Environmental Scanning

Report
on
Bharti Airtel
• Incorporated on July 7, 1995
• Largest Private Integrated Telecom Company in
India
• 4th Largest Wireless Operator in the World
• Largest Telecom Company listed on Indian Stock
Exchange

2
Milestones
1995-1996 2003-2004
• Launches Airtel in Delhi & HP • SA with IBM & Ericsson
• BT acquires stakes in Airtel • Launches Blackberry
1999-2000 • First private player to launch
• Becomes largest private mobile service in J&K
telecom player 2006-2007
• JV with Singtel • SA with Google,
2001-2002 • SA with Microsoft
• Launches Indiaone • Forays into Srilanka and USA
• Launches India’s first private
submarine cable
• Initial IPO
• Introduces AR Rehman
Signature Tone
• Airtel_Jingle_-_FluteOnly_-_Original.mp3
The Company is first :
• To launch full roaming service on pre-paid in the
country.
• To launch 32K SIM cards.
• In Asia to deploy the multi band feature in a wireless
network for efficient usage of spectrum.
• To deploy Voice Quality Enhancers to improve voice
quality and acoustics.
• Telecom company in the world to receive the ISO
9001:2000 certification from British Standards
Institute.
Awards
• CNBC-TV18 India Business Leader Award for the Outstanding
Company of the year, 2007
• Top honours at the NDTV Profit Business Leadership Awards
2007
• Among the top 10 best performing companies in the world
according to BusinessWeek IT 100 list
• "Indian Mobile Operator of the Year 2005”
• 'The Best Asian Telecom CEO' award.
• Asia's 'Best GSM Carrier’
Integrated Telecom Company
Mobile Services  Enterprise Services
– Mobile and fixed – Internet
wireless service – VPN
– GSM technology – IPLC
– Value added – VSAT
services like Hello – Audio & Video
Tunes, GPRS, Voice conferencing.
Mail, call
conference, call  Telemedia Services
wait, call divert, – Fixed Line
SMS – Broadband
– DTH
6
Business Segments
Indian Telecom Sector
• Fastest Growing Sector – CAGR 22% (2002-07)
• Second Largest Telecom Market
• Lowest Tariffs
• Low Teledensity
250 24

Teledensity (in percent)

Subscribers (in million)

18.3 19.9 20
200
12.8 16
150
9.1 12
225.21
100 7.0
206 8
5.1 140.3
50 98.4 4
53 76
0 0
2002–03 2003–04 2004–05 2005–06 2006–07 2007–08 (as
of June
2007)
Telecom Subscriber Base Teledensity

8
 INDIAN CONSUMERS GET THE WORLD’S
LOWEST MOBILE TARIFFS

0.25
0.23
0.22

0.2 0.19

0.17
0.16
USD

0.15

0.11 0.11 0.11

0.1 0.09

0.05 0.05
0.05 0.04
0.03
0.02

0
Philippines

Hong Kong

Thailand
Malayasia
Argentina
Belgium

Taiwan

Pakistan

China
France

Brazil
Italy

India
UK

9
Source: Merrill Lynch Global Matrix - Q1 2007
Health Indicators
• Average Revenue Per User (ARPU)

• Churn
• Minutes of Usage
• Total Customers

>>
ARPU TRENDS
 HIGHEST MINUTES OF USAGE

461

320 323 326

315

179
159

84

Russia M alaysia Australia Korea Singapore China Thailand India

<<<
Source: Merrill Lynch Global Matrix – Q1 2007
SUBSCRIBER BASE
• Average %age Growth
=80%
Customer Base- Airtel

70.00
60.00
Total Subscribers (in Mn)

50.00
40.00
Customer Base
30.00
20.00
10.00
0.00
03
04
05
06
07
08
20
20
20
20
20
20

Year
• <<<
Health Indicators
Parameters Unit Dec. 2008 Sept. 2008 Jun-08 Mar-08 Dec. 2007 Sept. 2007 Jun-07

Customers 000s 88,270 79,988 71,777 64,268 57,341 50,950 44,676

Average Revenue
Per User
(ARPU) INR 324 331 350 357 358 366 390

Minutes of Use
(MOU) Minutes 505 526 534 507 474 469 478

Post-paid
Voluntary
Churn % 1.10% 1.10% 1.00% 1.00% 0.90% 1.10% 1.10%

Post-paid
Company
Initiated
Churn % 1.20% 1.40% 1.40% 1.50% 1.80% 2.10% 2.50%

Pre- paid Churn % 2.90% 3.20% 3.80% 4.30% 3.90% 3.80% 4.00%
STEEP ANALYSIS

Telecom Environment
 Social Factors
Demand for VAS & Broadband
services Among Youth

