Index: Index Introduction to Indian Telecom Industry Introduction to Bharti Airtel Financial Analysis Marketing Analysis Porters 5 forces analysis BCG, GE Matrix Future INTRODUCTION: INTRODUCTION Evolution of Telecom In India: Evolution of Telecom In India Go-ahead to the CDMA technology INDIA Private players were allowed in Value Added Services National Telecom Policy (NTP) was formulated 1992 1994 1997 Independent regulator, TRAI, was established NTP-99 led to migration from high-cost fixed license fee to low-cost revenue sharing regime 1999 2000 2002 BSNL was established by DoT ILD services was opened to competition Internet telephony initiated Reduction of licence fees 2003 Calling Party Pays (CPP) was implemented Unified Access Licensing (UASL) regime was introduced Reference Interconnect order was issued 2004 Intra-circle merger guidelines were established Broadband policy 2004 was formulated—targeting 20 million subscribers by 2010 2005 FDI limit was increased from 49 to 74 percent Attempted to boost Rural telephony 2006 Number portability was proposed (pending) Decision on 3G services (awaited) 2007 Department of Telecommunication (DoT) is the main body formulating laws and various regulations for the Indian telecom industry. ILD – International Long Distance PowerPoint Presentation: Demand for VAS & Broadband services Among Youth 28 % Urban Population Rapid Urbanization Rising Income level Changing Demographics 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 Technologies Telecom Ecosystem: Telecom Ecosystem Indian Telecom Industry Framework Indian Government Bodies Independent Bodies Wireless Planning and Coordination (WPC) Department of Telecommunications Telecom Commission Group on Telecom and IT (GoT-IT) Telecom Regulatory Authority of India (TRAI) Telecom Disputes Settlement and Appellate Tribunal (TDSAT) Handles spectrum allocation and management DoT – Licensee and frequency management for telecom Exclusive policy making body of DoT Handles ad hoc issues of the telecom industry Independent regulatory body Telecom disputes settlement body Association of Unified Telecom Service Providers(AUSPI ) Regulatory framework: Regulatory framework 74% FDI Investment Lack of Transparency in Spectrum & License Allocation 3G Policy & MNP still Pending GROUP 7 8 Industry: 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: 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 : 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: 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: Organization Structure Company History: 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: Subsidiary Companies Bharti Hexacom Bharti Comtel Bharti Aquanet Bharti Broadband Bharti Infratel Bharti Telemedia Bharti Airtel(UK,US,Canada, Hongkong, USA, Lanka) Airtel- SBUs : 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.: 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. : 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.: Contd. - Corporates Deep domain knowledge exploitation for Banking, BFES, IT/ITES, Media, Education, Retail Integrated services for key corporate accounts FINANCIALS: FINANCIALS Share Capital: 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…: Some Key highlights… Income Statement (Sep '08) (Mar '08) Quarterly Annual Net Sales 8274.37 25703.51 Other Income 28.43 235.86 PBDIT 3151.06 10736.89 Net Profit 1604.78 6244.20 Balance Sheet Amount in Rs. Cr Total Share Capital 1897.91 Net Worth 20241.49 Total Debt 6570.34 Net Block 19030.65 Investments 10952.85 Net Current Assets -5922.94 Total Assets 26811.84 Key Ratios: Key Ratios Key Ratios - Airtel Mar-08 Mar-07 Mar-06 Mar-05 Mar-04 Debt-Equity Ratio 0.38 0.54 0.83 0.6 0.07 Long Term Debt-Equity Ratio 0.35 0.5 0.76 0.5 0.03 ROCE (%) 34.88 34.07 22.55 23.96 0.16 RONW (%) 39.53 43.04 31.82 23.88 -0.27 Key Ratios - Industry 2007 2006 2005 2004 2003 Debt-Equity Ratio 0.35 0.21 0.27 0.34 0.36 Long Term Debt-Equity Ratio 0.3 0.19 0.24 0.29 0.33 ROCE (%) 9.72 10.28 8.25 8.43 3.07 RONW (%) 10.11 10.62 10.87 6.76 0.18 GROWTH!!!!!!!!!: GROWTH!!!!!!!!! Subscriber Growth: Subscriber Growth Group Company wise % market share - Nov'2008 Sr, No. Name of Company Total Sub