BHARTI AIRTEL(GSM MOBILE SERVICES)

STRATEGIC MANAGEMENTTERM PAPER

Sumit Srivastava Cohort 7 Learn Team 12 B

Company Background• Established in 1995 by Sunil Bharti Mittal, currently the Chairman and MD of Airtel

• Telecom giant Bharti Airtel is the flagship company of Bharti Enterprise

• Bharti Airtel Limited, (commonly known as Airtel), is India’s largest integrated and the first private telecom services provider with services in all the telecom circles

• Bharti Airtel is structured into three strategic business units - Mobile services, Telemedia services, Enterprise services and Digital TV services*

• The mobile business provides mobile & fixed wireless services using GSM technology

* This study is based on the Airtel Mobile Services only

Target Market(s)Airtel has two major customer segments (demographically) in the mobile telephony services:

• Students and young professionals who use the prepaid services (use convenient recharge/load)

• Premium and upper middle class customers, who value time and have the paying capacity. They are mostly post-paid users (billed on a monthly basis)

Airtel has mobile services in all the telecom circles in India (geographically). The concentration is mostly in urban and sub-urban areas where mobile users are more)

Competition• Airtel is the market leader in GSM mobile services• Other key players along with the percentage market share has been shown in the table and pie chart* below

Bharti Airtel28%

Vodafone24%

IDEA16%

BSNL15%

Aircel10%

Others8%

* GSM market share as of Aug 2011 (based on number of subscribers)Source: http://investorzclub.blogspot.com/2011/04/telecom-companies-market-share.html

Telecom Company No of Subscribers

Bharti Airtel 171,846,824

Vodafone 144,144,031

IDEA 98,441,714

BSNL 90,622,219

Aircel 59,191,661

Others 47,512,178

PEST Analysis/Factors

ECONOMIC FACTORS

• Fastest Growing Sector – CAGR 22% (2002-07)• Tariff rates declining since the year 2000• Declining ARPU but increasing subscriber base

TECHNOLOGICAL FACTORS

• e-commerce portal•R&D driven industry• Introduction of newer products/ services/ plans• 3G, 4G and high speed broadband in the market

POLITICAL FACTORS

• Regulatory bodies – DoT & TRAI• Mobile number portability introduced in January 2011• Lack of Transparency in Spectrum & License Allocation

SOCIAL FACTORS

•Customers notion regarding brand and status symbol• Cost factor is major concern to customers• Likes and dislikes of a teenager and adult not the same

Porter’s 5 Forces Analysis

Industry RivalryHIGH

Threat of New Entrants

HIGH

Bargaining power of

BuyersHIGH

Bargaining power of Suppliers

HIGH

Threat of Substitutes

HIGH

As per the Porter’s 5 forces study, the Indian Telecom Industry is Highly Unattractive

Strategic Maps

• Airtel is good in quality but has relatively higher prices (hence lower score)• BSNL has least price (being government division), but lacks the call quality• Vodafone and Aircel are priced at similar level but differ in call quality

Call Quality

Pric

e

High

Medium

Low

HighMediumLow

Strategic Maps

• Airtel has substantial network coverage, but at a higher price• BSNL has highest network coverage and least price• Aircel has lowest network coverage and medium level price

Network Coverage

Pric

e

HighMediumLow

High

Medium

Low

Strategic Maps

• Airtel is considered the best brand with high no of products/services/plans offered• BSNL lacks the brand image and is very low on the no of services/plans offered• Idea and Aircel lie in the medium range, lower than Vodafone and Airtel

Brand Image

Prod

uct

Offe

ring

s

High

Medium

Low

HighMediumLow

Strategic Maps

• Airtel and Vodafone provide the best customer services, with large no of outlets• Idea has got higher reach than Aircel with similar customer service• BSNL is low on both customer service and reach

Reach / No of Outlets

Cust

omer

Ser

vice

s

High

Medium

Low

HighMediumLow

Key Success FactorsThe key success factors for the industry are as below:

• Price (Threshold)

• Customer Services

• Brand Image

• Network Coverage

• Call Quality

• Reach/No of outlets

• Product Offerings*

* This includes value added features like international roaming, international calling, CUG services, BlackBerry and iPhone connection and services etc

Competitive Matrix

Key Success Factors Weightage Airtel Vodafone IDEA BSNL Aircel

Network Coverage 25% 8 7 7 9 4

Call Quality 25% 8 9 6 6 6

Product Offerings 15% 9 8 7 3 6

Brand Image 15% 9 8 6 4 6

Reach / No. of Outlets 10% 9 8 6 2 4

Customer Service 5% 9 8 5 3 5

Price 5% 6 7 6 9 7

Score 100% 8.35 7.95 6.35 5.85 5.3

Market Share 28.09% 23.56% 16.09% 14.81% 9.68%

• Network coverage and call quality are the most important factors in the telecom market• The products/plans offered, along with the brand image also play an important role for customers decision making process• Price is a threshold as similar prices are charged by all private players (BSNL is Govt. owned)

Triangle Model

Key Success Factors

•Price• Customer Services• Brand Image• Network Coverage• Call Quality• Reach/No of outlets•Product Offerings

Core Competencies

• Sales & Promotions• Brand Image• Market Share• Resource availability• Product quality

Value Proposition

Quality, Value, Consistency and Reliability – Anywhere, Anytime

Vision / Mission

Ladder Model

1. Market Share2. Distribution3. Brand

1. Innovative pricing

1. Network Infrastructure

2. Distribution

1. Customer Service

1. Market Leader2. Product

Innovation

1. Basic voice and data services

1. Network Coverage

2. Product Offering

1. Market Share2. Distribution

system

1. Brand Image2. Products & VAS3. R&D capability

Resources

Incompetency

Competencies

Peripheral Comp.

