Mrinal Sharma (419) Aliasgar Navagharwala (425) Shikhar Tyagi (423) Jai Awatramani (402)

Index
Introduction to Indian Telecom Industry Introduction to Bharti Airtel Financial Analysis Marketing Analysis Porters 5 forces analysis BCG, GE Matrix Future

INTRODUCTION

Evolution of Telecom In India

Independent regulator, TRAI, was established BSNL was established by DoT ILD services was opened to competition Go-ahead to the CDMA technology 1994 1992 1997 1999 2000 2002 Internet telephony initiated Reduction of licence fees Number portability Intra-circle merger was proposed guidelines were established Attempted to (pending) boost Rural telephony 2004 2005 2006 Broadband policy 2004 was formulated targeting 20 million subscribers by 2010 2007

Private players were allowed in Value Added Services

Calling Party Pays (CPP) was implemented

INDIA

2003 Unified Access Licensing (UASL) regime was introduced Reference Interconnect order was issued

National Telecom Policy (NTP) was formulated

NTP-99 led to migration from highcost fixed license fee to low-cost revenue sharing regime

FDI limit was increased from 49 to 74 percent

Decision on 3G services (awaited)

Department of Telecommunication (DoT) is the main body formulating laws and various regulations for the Indian telecom industry. ILD International Long Distance

Changing Demographics
Demand for VAS & Broadband services Among Youth 28 % Urban Population Rapid Urbanization Rising Income level
Source: Mckinsey Report

Technologies
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
2G/3G

VoIP

Technology

CDMA

WIMAX

Telecom Ecosystem
Indian Telecom Industry Framework
Indian Government Bodies
Independent Bodies

Wireless Planning and Coordination (WPC) Department of Telecommunications

Handles spectrum allocation and management

Telecom Regulatory Authority of India (TRAI) Telecom Disputes Settlement and Appellate Tribunal (TDSAT)

Independent regulatory body

DoT Licensee and frequency management for telecom

Telecom disputes settlement body

Telecom Commission
Group on Telecom and IT (GoT-IT)

Exclusive policy making body of DoT

Handles ad hoc issues of the telecom industry

Association of Unified Telecom Service Providers(AUSPI)

Regulatory framework
 74% FDI Investment
ADC

Regulation

 Lack of Transparency in Spectrum & License Allocation

USO

UASL

 3G Policy & MNP still Pending

GROUP 7

Industry
Subscriber base- 330m Wireless penetration- 14.7% CAGR (wireless)- 68% Second Largest Telecom Market Lowest tariff charges in the world Wireless Subscribers 315.3 Mn Wireline Subscribers 38.4 Mn Teledensity 30.6 Share in Asia Pacific mobile phone market- 6.4 Mobile subscriber base growth rate- 82.2%, 42% of the population below 20 9 GSM and 5 CDMA players in 19 circles and 4 metro cities connecting 2000 towns Bharti Airtel largest player with presence in all 23 circles

Vision 2010
By 2010 Airtel will be the most admired brand in India:
Loved by more customers Targeted by top talent Benchmarked by more businesses

Vision 2020
To build India's finest business conglomerate by 2020 Supporting education of underprivileged children through Bharti Foundation Strategic Intent:
To create a conglomerate of the future by bringing about Big Transformations through Brave Actions.

Mission
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

Organization Structure

Company History
1995 mobile service brand in Delhi and HP and BT acquires a stake 1996-97 Formed Bharti BT VSAT Ltd 1999-2000 Acquires JT Mobiles in Karnataka, AP and Punjab 2001-02 Launches IndiaOne , 8 new licenses in the East, becomes largest operator, launches Airtel tune 2003-04 Association with Ericsson, IBM, RIM 2006-07 Forays into Sri Lanka and US, tie up with Google and Microsoft

Subsidiary Companies
Bharti Hexacom Bharti Comtel Bharti Aquanet Bharti Broadband Bharti Infratel Bharti Telemedia Bharti Airtel(UK,US,Canada, Hongkong, USA, Lanka)

Airtel- SBUs
Mobile Service across 23 circles 4676 census towns and 207327 non-census towns and villages covering 59% of population Market share- 22.9% 85mn subscribers from 25m in Jul 2006

Airtel- SBUs contd.

Broadband & Telephone Services (B&TS) Service across 94 cities across 16 circles 1.75 m voice and 0.59 m broadband customers

Airtel- SBUs contd.