Figures % Market Share 1 Bharti Airtel 8,29,20,593 33.25% 2 Vodafone Essar 5,87,64,164 23.57% 3 BSNL 4,04,87,511 16.24% 4 IDEA 3,28,09,720 13.16% 5 Aircel 1,53,75,258 6.17% 6 Reliance Telecom 95,82,695 3.84% 7 Spice 37,05,894 1.49% 8 MTNL 38,21,277 1.53% 9 BPL 18,82,324 0.75% All India 24,93,49,436 100.00% Customer Growth across the years: Customer Growth across the years Year Overall Subscriber Base Airtel Subscriber Base Market Share Mar-04 2,61,54,405 42,16,317 16.12087 Mar-05 4,10,25,940 1,04,78,585 25.54136 Mar-06 6,91,93,321 1,95,79,208 28.29638 Mar-07 12,14,31,166 3,71,41,210 30.58623 Mar-08 18,44,13,702 6,19,84,721 33.61178 Income and Expenditure(Rs. Cr): Income and Expenditure(Rs. Cr) Operating Profit (Rs. Cr.): Operating Profit (Rs. Cr.) Stock Movement: Stock Movement Share Price Competitors Differentials: Share Price Competitors Differentials Company Name Last Price % Chg 52 wk High 52 wk Low Market Cap (Rs. cr) Bharti Airtel 722.30 -2.69 1,063.00 484.00 137,107.31 Reliance Comm 249.20 4.18 844.00 148.60 51,435.55 Idea Cellular 53.50 0.09 148.90 34.05 16,585.51 Tata Comm 495.15 0.53 783.00 320.00 14,111.78 MTNL 74.85 -2.54 219.45 51.75 4,715.55 TataTeleservice 20.15 2.03 65.00 12.50 3,822.84 Spice Comm 36.00 10.43 77.30 23.25 2,483.73 Tulip Telecom 501.20 15.66 1,225.00 385.00 1,453.48 HFCL Infotel 7.45 6.28 59.70 5.55 391.51 Net Sales Year End 2008: Net Sales Year End 2008 Company Name Last Price Change % Change Net Sales (Rs. cr) Bharti Airtel 722.30 -20.00 -2.69 25,761.11 Reliance Comm 249.20 10.00 4.18 14,792.05 Idea Cellular 53.50 0.05 0.09 6,719.99 MTNL 74.85 -1.95 -2.54 4,722.52 Tata Comm 495.15 2.60 0.53 3,283.30 TataTeleservice 20.15 0.40 2.03 1,707.19 Tulip Telecom 501.20 67.85 15.66 1,216.44 Spice Comm 36.00 3.40 10.43 957.85 HFCL Infotel 7.45 0.44 6.28 248.88 Net Sales(Rs. Cr): Net Sales(Rs. Cr) Net Profit: Net Profit Company Name Last Price Change % Change Net Profit (Rs. cr) Bharti Airtel 722.30 -20.00 -2.69 6,244.19 Reliance Comm 249.20 10.00 4.18 2,586.45 Idea Cellular 53.50 0.05 0.09 1,044.36 MTNL 74.85 -1.95 -2.54 406.82 Spice Comm 36.00 3.40 10.43 380.13 Tata Comm 495.15 2.60 0.53 304.46 Tulip Telecom 501.20 67.85 15.66 187.27 Goldstone Infra 17.55 -0.40 -2.23 10.01 Northeast Sec 12.08 0.57 4.95 5.25 TataTeleservice 20.15 0.40 2.03 -125.74 HFCL Infotel 7.45 0.44 6.28 -142.54 Net Profit(Rs. Cr): Net Profit(Rs. Cr) For the current year: For the current year MARKETING: MARKETING Core Values of AirTel: Core Values of AirTel Performance Dynamism Leadership TARGETING: TARGETING Elite Up market professionals Entrepreneur with business plans Low income mass category Youth Women and senior citizens by post paid connection POSITIONING: POSITIONING “ Power to keep in touch” “Touch tomorrow” “Live every moment” “Express yourself” TIME LINE: TIME LINE “Power to keep in touch”: “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: TIME LINE “Touch tomorrow”: “ 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: TIME LINE “Live every moment”: “ 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: TIME LINE “Express Yourself”: “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: THE FIRST MOVER ADVANTAGE Electronic recharge Hello tunes Airtel Live! Portfolio manager Song catcher Easy music Black berry handsets M-cheques First Mover Advantage: First Mover Advantage RURAL STRATEGIES: 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: IMC TOOLS Advertisements Sales promotion Publicity and events AIRTEL ADVERTISEMENT: AIRTEL ADVERTISEMENT Airtel basically uses two appeal to connect to the users Emotional Humorous Total advertising budget of Airtel is Rs. 150 crore PowerPoint Presentation: The Ad diagnostics score helps to understand how far the Ad has been able to break the clutter INTERNET ADVERTISING: INTERNET ADVERTISING Massive advertising through Google AdSense BidVertisers Sponsor online games at Zapak.com SALES PROMOTION: SALES PROMOTION “Friendz” pre-paid plan “Ladies special” plan “Senior citizen” plan Youtopia: 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: PUBLICITY AND EVENTS Sponsored events Delhi half marathon Delhi golf tournament Sponsored TV shows Big Boss KBC Indian Idol OUTCOME OF