28 % Urban Population

Rapid Urbanization

Rising Income level

Out of town employment

Outstation trips 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

 Threat from VOIP

 Next Generation
Economic Factors
GDP growth rate - Averaged around 7.9 % from 2002-
2008

Growing per capita income/disposable Income

Rs 18,885 in 2002 to Rs 38,084 in 2008

Falling Handset Prices (ASP= INR 3150)

Falling Tariffs
Regulatory Framework
 TRAI, DoT, TDSAT
 74% FDI Investment
 High taxes etc in the telecom industry : 17-26%
 Lack of Transparency in Spectrum & License
Allocation
 3G Policy & MNP still Pending

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COMPETITOR ANALYSIS
Major Players
Customer Base Comparison
Financial Comparison

OperatingProfit Total Assets Earnings per

Net Sales (INR (INR Net Profit (INR (INR Share
Competitors Information billion billion) billion) billion) (INR)

Bharti Airtel 257. 61 106.62 62.44 268.12 32. 9

Reliance Communications 147. 92 61.73 25.86 451.26 12. 53

Idea Cellular 67. 2 24.91 10.44 100.61 3. .96

Tata Communications 32. 83 6.45 3.04 73.25 10. 68

Porter’s 5 Forces

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1. Threat from Competition
Wireless Market – Top 4 garnering 75%
market share

HIGH

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2. Customer Bargaining Power
 Lack of differentiation among HIGH

Service Providers
 Cut throat Competition
 Low Switching Costs
 Number Portability will have –ve
Impact

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3. Suppliers Bargaining Power
LOW

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4. Threat of Substitutes
 Landline DIMINISHING
HIGH
MARKET

 CDMA

 Video Conferencing
BROADBAND
SERVICES
 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

LOW
 Highly regulated

 Spectrum Availability & Regulatory Issues

 Infrastructure Setup Cost - High

 Rapidly changing technology

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SWOT ANALYSIS
Strengths Weakness
• Pan India Presence • Outsourcing of Core
• Largest Telecom Player in Systems
India • Price Competition from
• Strategic Alliance with BSNL and MTNL
Sony-Ericsson, Nokia - and • Untapped Rural Market
Sing Tel • Absence of own towers.
• Strong Financials
• Very focused on telecom.
• Leadership in fast growing
cellular segment.
• The only Indian operator,
other than VSNL, that
has an international Source: CMIE Report NOV 08
submarine cable.
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SWOT ANALYSIS
Opportunities Threats
• Rural Markets • Introduction of MNP
• International Markets • Intense Competition &
• 3G/ Wimax Shortage of Bandwidth
• Current Tele-Density is • Substantial payment
still low among for 3G licensing
developing countries
• Saturation point in
• Low Broadband
Penetration Basic telephony
service

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BCG Matrix for Bharti Airtel
HIGH

IPLC
CELLULAR SERVICE

ISP
BROADBAND

BASIC TELEPHONE
(Fixed Line)
LOW

HIGH LOW
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ANSOFF MATRIX
MARKET PRODUCT DEVELOPMENT
PENETRATION
IPLC PRODUCTS
Existing ENTERED IN BROADBAND AND
Market FIXED LINE MARKET

MARKET DIVERSIFICATION
DEVELOPMENT

LOOKING FOR OVERSEAS MARKET OUTSOURCING

New AND RURAL MARKET
Market

Existing New
Product Product
FINANCIAL REPORTS
 REVENUE TRENDS
Financial Metrics -Airtel • Average %age Growth
=55%
300,000
250,000
200,000
Revenue (in Mn)

150,000 Series1
100,000
50,000
0
2003 2004 2005 2006 2007 2008
Year
 EBITA TRENDS
• Average %age Growth
Financial Metrics-Airtel =76%

120,000
100,000
80,000
EBITDA (in Rs Mn)

60,000 Series1
40,000
20,000
0
2003 2004 2005 2006 2007 2008
Year
FINANCIAL GROWTH
Financials Snapshot-Performance Indicators

Particulars 2008

Revenue (in Rs Mn) 2,70,122

EBITDA (Rs. Mn) 114,018

PAT (Rs. Mn) 63,954

EPS (Basic) Rs. 34.23

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Financial Snapshot - Ratios

Telecom
Key Ratios Airtel Industry

Debt-Equity Ratio 0.38 0.35

Long Term Debt-Equity Ratio 0.35 0.3

ROCE (%) 34. 88 9.72

RONW (%) 39. 53 10.11

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Growth Factors

40
Road Map – Growth Path
VPN &
VoIP

WiMAX

3G

2G/2.5G

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THANK YOU !!

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