Parthiban.S

RamaSubramanian.S

Sabarish.V

SenthilKumar.V

Thirumurugan.S

Industrial Unit Analysis

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Evolution of the industry-Important Milestones1851 First operational land lines were laid by the government near Calcutta

(seatof British power)

1881 Telephone service introduced in India

1883 Merger with the postal system

1923 Formation of Indian Radio Telegraph Company (IRT)

1932 Merger of ETC and IRT into the Indian Radio and Cable Communication Company (IRCC)

1947 Nationalization of all foreign telecommunication companies to form the Posts, Telephone and Telegraph (PTT), a monopoly run by the government's Ministry of Communications

1985 Department of Telecommunications (DOT) established, an exclusive provider of domestic and long-distance service that would be its own regulator (separate from the postal system)

1986 MTNL incorporated to provide fixed-line telephone services in Mumbai and New Delhi

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1986 VSNL incorporated to provide international telecom services

1991 DoT invites bids from Indian companies for cellular licenses in the four metropolitan circles

1994 Government announces the National Telecom Policy, opening up the basic service sector to private players

• SEP - Entry guidelines for basic services announced• NOV - Licenses were issued to cellular operators in the four metros

1995 January - Tenders floated for basic operators as well as cellular operators in non-metro sectors.

1995 March - Paging services by private operators commence

1996 Licenses for 20 cellular circles issued

1997 Telecom Regulatory Authority of India established by government

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1998 ISP business opened up to operators other than DoT and VSNL

1999 Government announces NTP 1999

1999 DoT announces Migration Package for existing operators’ licensing costs, subject to compliance with certain conditions

2000 TRAI issues the first tariff order and cuts domestic and international long distance telephony charges and DoT becomes a corporation, BSNL

2001 DoT allows basic operators to provide WLL services on a restricted basis.

2001 Opening of National Long Distance Service to competition and Fourth Cellular licenses issued

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2002 Bharti starts cellular to cellular long distance services with sharp cuts in tariffs

Feb. '02 - Government transfers control of VSNL to Tatas through sale of strategic holding

April-02 - ILD sector opened to competition. End of VSNL monopoly. Government allows restricted IP Telephony

May '02 - Bharti offers ILD services with sharp cuts in tariffs

Sept. '02 - TRAI decides to 'forbear' from regulating cellular tariffs

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Indian Telecom

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Telecom Policy

Spectrum Allocation

•GSM operators initially get 4.4 Mhz and get 10 Mhz when they have 10 lakh subscribers.•In 2002, the cost of 4.4 Mhz of spectrum was Rs.1650 crores and in 2007 the cost remains same.• The rule mandate that no company should have more than 6.2 Mhz, but Bharti, vodafone and BSNL have 10Mhz spectrum which will cost the nation Rs.7216 crore annually.FDI•FDI is allowed 49%, but allowed up to consolidated amount of 74% with others such as NRI’s, Financial Institutions.

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TYPES OF PLAYERS

STATE OWNED BSNL & MTNL

PRIVATE INDIAN OWNED Reliance infocomm, Tata Teleservices

FOREIGN INVESTED Bharti Airtel , Vodafone Essar , Idea cellular, BPL Mobile, Escotel

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The top players in Telecom

1. Bharti Airtel2. Vodafone Essar3. BSNL4. MTNL5. Reliance Communications6. Tata TeleServices7. Idea Cellular Limited

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Sl.

No. Service Provider Licensed Service areasNo. of

Circles

1 BSNL All India (except Delhi & Mumbai) 21

2 Bharti All India 23

3 Reliance All India 23

4 Aircel* All India 23

5 Vodafone All India (except MP) 22

6 Tata Teleservices All India (except Assam, NE, J&K) 20

7 IDEA*** 13 (Delhi, Mumbai, Maharashtra,

Gujarat, Andhra Pradesh, Kerala, Haryana, UP-W, UP-E, Rajasthan, Madhya Pradesh, Himachal Pradesh, Bihar)

13

8 BPL Mumbai 1

9 MTNL Delhi, Mumbai 2

10 HFCL Punjab 1

11 Shyam Telelink Rajasthan 1

Areas of operation

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• Bharti Airtel Limited a group company of Bharti Enterprises, India’s leading integrated telecom services provider with an aggregate of over 77.24 million customers as of end of August 2008, consisting of 74.77 million mobile customers.