THE CAMPAIGN: OUTCOME OF THE CAMPAIGN Addition of 2.7 Million customers in a month Group Company wise % market share - Sep'2008 Sl. No. Name of Company Total Sub Figures % Market Share 1 Bharti Airtel 77479215 33.16% 2 Vodafone Essar 54624809 23.38% 3 BSNL 39166943 16.76% 4 IDEA 30380163 13.00% 5 Aircel 13878243 5.94% 6 Reliance Telecom 9206127 3.94% 7 Spice 3599744 1.54% 8 MTNL 3677782 1.57% 9 BPL 1663904 0.71% All India 233676930 100.00% Oct’2008 Total Sub Figures % Market Share 80199747 33.18% 56703506 23.46% 39811109 16.47% 31582937 13.07% 14659298 6.06% 9582695 3.96% 3637129 1.50% 3743879 1.55% 1807902 0.75% 241728202 100.00% PORTERS 5 FORCES, GE MATRIX: PORTERS 5 FORCES, GE MATRIX Porters Generic Strategy: Porters Generic Strategy Differential Strategy Cost Leadership Narrow Market Scope Broad Market Scope Uniqueness Competency Low Cost Competency Porter’s 5 forces: Porter’s 5 forces 1. Threat from Competition: 1. Threat from Competition Wireless Market – Top 4 garnering 75% market share HIGH Competitor Analysis: Competitor Analysis OP Margin Net Margin Company Sep-07 Sep-08 Sep-072 Sep-083 Bharti 43.00% 38.00% 26.40% 19.30% Rcom 37.90% 31.60% 23.90% 13.20% IDEA 32.80% 26.60% 14.10% 6.50% MTNL 23.70% 22.90% 7.00% 6.80% Best OP Margins & Net Profit Margins among Peers Source: CMIE November 2008 AMOU & ARPU Stats: AMOU & ARPU Stats Minutes of Usage per Month – Mobile Services ARPU* in India – Mobile Services 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. 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: 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: Market Scenario Postpaid Vs Prepaid Customers & Market Share Q207 Q307 Q407 Q108 Q208 Q207 Q307 Q407 Q108 Q208 3. Suppliers Bargaining Power: 3. Suppliers Bargaining Power LOW 4. Threat of Substitutes: 4. Threat of Substitutes Landline CDMA World Phone Video Conferencing VOIP - Skype, Gtalk, Yahoo Messenger e-Mail & Social Networking Websites BROADBAND SERVICES DIMINISHING MARKET HIGH 5. Threat of New Entrants: 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 Infrastructure Setup Cost - High Rapidly changing technology Previously Low, Now High 5. Threat of New Entrants: 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: BCG Matrix for Bharti Airtel Stars ? Retail Insurance Cows Dogs Fixed Line Services Market Share LOW HIGH Market Growth Rate HIGH LOW Mobile Services DTH & IPTV Broad Band PowerPoint Presentation: GE Matrix Classification Market Attractiveness Strong Medium Weak Low Medium High Business Strength 5.00 1.00 2.33 3.67 5.00 3.67 2.33 PowerPoint Presentation: Factors Weight Rating (1 –5) Value = (Weight * Rating) Resource availability 0.20 3.5 0.7 Overall market size 0.20 4 0.8 Annual Market growth rate 0.20 4 0.8 Profitability 0.15 4 0.6 Competitive intensity 0.10 4 0.4 Technological requirements 0.15 4.5 0.675 Total 1.0 3.975 Factors Underlying Market Attractiveness PowerPoint Presentation: Factors Weight Rating (1 –5) Value = (Weight * Rating) Market share 0.15 5 0.75 New product development 0.15 3.5 0.525 Brand Image 0.10 4 0.40 Sales force 0.15 3 0.45 Pricing 0.15 3 0.45 Distribution capacity 0.10 4.5 0.45 Product quality 0.10 4.5 0.45 R&D Performance 0.10 3 0.30 Total 1.0 3.775 Factors Underlying Market/Biz Strength PowerPoint Presentation: Airtel’s GE Matrix Business Strengths Market Attractiveness Low High Low High Attractive Moderate Attractive Unattractive Mobile Airtel TeleMedia 5.00 1.00 2.33 3.67 5.00 3.67 2.33 Enterprise SWOT: SWOT 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: 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 Airtel – Strategy: Airtel – Strategy MANTRA : Focus on Core Competencies and Outsource the rest! Strategy: 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: 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.: 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: 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 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: Growth Factors Road Map – Growth Path: Road Map – Growth Path VPN & VoIP WiMAX 3G 2G/2.5G Airtel - Strategy: Airtel - Strategy MANTRA : Focus on Core Competencies and Outsource the rest! Thank You!!!!!!!: Thank You!!!!!!!