Enterprise Network -Carriers 49000 kms of fiber Submarine cable landing station at Chennai Association with SEA-ME-WE-4 with 15 more operators

Contd.
-Corporates
Deep domain knowledge exploitation for Banking, BFES, IT/ITES, Media, Education, Retail Integrated services for key corporate accounts

FINANCIALS

Share Capital
Rs 8,340.15 million raised through the IPO 2002 Went Public Shares in issue
1,898,101,604 as at September 30, 2008

Market Capitilization
Approx. Rs. 1,371 billion

P/E
19.98

EPS
36.16

Some Key highlights

Balance Sheet Total Share Capital Net Worth Total Debt Net Block Investments Net Current Assets Total Assets Amount in Rs. Cr 1897.91 20241.49 6570.34 19030.65 10952.85 -5922.94 26811.84 Net Sales Other Income PBDIT Net Profit Income Statement (Sep '08) Quarterly 8274.37 28.43 3151.06 1604.78 (Mar '08) Annual 25703.51 235.86 10736.89 6244.20

Key Ratios
Key Ratios - Airtel Debt-Equity Ratio Long Term Debt-Equity Ratio ROCE (%) RONW (%) Mar-08 Mar-07 Mar-06 Mar-05 0.38 0.35 34.88 39.53 0.54 0.5 34.07 43.04 0.83 0.76 22.55 31.82 0.6 0.5 23.96 23.88 Mar-04 0.07 0.03 0.16 -0.27

Key Ratios - Industry Debt-Equity Ratio Long Term Debt-Equity Ratio ROCE (%) RONW (%)

2007 0.35 0.3 9.72 10.11

2006 2005 2004 2003 0.21 0.27 0.34 0.36 0.19 0.24 0.29 0.33 10.28 8.25 8.43 3.07 10.62 10.87 6.76 0.18

GROWTH!!!!!!!!!

Subscriber Growth
Group Company wise % market share - Nov'2008 Sr, No. 1 2 3 4 5 6 7 8 9 Name of Company Bharti Airtel Vodafone Essar BSNL IDEA Aircel Reliance Telecom Spice MTNL BPL All India Total Sub Figures 8,29,20,593 5,87,64,164 4,04,87,511 3,28,09,720 1,53,75,258 95,82,695 37,05,894 38,21,277 18,82,324 24,93,49,436 % Market Share 33.25% 23.57% 16.24% 13.16% 6.17% 3.84% 1.49% 1.53% 0.75% 100.00%

Customer Growth across the years

Year Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Overall Subscriber Base 2,61,54,405 4,10,25,940 6,91,93,321 12,14,31,166 18,44,13,702 Airtel Subscriber Base 42,16,317 1,04,78,585 1,95,79,208 3,71,41,210 6,19,84,721 Market Share 16.12087 25.54136 28.29638 30.58623 33.61178

Income and Expenditure(Rs. Cr)

30000 25,874.20 25000

20000 17,987.30

Big Margin

15000

15107.75

11,272.22 10000 6,446.06 5000 5,156.34 7206.71

10621.14

63.15 0 Mar '04

35.76 Mar '05 Mar '06 Mar '07 Mar '08

Total Income (Rs. Cr.) Total Expenses (Rs. Cr.)

Operating Profit (Rs. Cr.)

Operating Profit (Rs. Cr.)

10662.41

7260.54

4038.57 2997.67 27.22 Mar '04 Mar '05 Mar '06 Mar '07 Mar '08

Stock Movement

Share Price Competitors Differentials

Company Name Bharti Airtel Reliance Comm Idea Cellular Tata Comm MTNL TataTeleservice Spice Comm Tulip Telecom HFCL Infotel Last Price 722.30 249.20 53.50 495.15 74.85 20.15 36.00 501.20 7.45 % Chg -2.69 4.18 0.09 0.53 -2.54 2.03 10.43 15.66 6.28 52 wk High 1,063.00 844.00 148.90 783.00 219.45 65.00 77.30 1,225.00 59.70 52 wk Low 484.00 148.60 34.05 320.00 51.75 12.50 23.25 385.00 5.55 Market Cap (Rs. cr) 137,107.31 51,435.55 16,585.51 14,111.78 4,715.55 3,822.84 2,483.73 1,453.48 391.51

