Project Report on Bharti Airtel-Case Study on Marketing Strategy
Case Study on Financial and Strategic Analysis of Bharti Airtel
Synopsis on Marketing Topic-Telecommunications Company Analysis on Bharti Airtel
SWOT Analysis of Bharti Airtel
Strengths
Bharti Airtel
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Company
Performance
Financial Data
Operational
Indicators
Company Address
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- With more than 150mn wireless subscribers (December 2010), Bharti is the country's leading mobile operator
- Bharti offers a fully integrated telecoms service including mobile, fixed line and broadband and now targets the IPTV and DTH markets with its plan to offer triple-play services
- Bharti Airtel attracted 9.2mn net additions in Q410, its highest new subscriber count
- Fixed-line penetration across India still very low and broadband take-up remains sluggish
- Fragmented wireless market makes it difficult for Bharti Airtel to be any more dominant
- Decline in ARPU and non-voice revenues on the back of an increase in lower value prepaid custom
- Although slow in doing so, the government is looking to introduce 3G services to India. Bharti will be hoping to lead this new, potentially high-growth market
- Network sharing agreement with Vodafone and capital expenditure plans should increase network coverage, in turn leading to added subscriber growth potential
- Ready to enter high-growth mobile market of Sri Lanka, as well as other exciting markets in the region including Bangladesh and Nepal
- Launched IPTV and triple-play services in January 2009
- High number of prepaid customers impacts on ARPU and, therefore, profitability
- Growth of CDMA operator Reliance and of fellow GSM operator Vodafone Essar could pose a threat to Bharti's dominance
- MNP could benefit smaller operators at Bharti's expense
Bharti Airtel is India's largest mobile operator with presence in all 23 of
India's circles. The operator is divided into three business units -- mobile
services, broadband and telephone services, and enterprise services. The
operator's enterprise unit is divided into carriers and corporate business
units. The carrier unit offers data and voice wholesale services, while the
corporate business units supply data and telecommunications needs for corporate
and SMEs.
In June 2010, Bharti Airtel announced that it had finalised the acquisition
of the African assets of Kuwait-based Zain Group, with the deal valued at
US$10.7bn. Under the terms of the deal, first announced in March 2010, Bharti
will pay US$8.3bn upfront, followed by a further cash payment of US$700mn after
one year, while it will also take over approximately US$1.7bn of Zain's debt.
Bharti has taken over Zain's operations in 15 countries: Burkina Faso, Chad,
Republic of Congo, Democratic Republic of Congo, Gabon, Ghana, Kenya,
Madagascar, Malawi, Niger, Nigeria, Sierra Leone, Tanzania, Uganda and Zambia.
The Kuwaiti company's subsidiaries in Morocco and Sudan were not included in
the sale. Zain has also agreed to licence its name and related trademarks to
Bharti in all of the new countries for an interim period; the Airtel brand is
expected to be introduced across its news units by October 2010.
Following the completion of the deal, Bharti claims to have become the
world's fifth largest mobile group, with full commercial wireless operations in
19 countries -- the 15 newly acquired African units alongside India, Sri Lanka,
Bangladesh and the Seychelles -- and a customer base of about 180mn. Bharti
said it plans to expand aggressively in its new regions of operation and has
set a target of 100mn subscribers in Africa by 2012/13, while it expects the
region to generate revenues of US$5bn and EBITDA of US$2bn by that date.
Corporate Structure
Although Bharti Airtel is majority owned by the Bharti Group, SingTel owns a
strategic 32.2% stake in it. Following Vodafone's acquisition of a majority
67.0% stake in Hutchison Essar in early 2007, the UK-based operator sold a
4.99% stake to the Bharti Group, although the group has given Singapore's
Temasek Holdings, parent company of SingTel, the option to acquire the stake.
Recent Financial Results
In the quarter ended December 2010 Bharti Airtel's India and South Asia
operations reported revenues of INR117.213bn, an increase of 3.4% q-o-q and
19.9% y-o-y. This was largely due to the 6.4% q-o-q and 28.3% y-o-y increase in
the operator's subscriber base. The disproportionate increase could be
attributed to strong competition and declines in ARPU levels. Bharti Airtel's
blended ARPU fell to INR198 in December 2010, down from INR202 in September
2010 and INR230 in December 2009. Bharti Airtel's EBITDA held relatively stable
at INR42.089bn but net profits fell by 10.4% to INR18.282bn, which is a
reflection of the ongoing price war.
