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Mobile Telephony in India

The mobile telephony revolution started in India when the government decided to allowprivate sector participation in the Indian telecom sector. In 1994, the Department ofTelecommunications (DoT), Government of India (GoI), issued licenses to private

operators to start mobile services in the four Metropolitan cities of Delhi, Mumbai,Chennai, and Calcutta (now Kolkata).

Emerging Market Champion

In the 2000s, telecommunications (telecom) company Bharti Airtel Limited (BAL) was themarket leader in the Indian telecom market. It had established itself as the leader in themarket by differentiating itself with its focus on building a strong brand through innovationin sales, marketing, and customer service, and an innovative cost effective business model.Analysts also credited BAL with negotiating the regulatory hurdles in this emerging marketand competition very effectively. This enabled it to become profitable despite the Indiantelecom market having the lowest tariffs in the world.

Some analysts opined that BAL's unique business model had become the benchmark foremerging markets. Mobile telephony in India was experiencing the fastest growth in theworld and India was already one of the leading markets in terms of mobile subscriber base.Despite Average Revenue per User (ARPU) figures in the country being quite lowcompared to many other markets, it was viewed as an attractive market as mobilepenetration of the market, particularly in the huge rural areas in India, was still low. Withthe developing market in the West reaching high levels of saturation (70% in US and 100%in some European markets), many global telecom operators were looking at emergingmarkets for their growth and this made India a prime target market for these firms. Themarket in India was also expected to witness many changes with the introduction of new

technologies and mobile number portability.

In early 2008, BAL, which still dominated the Indian telecom market and was the world'stenth largest telecom company, was also readying itself to replicate its success story insome other emerging markets.

On February 13, 2008, Bharti Airtel Limited (BAL), the leading telecommunications(telecom) company in India, crossed the 60-million customer mark.

BAL had crossed the crucial 50 million subscriber mark in the fourth quarter of 2007 and

had become the tenth largest telecom company in the world in terms of subscriber base.(Refer to Exhibit I for the world's top 10 wireless telecom operators) The wireless segmentconstituted 96% of BAL's total customer base.

According to the Cellular Operators'Association of India (COAI), BAL retained itsleadership position in the Indian telecom market with a market share of 31.88% in 2007.The valuation of BAL stood at US$ 40 billion as of February 2008. BAL's spectaculargrowth matched the growth in the Indian telecom sector, which was the fastest in the


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world. The Indian telecom sector was adding 8 million customers per month as of early2008.

On becoming the tenth largest telecom company in the world, the CEO of BAL ManojKohli (Kohli), said, "The last journey for first 50 million (customers) was completed within

12 years of starting operations in November 1995. This puts Bharti Airtel among the toptelecom companies in the world. Our next target is to reach 100 million marks by 2010."

BAL was the only small initial entrant in the Indian telecom market which managed tosurvive consolidation in the sector. Despite tough competition from other privatecompanies such as Hutchison Essar Ltd (Hutch), Reliance Communications Ltd (Reliance),Tata Teleservices Ltd (Tata), and the state-owned Bharat Sanchar Nigam Ltd (BSNL), itemerged as the undisputed leader in the Indian mobile telecom market.

New Challenges and Competitors

Since 2007, BAL had been facing serious threats to its leadership position. On the onehand, there was the onslaught from global players such as Vodafone and Virgin Mobile,and on the other, the threat from established Indian companies such as RelianceCommunications Ltd., Tata Teleservices Ltd., and the state-owned Bharat Sanchar NigamLtd (BSNL). Moreover, the market was expected to witness the entry of some more Indianand foreign companies. BAL had responded to investing heavily in expanding its network,technology, and marketing. It was trying to cover all segments of the population -from thetech-savvy youth population who coveted the latest value-added services (VAS) to theBottom of the Pyramid (BoP) segment who would be satisfied with a low-costoffering.

When Vodafone acquired Hutch, BAL faced the first major threat to its supremacy in theIndian mobile market since the entry of Reliance into this market. Reliance was not able toovertake BAL as the CDMA technology it had adopted did not do too well in the Indiantelecom market...

Countering the Threats - Network Expansion

BAL had focused on differentiating itself in the Indian telecom market by ensuringcustomer delight and a cost-effective business model -a business model of being profitabledespite having the lowest tariff in the world.

BAL's various initiatives helped it attain a dominant position in the market (Refer to TableII for the top mobile telecom operators in India) As of March 2008, its ARPU was US$ 10,higher than that of other operators in India.

BAL focused on expanding its network coverage all over the country before other playerscould expand on a big scale. In February 2008, it announced an annual investment plan ofUS $ 2 billion to expand its network over the next 3 years. This was substantially higherthan its average annual investment plans of US$ 1.5 billion. BAL planned to add anadditional 30,000 base stations to its existing 40,000 base stations for the fiscal year 2007


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and thereby cover 70% of the country. Nearly 50 to 60% of the future expansion was to bein the rural areas.

By early 2008, BAL was not only the dominant player in the Indian market but also had aninternational presence in Seychelles through its subsidiary Telecom Seychelles Ltd., and

Europe (Channel Islands) through its subsidiaries Jersey Airtel Limited (JAL) andGuernsey Airtel Limited (GAL).

Outlook

Analysts felt that its success notwithstanding, BAL faced some challenges to its leadershipposition in the Indian telecom market. It had to focus on devising aggressive strategies tocontinue its dominance and grow at the same rate at which it had been growing...

Issues:

Understand how Bharti Airtel Ltd. tapped the opportunities in the Indian telecom sectorand established itself as the market leader.

Analyze the booming telecom sector in India that was experiencing high growth rates,with special emphasis on the competitive landscape in the sector.

Understand the opportunities that emerging markets such as India offer to global businessenterprises.

Understand the issues and challenges faced by organizations operating in emergingmarkets.

Questions:1. Analyze the business environment of booming telecom sector in India that wasexperiencing high growth rates, with special emphasis on the competitive landscape in thesector.2. Discuss the opportunities and the threats for Bharti Airtel Limited in the current telecomscenario.3. Highlight the present business strategies adopted by Bharti Airtel Limited for counteringthe threats.

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