Strategic Comp.

Threshold Comp.

Distinctive Comp.

Comp. Advantage

Sustainable Comp. Advantage

Vision, Mission, Values

By 2015 Airtel will be the most loved brand,

enriching the lives of millions

VISION

“ 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”

MISSION

• Empowering People• Being Flexible• Making it Happen • Openness and transparency• Creating Positive Impact

VALUES

1. Increase Market Share: Continue to grow at a higher rate (42.1% in 2010-11) than the industry growth rate (7%) to maintain market leadership

2. Dividends for Shareholders: Pay progressive dividends to the share holders (4,428 million INR in 2010-11)

3. Cash Reserves: Maintain cash reserves to invest in R&D and network development (cash and cash equivalent in 2010-11 was 9,575 million INR). PPE increased more than 9 folds in 2010-2011

1. Technical Enhancement: Equip technically to stand against competitors (extension of 3G to all 22 circles in India & introduction of 4G in the top 10 cities)

2. Bottom of the pyramid: Provide connectivity to in the low income group in rural area targeting a teledensity of more than 50% is currently 33.8% only

3. Increase Usage:By value added services like m-commerce (mobile wallet), Airtel can increase it’s ARPU by 20% from the current level of Rs 194 per month

Long Term ObjectivesSTRATEGIC FINANCIAL

Continue market leadership and increase

the market share

Grow at higher than industry rate and create value for shareholders

New Key Success Factors

Key Success Factors Weightage Airtel Vodafone IDEA BSNL Aircel

R&D Performance 30% 9 8 7 5 6

Rural Market Focus 25% 8 6 5 9 5

Partnership 20% 9 8 6 3 4

Network Coverage 10% 9 7 7 9 4

Call Quality 10% 9 9 8 6 7

Product Offerings 5% 9 9 8 3 8

Score 100% 8.3 7.2 6.35 6.05 5.45

Market Share * 35.00% 25.00% 15.00% 10.00% 8.00%

* This is the expected market share based on the new key success factors

• R&D is required to provide higher bandwidth data services to high income group• Rural market still remains quite unexplored, which has huge potential customer base• Partnership with mobile phone manufacturers can help in starting the concept of contract based service plans (especially for lower income group)

New Triangle Model

Key Success Factors

• R&D Performance• Rural Market Focus•Partnership• Network Coverage•Call Quality• Product Offerings

Core Competencies

• Technological Capabilities• m-Commerce• Brand Image• Market Share•Product quality

Value Proposition

Connecting people across the country with latest

technology and high quality service in all states, cities,

towns and villages

Vision / Mission

Strategic Options

SWOTAnalysis

S1 – Current Market ShareS2 – Brand ImageS3 – R&D CapabilitiesS4 – Distribution NetworkS5 – Network Coverage

W1 – Infrastructure issuesW2 – Higher price

O1 – 3G expansionO2 – 4G introductionO3 – Low rural penetrationO4 – m Commerce

1-Pan India 3G service(S1,S3,O1)2-Introduce 4G in all tier 1 cities (S1, S2, S3, O2)3-Rural sector with tele-density of only 33.8% (S1, S4, O3)4-Value added services like mobile wallet and international SIM etc(S2,S3,O4)

1 – Improve the infrastructure in order to support technical enhancements (W1, O1, O2)2 – Innovate to reduce price for rural expansion (W2, O3)

T1 – Increased competitionT2 – Regulatory IssuesT3 – Vulnerability to recessionT4 – Mobile number portability

1 – Improve time to market to handle growing competition (S3, S5, T1)2 – Increase network coverage to support MNP (S5, T4)

1 – Reduce price to match the competitors (T1, W1)2 – Maintain cordial relation with the government (T2)3 – Improve infrastructure in order to retain customers not to move out by MNP (W1, T4)

THREATS

OPPORTUNITIES

STRENGTHS WEAKNESSES

Options Filter

StrategicOptions

Long Term Objectives

Value Proposition

Organizational Capability

Mission / Values

TotalScore

30% 30% 30% 10%

3G Expansion 8 9 9 9 8.7

4G Introduction 9 5 4 6 6.0

Rural Penetration 8 7 7 7 7.3

Value Added Services 7 9 8 9 8.1

1. Rural Penetration: The telecom rural penetration at 33.8% at end of March 31, 2011 offers huge growth potential in terms of both customers and usage

2. 4G Introduction: The upper segment customers are looking forward for high speed data availability on the move

1. 3G Expansion: The 3G services are currently being offered in the tier 1 cities. They should be extended to other cities/towns as well

2. Value Added Services: With the current teledensity of almost 75%, VAS like the m-commerce and international SIM provide a way ahead for mobile industry

RecommendationsSHORT TERM LONG TERM

Telecom House Framework

Core Competencies

Vision / Mission / Values

Value Proposition

Competitive Advantage

Sustainable Growth

Market Leadership

New

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References• Bharti Airtel Annual Report 2010 – 2011

• https://www.airtel.in

• http://www.airtel.in/wps/wcm/connect/about+bharti+airtel/Bharti+ Airtel/Investor+Relations/Company+Profile/PG_Company_Profile?countrytabs=1

• http://investorzclub.blogspot.com/2011/04/telecom-companies-market-share.html

• http://www.marketingteacher.com/swot/bharti-airtel-swot.html#

• http://www.financialexpress.com/news/bharti-airtel-says-q4-india-arpu-drops-12/786275/

THANK YOU!!