• Bharti Airtel is structured into three strategic business units –

• Mobile services,

• Telemedia services and

• Enterprise services.

• The mobile business provides mobile & fixed wireless services using GSM technology across 23 telecom circles.

• The company primarily operates in India,

• Headquarters - New Delhi

• Employees - 25,543 people (as on March 08)

About - Airtel

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• It has set a target of 125 million subscribers by 2010

• Prepaid customers account for 88.5% of Bharti’s total subscriber base, an increase from 82.7% a year ago

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Mile Stones of Bharti Airtel• Bharti Airtel was established as Bharti Tele-Ventures, in 1995.

• The company offered its initial public offering in 2002.

• During 2004, the company delisted its shares from the Delhi Stock Exchange. It continued to trade on the National Stock Exchange and the Mumbai Stock Exchange.

• Vodafone acquired a 10% stake in Bharti Tele-Ventures for around $1.5 billion, in 2005. Bharti Tele-Ventures renamed itself to Bharti Airtel Limited, in 2006.

• In September 2007, the company signed a managed networks deal for its Sri Lanka operations with Huawei Technologies Company, a leader in providing next generation telecommunications network solutions for operators around the world.

• In October 2007, Bharti Airtel and Indian Institute of Technology (IIT) Delhi announced their plans to establish the Bharti-IIT Delhi Telecom Centre of Excellence.

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• In March 2008, the company launched Airtel CallHome service for calls made from US to India.

• In the same month, Guernsey Airtel, a subsidiary of the Bharti Group, launched its mobile services in Guernsey (Channel Islands, Europe). The company offered products and services under the Airtel-Vodafone brand to customers on the Island. 

• Also in the same month, Airtel Telemedia Services, a private broadband and telephone service provider, launched airtellive.com, an all-in-one internet portal for Airtel customers.

• Airtel launched its Iphone in august 2008.

• Airtel successfully tested 3G services in Delhi, Mumbai and Bangalore and are waiting for the spectrum to be allocated.

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Bharti Enterprises

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Bharti Airtel

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

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(i) Bharti Hexacom Limited (ii) Bharti Comtel Limited (iii) Bharti Aquanet Limited(iv) Satcom Broadband Equipment Limited(v) Bharti Broadband Limited(vi) Bharti Infratel Limited(vii) Bharti Telemedia Limited(viii) Bharti Airtel (UK) Limited(ix) Bharti Airtel (Canada) Limited(x) Bharti Airtel (Hongkong) Limited(xi) Bharti Airtel (USA) Limited and(xii) Bharti Airtel Lanka (Private) Limited

Subsidiaries of Bharati

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Subscriber Base - Airtel The Airtel subscriber base according to COAI - Cellular Operator Association of India as of May 2008 was:•Delhi - 4,055,704 •Mumbai - 2,468,016 •Chennai - 1,823,532 •Kolkata - 1,852,838 •Maharashtra & Goa - 4,345,945 •Gujarat - 3,004,824 •Andhra Pradesh - 6,516,332 •Karnataka - 7,316,500 •Tamil Nadu - 4,218,705 •Kerala - 1,703,298

• Punjab - 3,239,200 • Haryana - 1,067,990 • Uttar Pradesh (West) - 1,624,001 • Uttar Pradesh (East) - 3,897,278 • Rajasthan - 4,242,006 • Madhya Pradesh - 3,084,776 • West Bengal

& Andaman and Nicobar - 2,106,163 • Himachal Pradesh - 809,829 • Bihar - 4,912,900 • Orissa - 1,911,070 • Assam - 939,746 • North Eastern States - 585,213 • Jammu & Kashmir - 1,100,069