Net Sales Year End 2008

Company Name Bharti Airtel Reliance Comm Idea Cellular MTNL Tata Comm TataTeleservi ce Tulip Telecom Spice Comm HFCL Infotel Last Price 722.30 249.20 53.50 74.85 495.15 20.15 501.20 36.00 7.45 Change -20.00 10.00 0.05 -1.95 2.60 0.40 67.85 3.40 0.44 % Change -2.69 4.18 0.09 -2.54 0.53 2.03 15.66 10.43 6.28 Net Sales (Rs. cr) 25,761.11 14,792.05 6,719.99 4,722.52 3,283.30 1,707.19 1,216.44 957.85 248.88

Net Sales(Rs. Cr)

30,000.00 25,761.11 25,000.00

20,000.00

15,000.00

14,792.05

10,000.00 6,719.99 5,000.00 4,722.52 3,283.30 1,707.19 957.85 0.00 Bharti Airtel Reliance Comm Idea Cellular MTNL Tata Comm TataTeleservice Spice Comm

Net Profit
Company Name Bharti Airtel Reliance Comm Idea Cellular MTNL Spice Comm Tata Comm Tulip Telecom Goldstone Infra Northeast Sec TataTeleservice HFCL Infotel Last Price 722.30 249.20 53.50 74.85 36.00 495.15 501.20 17.55 12.08 20.15 7.45 Change -20.00 10.00 0.05 -1.95 3.40 2.60 67.85 -0.40 0.57 0.40 0.44 % Change -2.69 4.18 0.09 -2.54 10.43 0.53 15.66 -2.23 4.95 2.03 6.28 Net Profit (Rs. cr) 6,244.19 2,586.45 1,044.36 406.82 380.13 304.46 187.27 10.01 5.25 -125.74 -142.54

Net Profit(Rs. Cr)

7,000.00 6,244.19 6,000.00

5,000.00

4,000.00

3,000.00

2,586.45

Net Profit (Rs. cr)

2,000.00 1,044.36 1,000.00 406.82 0.00 -125.74 -1,000.00 380.13 304.46

For the current year

86% 58% 79% 100%

Customer Growth Rate Increase in Revenue Increase in EBITDA Growth in Profit

MARKETING

Core Values of AirTel

Performance Dynamism Leadership

TARGETING
Elite Up market professionals Entrepreneur with business plans Low income mass category Youth Women and senior citizens by post paid connection

POSITIONING
Power to keep in touch Touch tomorrow Live every moment Express yourself

TIME LINE
1995: BSNL, BPL,HutchMax touch AirTel enters 2002: Reliance targets lower income group, AirTel launches Prepaid

2000:TRAI introduces revenue sharing, drop in tariffs AirTel targets new markets

2003: Incoming free, AirTel launches Express Yourself campaign to promote VAS services

Power to keep in touch

Positioned in premium category aimed at elite class of society Convey power of instant communication Perception of aspirational and lifestyle brand Airtel decided that the brand should always connote leadership be it in network, innovations, offerings, services Sponsored games like Golf

TIME LINE
1995: BSNL, BPL,HutchMax touch AirTel enters 2002: Reliance targets lower income group, AirTel launches Prepaid

2000:TRAI introduces revenue sharing, drop in tariffs AirTel targets new markets

2003: Incoming free, AirTel launches Express Yourself campaign to promote VAS services

Touch tomorrow
New campaign launched to facilitate entry into new markets Started to capture mass market A new logo for Airtel- Red , black and white colors with Airtel enwrapped in an eclipse. Logo indicated core value of the brand: leadership, performance and dynamism

TIME LINE
1995: BSNL, BPL,HutchMax touch AirTel enters 2002: Reliance targets lower income group, AirTel launches Prepaid

2000:TRAI introduces revenue sharing, drop in tariffs AirTel targets new markets

2003: Incoming free, AirTel launches Express Yourself campaign to promote VAS services

Live every moment

Launched to capture the imagination of the customer Projects a persons desire to spontaneously communicate through words, emotions, sights, sounds, thoughts and actions over boundaries, distances and geographies

TIME LINE
1995: BSNL, BPL,HutchMax touch AirTel enters 2002: Reliance targets lower income group, AirTel launches Prepaid

2000:TRAI introduces revenue sharing, drop in tariffs AirTel targets new markets

2003: Incoming free, AirTel launches Express Yourself campaign to promote VAS services

Express Yourself
In 2003, Airtel repositioned its brand with Express yourself campaign Changed its logo to give more energetic and younger look Highlight capability of Airtel s performance and network coverage Launched in regional language

THE FIRST MOVER ADVANTAGE

Electronic recharge Hello tunes Airtel Live! Portfolio manager Song catcher Easy music Black berry handsets M-cheques

