Telecom Sector in India

•One of the fastest growing sectors in the world- Number of subscriber additions showed a growth of 3.25% from March to April, 2009• Key Highlights attributable to the Sector are : Subscriber base- More than 330Mn Second Largest Telecom Market9 GSM & 5 CDMA players in 19 circles and 4 metros connecting 2000 townsLowest tariff charges in the world

Bharti Group - Overview

Bharti Airtel

•Airtel is the flagship company of Bharti Enterprises•Asia’s leading integrated telecom services provider with operations in India and Sri LankaBusinesses at Bharti Airtel have been structured into three individual Strategic Business Units (SBUs): - Mobile Services - Airtel Telemedia Services - Enterprise services • VISION: To make Airtel India’s most admired brand that will be : Liked by more customers, targeted by top talent, benchmarked by more businesses•MISSION: “We will meet global standards for telecom services that delight customers through Customer service Focus, Empowered Employees, Innovative Services and cost efficiency “

Porter’s 5 Forces Analysis of Industry

Threats from Competitors: HighThreats from Competitors: High

•Large number of players in the Indian market poses a serious threat• Average Revenue Per Unit (ARPU) in India is decreasing each year due to intense competition faced in the market

•Cut throat competition proving as advantage for Customers•Low Switching Costs•Number Portability option in near future•Lack of differentiation among service providers

Customer Bargaining Power: HighCustomer Bargaining Power: High

Threat of Substitutes: HighThreat of Substitutes: High

• Better services of International players entering India viz. Vodafone• VOIP- Skype, Gtalk, Yahoo Messenger

Porter’s 5 Forces Analysis Cont…..

Threat of New Entrants: LowThreat of New Entrants: Low

•Huge License fees to be paid for entry•Spectrum Availability and Regulatory Issues•High Setup Cost of Infrastructure•Rapidly changing technology

Suppliers Bargaining Power : LowSuppliers Bargaining Power : Low

Outsourcing Deals

Vendors/Suppliers

Features

Networking and Maintenance

Ericsson, Nokia Siemens Network

Ease of Network PlanningPayment linked to service quality and network quality

Information Technology

IBMPayment as a % of revenuesService Level Agreement for quality and deployment

Passive Infrastructure

Indus Towers,Bharti Infratel Reduced CAPEX spending

Increased focus on sharing infrastructure

Call Centre Outsourcing

IBM Daksh,Aegis BPO,Hinduja TMT

Enhanced and consistent customer experienceCommon platform across groups

SWOT Analysis

StrengthsStrengths

- Largest cellular provider in India, also big share in broadband services- Strategic Alliance with Sony-Ericsson, Nokia - and Sing Tel- Has covered the entire Indian nation with its network- Has a good hold over Financial resources

WeaknessesWeaknesses

-Airtel does not has hold over infrastructure eg. own towers- MTN failure: lack of any real emerging market investment opportunity

OpportunitiesOpportunities

-Still there is untapped market – local as well as other emerging markets-Embarking joint venture to create a new independent tower company -To change the revenue-per-minute model to pulse model

Threats Threats-Entry of Foreign players in India with 3G tech. eg. Aircel-Knowledge and technology moved to one of its competitors- Vodafone

Strategic Decisions: Operations Front

Suggestions to Increase Customer Base

Suggestion Resources Acceptability Effectiveness SustainabilityAirtel to Airtel calls, Group packs etc. basically volume based games

Not much and which can be recovered with increased customer base

Will capture new markets and also established ones

Will be really effective if they satisfy different customers with different needs

High with more profits

• Marketing (event sponsors), CSR initiatives• Taking advantage of Melas• Doordarshan enjoys maximum viewership

Not a problem. Rs 150 -200 Crores

Will be more if campaigns are attractive, creative and more retainable in customers mind

Help in brand awareness and brand recall

High

Strategic alliances and acquisitions

Heavy investments (capital and human)

Lesser competition and more resources in pool (human, suppliers etc)

• Innovative value adds can be designed to cover more customers• Access to established network and distribution chain. “Ease of availability”

High

Infrastructure Front

ChallengeChallenge

Country wide expansion but requires huge investment to set their own towers

Decisions TakenDecisions Taken

Sharing of Towers (INDUS): - Rapidly increasing subscriber base- Emerging technology- Sharply rising site rentals- Need for denser coverage due to spectrum constraints- Regulatory and planning authorities- New Tower Restrictions

Infrastructure Front

Decisions taken Contd….Decisions taken Contd….

- Nokia-Siemens as service partner- Huawei Technologies to manage Airtel’s core network- Ericsson to design, plan, deploy and optimize Airtel’s GSM network- IBM to transform its processes and take on the management of its IT infrastructure.

BenefitsBenefits

- Ability to process 1.5 million new customers per month - Optimization of business processes through flexible, standardized integration framework - Outsourcing of technology enables Airtel to focus resources on growing the business - Tie ups enables Airtel to avoid major increases in capital expenditures

Technology Front

3G3G

- Spectrum and licensing- Infrastructure- Pricing - User Conversion- 4G?