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Customer base

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Growth in cutomer base

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Business Partners

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Services Partners/Vendors Role

Mobile services

Ericsson and Nokia Network Equipment partners

1. IBM Daksh, 2. Hinduja TMT,3. TeleTech 4. Mphasis

Call center operations

Telemedia & Enterprise services Siemens Nortel

Equipment suppliers

IT Requirements IBM Group wide technology req

Nortel Call center tech req

Partner’s role

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Other AlliancesIn 2007 ,Bharti Airtel has entered into following major agreements

and alliances:

• With Microsoft to offer software and services for the Small and Medium Business (SMB) market in India.

• As part of the agreement, Airtel will bring Google search to the Airtel Live mobile WAP portal. Google will also incorporate advertising through its Mobile Ads product on the Airtel Live mobile portal;

• A three-year contract with Nokia at an estimated value of US$ 400 mn to expand its managed GSM/ GPRS/EDGE networks in eight Airtel circles and deploy a pan India WAP solution across its networks;

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• The company has a strategic alliance with SingTel. The investment made by SingTel is one of the largest investments made in the world outside Singapore, in the company.

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Porters Five force model for the IndustryThreat of new entrants :

•In 2002, the cost of 4.4 Mhz of spectrum was Rs.1650 crores and in 2007 the cost remains same.

•Six new licences were given this year.

Threat of Substitute Products:

Wimax allows VOIP which may be threat in future since ISP can operate it with low cost.

 Barriers to entry

•High capital investments, older and well-established players who have a nation wide network, license fee, continuously evolving technology and falling tariffs.

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Bargaining power of suppliers

• Improved competitive scenario and commoditisation of telecom services has led to reduced bargaining power for services providers.

 Bargaining power of customers

• A wide variety of choices available to customers both in fixed as well as mobile telephony has resulted in increased bargaining power for the customers.

 Competition

• The entry of fourth cellular player and commencement of WLL services has resulted in intense competition in the bigger cities. Reducing tariffs will hurt the new entrants, as they will be unable to recover their high capital investments.

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SWOT Analysis:Strength:

• Operation in 23 circle in the country• Higest no of towers (Around 80,000) by airtel• 22 million subscribers ahead of its nearest competitors.Weakness:Too much dependence on domestic market.

Opportunities:

A strong economy and a growing market:

• The Indian telecommunication industry is amongst the fastest growing telecom markets in the world and

• Higher per capita income and appetite for increased consumption is resulting in a greater-than-proportionate impetus for telecom growth.

•As an ISP, Bharti can roll out VOIP services if WiMax texhnology is rolled out.

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Threats:

•Dip in ARPU.

•Increased competition may reduce market share and/or revenue

•Mobile Number portability may result in switch over of customers to competitors.

•Taxation(30% of revenue).

•Vodafone has the advantage in 3G services than Airtel since it has experience of running the 3G service in other countries.

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Financial Analysis

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Share holding pattern

Share Holding patterns %

Promoters 66.5

MF’s , FI’s & Banks 5.7

FII’s 23.6

Others 4.2

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INR in millions(march 08)

Increase in % from 2007

Revenues 270,249.3 45.9%

Operating Profit 76,455 55.1%

Net Profit 67,008 57.4%

Revenues and Profits

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Market Share

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• 52-week range (INR) : 1,149 / 688• Share in issue (mn) : 1,898.0• Makcap (INR bn/USD mn) : 1,517/34,805• Avg. Daily vol. BSE (’000) : 3,898.5

As on 23/aug/08

Market Data

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Economies of scale and efficient working capital management helped boost profit margin

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C o m p a n y ’s p o licy o f reta in in g en ti re p ro fi ts h elp s in keep in g th e D /E lo w d esp ite su rg in g lo a n b o o k

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Better controls helped check bad debt losses

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Increasing subscriber base caused higher fixed asset turnover ratio

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Economies of scale help reduce the percentage cost of advertisement expenditure

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Thank You