First Mover Advantage

RURAL STRATEGIES
Airtel follows Match-box strategy The firm expands regularly in Bihar, piggybacking on 300 distributors and more than 50,000 retail outlets selling Airtel prepaid cards Covers over 4,00,000 villages and hopes to expand to other 1,00,000 by 2009

IMC TOOLS
Advertisements Sales promotion Publicity and events

AIRTEL ADVERTISEMENT
Airtel basically uses two appeal to connect to the users
Emotional Humorous

Total advertising budget of Airtel is Rs. 150 crore

The Ad diagnostics score helps to understand how far the Ad has been able to break the clutter

INTERNET ADVERTISING
Massive advertising through Google AdSense BidVertisers Sponsor online games at Zapak.com

SALES PROMOTION
Friendz pre-paid plan Ladies special plan Senior citizen plan

Youtopia
Special tariff plan for youth- Youtopia Reduced tariffs, access to cell phones 14-19 years of age Expand customer base (limited to the older age groups till now) Deviation from earlier positioning for older people symbolizing dignity and power Re 0.25 for 30 seconds- night!, special bidding portal, music download facilities, SMS at affordable prices

PUBLICITY AND EVENTS

Sponsored events Delhi half marathon Delhi golf tournament Sponsored TV shows Big Boss KBC Indian Idol

OUTCOME OF THE CAMPAIGN

Group Company wise % market share Sep'2008
Sl. No. 1 2 3 4 5 6 7 8 9 Name of Company Bharti Airtel Vodafone Essar BSNL IDEA Aircel Reliance Telecom Spice MTNL BPL All India Total Sub Figures 77479215 54624809 39166943 30380163 13878243 9206127 3599744 3677782 1663904 233676930

Oct 2008
Total Sub Figures 80199747 56703506 39811109 31582937 14659298 9582695 3637129 3743879 1807902 241728202 % Market Share 33.18% 23.46% 16.47% 13.07% 6.06% 3.96% 1.50% 1.55% 0.75% 100.00%

% Market Share 33.16% 23.38% 16.76% 13.00% 5.94% 3.94% 1.54% 1.57% 0.71% 100.00%

Addition of 2.7 Million customers in a month

PORTERS 5 FORCES, GE MATRIX

Porters Generic Strategy

Narrow Market Scope

Broad Market Scope

Differential Strategy

Cost Leadership

Uniqueness Competency

Low Cost Competency

Porter s 5 forces
Customer Bargaining Power

Threat of New Entrants

Threat from Competition

Threat of Substitutes

Supplier Bargaining Power

1. Threat from Competition

Wireless Market Top 4 garnering 75% market share

HIGH

Competitor Analysis
Competitor Analysis
40.00% 35.00% 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% Bharti Rcom IDEA MTNL

Best OP Margins & Net Profit Margins among Peers

OP Margin Company Bharti Rcom IDEA MTNL Sep-07 43.00% 37.90% 32.80% 23.70% Sep-08 38.00% 31.60% 26.60% 22.90%

Net Margin Sep-072 26.40% 23.90% 14.10% 7.00% Sep-083 19.30% 13.20% 6.50% 6.80%

Source: CMIE November 2008

AMOU & ARPU Stats

Minutes of Usage per Month Mobile Services
USA
838

India

461

China

303

Russia

88

Despite a low teledensity of approximately 19 percent, India has the second highest minutes of usage per month. This offers huge growth opportunity to telecom companies.

ARPU* in India Mobile Services

ARPU (USD per month) 10 8 6 4 2 0 Q1 2006 Q2 2006 Q3 2006 GSM CDMA Q4 2006 Q1 2007

The declining ARPU implies that India Inc. is tapping a large market at the bottom of the pyramid by reducing tariffs; thereby, enhancing affordability.

2. Customer Bargaining Power

Lack of differentiation among Service Providers Cut throat Competition Low Switching Costs Attractive Schemes for new connection Availability of all operators everywhere Difficulty to differentiate Brand Number Portability will have Ve Impact Businesses & Consumers
HIGH

Market Scenario

Postpaid Vs Prepaid

Customers & Market Share

Q207

Q307

Q407

Q108

Q208

Q207

Q307

Q407

Q108

Q208

3. Suppliers Bargaining Power

LOW

4. Threat of Substitutes
Landline CDMA World Phone Video Conferencing
BROADBAND SERVICES
DIMINISHING MARKET HIGH

VOIP - Skype, Gtalk, Yahoo Messenger e-Mail & Social Networking Websites

5. Threat of New Entrants

Low Because Huge License Fees to be paid upfront & High gestation period Entry of MVNOs & WiMAX operators Spectrum Availability & Regulatory Issues Previously Low, Now High Infrastructure Setup Cost - High Rapidly changing technology