Mobile Number PortabilityMobile Number Portability

IPTVIPTV

FINANCIAL ANALYSIS

• EBTDA – Rs. 151 billion up by 33%• Negative only for digital TV (strong competition by

sun TV)• Revenue – Rs. 369 billion up by 37%• Cash profit – Rs. 140 billion up by 27%• Capital Expenditure – Rs. 140 billion• Average Revenue Per User – Rs 305 down from Rs.

324• Net profit – Rs. 84 billionEarning per Share – Rs. 44.67

FINANCIAL ANALYSIS- Contd..

Strategic Decisions- HR Front

ProblemsProblems

• Most of Youngsters leaving within 2 years of joining• Tata Telecom largest talent competitor – 28% of people joining them

StrategiesStrategies

•Revamping of PMS- employee to decide Flexi-benefits, increased Takehome•Rotation policy: Atul Bindal- Telemedia to Telecom Business; Creation of new position of Deputy CEO; Sanjay Kapoor- Mobile to Telemedia & DTH

Suggested StrategiesSuggested Strategies

•Inclusion of Sub-ordinates in PMS• Proper timing of Bonus and Incentive

Strategic Decisions- International Front

Key TrendsKey Trends

• 2007 ( Year of iPhone) – 2008 ( Touch Phones)• Mobile Industry- more than 1 Trillion USD : 80% services & 20% infrastructure• 50% worldwide penetration- 4 B worldwide ( 600 M China & 330 M Ind)• 3G penetration ( Japan – 85%); Mobile Web penetration- 25%

Developed Economies- European UnionDeveloped Economies- European Union

- European telecom sector- major contributor in economy- Highly concentrated: 4 players capturing 61%- Favours Infrastructure Competition

Trends to Watch out for Airtel- Developed EconomiesTrends to Watch out for Airtel- Developed Economies

• Consolidation in Sector: European operators achieved acquisitions through overseas instead of Regional consolidation• Convergence in Sector: Mobile & Services platforms merging• Go out with Locally responsive International Strategy

International Front Contd.. Developing Econ.

Differentiating FactorsDifferentiating Factors

- Growing middle class income- Small premium segment- Increasing rate of Urbanization- Young population compared to most developed nations

Key Trends to Watch out for Airtel- Developing EconomiesKey Trends to Watch out for Airtel- Developing Economies

- Make Broadband assessible to everyone- Look out for Government subsidized deployments- Korean Govt. offsets 50bn US$ to subsidy fibre; Govt. tax incentives

International Front Contd.. Developing Econ.

Recent Developments of Airtel Recent Developments of Airtel

- Announcement of online desktop for broadband- started in 95 countries- Australian Japan Cable and Airtel partnership- offer services in future - Overseas Recharge Service- Recharge available online in 150 money ex.- Looking out for merger with MTN; Started Operations in Sri Lanka

Proposed Airtel StrategyProposed Airtel Strategy

- Should go for Polycentric Approach- while costly may serve - Should look out Merger and Acquisitions - Look out for 3 things while short listing developing countries- political stability, regulatory aspect and easy licensing- Go to Disruptive Innovation/ Innovating strategies eg. TataDoCoMo

Strategic Decisions: Marketing Front

Changing Strategy TimelineChanging Strategy Timeline

Marketing MixMarketing Mix

•Product•Airtel Pre-paid•Airtel Post-paid•Blackberry Wireless HandheldValue Added Services (VAS)•Price•Customer based pricing strategies.•Flexible pricing mechanism Controlled by TRAI.•Place•It has wide and extensive presence even in the remotest areas•Airtel Customer Care Touch Points Distributors like : Paan shops, grocery stores, chemists, outlet etc•Promotion•Large scale print and video advertising.•Big celebrities like SRK and Sachin are roped in to endorse the product.•In 2002 Airtel got its Signature tune from A.R. Rehman, this signature tune is perhaps the most downloaded tune in India.Provides innovations such as Bollywood movie premiers, music services such as ring back tones & many more.

SWOT Analysis

StrengthsStrengths

Market share.Pan India Footprint.The only operator in India other than VSNL having international submarine cables.Customer care.Promotions.

WeaknessesWeaknesses

Price Competition from BSNL and MTNLLosing lead on technical expertise.

OpportunitiesOpportunitiesThe fast extending IPLC market. Latest technology and low-cost advantage. Growth of mobile phone users.Untapped Rural Market.

Threats ThreatsMarket Maturity in basic telephony segment.

Marketing Front- Future Perspective

SegmentationLong Term OutlookProduct InnovationQuality StrategyHeavy Advertising & Media PioneerEffective Sales PromotionCompetitive ToughnessCustomer care New tariff plans.More value added services.Increase in visibility and coverage The AirTel - AirTel advantageNew innovative packagesMore of the e-factor

Further SuggestionsFurther Suggestions

• Tele-density UtilisationIndia (1.29), US (60.73)CAGR of 23.44% is required to reach network that of US

• Partnership in developing economies• Technology Leadership• Constantly evolving Value Added Services