue.
Mobile Termination Charges reduced to .20 per min, indications towards zero MTC
M & A regulations restrict attractive synergies
Network Expansion• All India coverage – first mover advantage
• Feb 2008 -- Announcement of :-- Annual investment plan of US $ 2 billion-- addition of 30,000 base stations to existing 40,000-- 97% country coverage by2010-- 50-60% expansion in rural areas
• Enetered in a MOU with Nokia Siemens Network(telecom solution company) for:
-- end to end network expansion -- expansion of GSM network in 8 circles-- increasing footprint in rural area-- increase its overall network capacity
Airtel Geared up to Upgrade 2G Network In 8 Telecom Circles
Targeting All Segments • Offered new VAS:
-- Mobile Payment service-- Mobile money transfer service
• Rolled out complete mobile commerce services:-- Online purchases with handsets
• Tie up with Nokia:-- Offered entry level handsets-- Countered self branded handsets(Vodafone & TATA)-- Facilitate expansion in rural areas -- combine advertising & marketing to tap lower segments
Airtel –Nokia tie up
Targeting All Segments
• Avoided one size fits all strategy:-- Categorised cutomer based on ARPU-- Segmented their market-- High end customers were called « funsters »-- Marketing efforts focused on tech savvy heavy VAS users
HIGH END CUSTOMERS• Tie up with high end hand held devices manufacturers:
-- HTC for HTC Touch-- Research in Motion Ltd. forBlackberry
• Provided features such as:-- Push Mails , document support and touch screen interface -- Aimed at high end corporate users
LOW-END USERS • Reduced overall tariffs
-- Reduction in lifetime prepaid tariff by 50% per minute-- Reduced fixed charges to Rs 495 from 995-- Introduced number of post paid plans
• Removed the entry barriers for customers• Reduced recurring maintenance charges for consumers• Started new advertising campaigns to reposition the brand
Targeting All Segments
Airtel-Blackberry tie-up
Wooing the Rural Masses
• IFFCO Kisan Sanchar Limited-- VAS and voice services to farmers PAN India-- Low tariff to IFFCO members-- Bundled handsets in low prices-- 5 free voice messages daily on mandi price/farming techniques-- Access to helpline to answer farmer queries
• Tie-up with shop owners in remote areas -- Bundled info on weather, fertilizers etc
New Advertising Strategy
• Brand Repositioning
-- Earlier – emotional campaigns like Express Yourself…-- Now – Network coverage in kuch bandhan atoot hote hein…-- Iconic and global status to Airtel in Barriers break when people talk
• New Technology
-- Focus on 3G technology
Porter’s 5 Forces
Threat from Competition
Customer Bargaining Power
Threat of Substitutes
Supplier Bargaining Power
Threat of New Entrants
1. Threat from CompetitionWireless Market – Top 4 garnering 75% market share
HIGH
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
3. Suppliers Bargaining Power
LOW
4. Threat of Substitutes
Landline CDMA
Video Conferencing
VOIP - Skype, Gtalk, Yahoo Messenger e-Mail & Social Networking Websites
BROADBAND SERVICES
DIMINISHING MARKET HIGH
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
SWOTStrengths
• Largest Telecom Player in India - ~80Mn, 22.6%
• Very focused on Telecom: around 93% of the total revenue comes from telecom
• Strategic Alliance with other stakeholders in Bharti Airtel include Sony-Ericsson, Nokia - and Sing Tel
• Pan India Presence• Strong Financials
Weakness• Outsourcing of Core
Systems• Lack of emerging market
investment opportunity
SWOT
Opportunities• Bharti Infratel – Cutting
Down cost in Rural area• Match Box Strategy – Scale
of Penetration• Current Tele-Density – 30.6
is still low among developing countries
• Low Broadband Penetration, Rural Telephoney
Threats• India centric – Major
revenues from India• Falling ARPU & AMOU• Intense Competition &
Shortage of Bandwidth
Ansoff’s Matrix
Market Penetration:
Broadband and Fixed line
Product Development : IPLC products
Market Development:
Overseas Markets
Diversification: Outsourcing
Airtel – StrategyMANTRA: Defining customer acquisition and
growth as its core competence, and outsourcing everything else, including its network and its IT
Core Competencies
Product Innovation
VAS
Marketing and Branding
Pricing
• As of early 2008, BAL was trying to expand into other developing and emerging markets. In your opinion, should BAL expand to other developing and emerging markets or should it concentrate on the fast growing Indian market which still has scope for huge growth?
Domestic Market• Population: 1.1 billion
→increasing urbanisation→relatively large youth population
• GDP Growth (Real): ~6.7%→second highest growing economy
• GDP Size (PPP adjusted): US$ 3 trillion
→fourth largest economy in the world
• Telecom penetration: 38.88% (452.91 mntelecom subs)
→one of the lowest→Govt. target to reach 500 mn. telecom
subs by 2010
• Broadband penetration: 0.55% (6.40 mn)
→one of the lowest→Govt. target to reach 20 mn.
Broadband subs by 2010
Demand for VAS & Broadband services Among Youth
28 % Urban Population
Rapid Urbanization
Rising Income level
Changing Demographics
Source: Mckinsey Report
Tapping emerging Markets
• First attempt to make foray in international markets: possible takeover of Africa based MTN Group.
• Failed twice to finalise tie ups with MTN• Subsidiary in Sychelles:Telecom Seychelles Ltd. • Subsidiary in Europe: Jersey Airtel Ltd. And
Guernsey Airtel Ltd. (GAL)• Foray in Sri Lanka in mid 2007
Tapping Emerging Markets
• Completed its $9 billion acquisition of African operations from Kuwait's Zain in a deal that makes the Indian firm the world's fifth biggest cellphone company by subscribers.
• Aims to have 100 million subscribers and $5 billion a year in revenue in Africa by 2012/13
• Replicate success achieved in India in Africa? experiencing high growth Huge disparity in income like in India
Why Global?• Consolidation in India is difficult
– number of operators in any circle (generally a state or a large metro like Mumbai or Delhi) after a merger must be at least four. (It used to be three.)
– the market share of the new entity cannot be more than 40% (down from 67%).
• Average Revenue Per User– Indian companies:$10, – telecom companies in the U.S. and Europe : $100 – MTN, which operates largely in developing :$17