5. Threat of New Entrants

High Because Entry through 3G New Entrants are ready to enter with Huge Capital Considering the attractiveness of the market Increase Of FDI to 76% bringing competiton from Foreign players New Entrants from Non telecom companies with the ease of Outsourcing
Previously Low, Now High

BCG Matrix for Bharti Airtel

Stars
Mobile Services

?
Retail Insurance
DTH & IPTV Broad Band

Cows

Dogs
Fixed Line Services

LOW

HIGH

LOW

GE Matrix Classification
Business Strength
Strong High Medium Weak
5.00

Market Attractiveness

3.67

Medium

2.33

Low
5.00

3.67

2.33

1.00

Factors Underlying Market Attractiveness

Factors
Resource availability Overall market size Annual Market growth rate Profitability Competitive intensity Technological requirements Total

Weight
0.20 0.20 0.20 0.15 0.10 0.15

Rating (1 5)
3.5 4 4 4 4 4.5

Value = (Weight * Rating)

0.7 0.8 0.8 0.6 0.4 0.675

1.0

3.975

Factors Underlying Market/Biz Strength

Factors Weight Rating (1 5)
5 3.5 4 3 3 4.5 4.5 3

Value = (Weight * Rating)

0.75 0.525 0.40 0.45 0.45 0.45 0.45 0.30

Market share New product development Brand Image Sales force Pricing Distribution capacity Product quality R&D Performance Total

0.15 0.15 0.10 0.15 0.15 0.10 0.10 0.10

1.0

3.775

Airtel s GE Matrix
High High

Business Strengths

Low 5.00

Attractive
Airtel Mobile Enterprise

Market Attractiveness

3.67

TeleMedia

Moderate Attractive
2.33

Unattractive
3.67 2.33 1.00

Low 5.00

SWOT

SWOT
Strengths
Largest Telecom Player in India ~80Mn, 22.6% Market Leader Strong Leadership Sunil Bharti Mittal Recognized Globally Pan India Presence Strong Financials Focus on Core Activities Outsource the rest Strong Brand Image Marketing Team Strong New Business Development team

Weakness Outsourcing of Core Systems Network Coverage (earlier)

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 New Players coming in India Uncertain Economic conditions

AIRTEL STRATEGY

Airtel Strategy
MANTRA : Focus on Core Competencies and Outsource the rest!
Product Innovation

Pricing

Core Competencies

VAS

Marketing and Branding

Strategy
Partner with leading players in telecommunication across the globe. Managed to work with the best of domain specialists globally and emerge as a world class entity. Operational contracts with marquee vendors and strategic investors ranging from private equity investors to global telecom giants.

Outsourcing deals in 2004

Ericsson was given the mandate to provide, manage and maintain the equipment as well as provide quality assurance in Airtel s then 13 mobile circles. IBM was given the mandate to handle the back office requirements of Airtel s presence in India

Operational Strategies.
Higher emphasis on ARPU/min stark contrast with other operators who concentrate on ARPU only. Aim to be become a one stop shop for all telecommunication services under the Bharti umbrella. Exploring opportunities in international markets. Hived off tower infrastructure into a separate entity.

Performance till date

Bharti Airtel has enjoyed an excellent run ever since the telecom sector opened. It has managed to hold on to its leadership position inspite of the presence of other players with deep pockets Ambani s, Tata s, Birla s and Vodafone. Has coped well with regulatory changes. Continues to attract and delight customers.

FUTURE STRATEGIES

Future Strategies
Translate its expertise in Indian markets to other emerging economies. This could call for acquisitions globally. Technology leadership is a must Airtel must ensure that its reliance on GSM technology does not render it obsolete. Indian market inspite of being the worlds largest is still not matured. Opportunities abound in the hinterland which must be exploited.

Growth Factors
Infrastructure Sharing

Rural Telephony

Growth Factors

Managed Services

Enterprise Telecom

Road Map Growth Path

VPN & VoIP

WiMAX

3G

2G/2.5G

Airtel - Strategy
Product Innovation

Pricing

Core Competencies

VAS

Marketing and Branding

MANTRA : Focus on Core Competencies and Outsource the rest!

Thank You!!!!!!!