Bharti Airtel's mobile revenues in India and South Asia were INR91.459bn in
the quarter ended December 2010, which accounted for 78% of total revenues in
the region. Revenues from Telemedia services contributed 8% of the total, an
equivalent of INR9.068bn. Although Bharti Airtel added 41,000 new subscribers
over the quarter, revenues declined from the previous quarter due to lower ARPU
rates, which fell to INR934 in December 2010 from INR954 in September 2010.
Passive Infrastructure Services' revenues increased slightly over the
quarter to reach INR21.972bn in December 2010, which accounted for 19% of
Bharti Airtel's total. Bharti Airtel added 1,160 towers over the quarter to
bring its consolidated tower base to 77,695
In the quarter ended September 2010, Bharti Airtel announced revenues of
INR113.312bn for its India and South Asia operations. This was relatively
stable compared to the previous quarter and was also reflected in the company's
EBITDA. Bharti Airtel's EBITDA for the quarter reached INR42.222bn, representing
a decrease of 0.5%. However, an improvement in the operator's cash profit from
operations after derivative and exchange fluctuation as well as deferred tax
expenses meant Bharti Airtel saw a 7.1% increase in net profit to INR20.398bn,
up from INR19.048bn in June 2010 but down from INR23.210 in 2009. Mobile
services revenue declined 0.2% q-o-q to INR88.045bn, despite a net addition of
6.672mn subscribers in September 2010.
Meanwhile, Bharti Airtel total Passive Infrastructure Services (includes
Bharti Infratel and proportionate consolidation of 42% stake in Indus Towers)
reached INR21.161bn, an increase of 24% y-o-y from INR17.049bn. This was due to
an increase of 5,117 towers to bring the operator's consolidated tower base to
76,535. Bharti Infratel accounted for 41.6% of the total.
Telemedia services revenue (broadband, IPTV and telephones) grew by 6.7%
y-o-y to reach INR9.118bn in September 2010 due to a net addition of 288,000
subscribers over the year. However, ARPU fell to INR954 from INR989, representing
a decrease of 3.5% y-o-y.
Mobile Services
Through its GSM 900 and 1800 networks, Bharti offers wireless services. The
network covered 5,092 census towns and 440,023 non-census towns and villages
across India, covering 84.3% of the country's population, as of June 2010. This
is encouraging in that there still remains plenty of opportunity for further
growth, especially in rural India. Bharti hopes to cover 95% of India's
population by the end of the decade.
Bharti claims that it will be in a position to launch 3G services 'within a
few months' of receiving a 3G licence. However, it is understood that the
operator will need to invest about US$1bn to upgrade to UMTS. It has already
launched its SongCatcher next generation service, which is the country's first
mobile music service.
Bharti launched eight mobile feature handsets in September 2010 through its
subsidiary Beetel Teletech. Bharti aims to become one of India's top five
vendors in the next three years. The handsets will feature functions mobile
payments, dual-SIM capability and the subscribers will receive free calls and
SMS services due to a tie up with Indian social networking site Ibibo.
Bharti Airtel launched 3G services in one telecoms circle in January 2011
and plans to commence commercial services in the remaining 12 by March 2011.
The operator also aims to roll out the services in 1,500 cities across the
country by end-March 2012. The operator is also reportedly in talks with other
licence holders to roll out its 3G services in the remaining 10 circles through
its roaming offerings.
Domestic Fixed Network Services
Bharti also provides broadband (DSL) and fixed telephony services in 95
cities; it aims to supply broadband and telephone business wherever there is
high enough revenue potential. Fixed-line telephony services include local,
national and international long-distance connectivity.
In January 2009, Bharti Airtel launched an IPTV service, Airtel Digital TV
Interactive, based on Carrier Ethernet and MPEG-4 technology. In the process,
Bharti also became a triple-play service provider, having launched a DTH
service in October 2008. Bharti Airtel previously announced plans to enter
India's IPTV (with the help of UTStarcom) and DTH markets in October 2007.
By launching IPTV, Bharti has put itself in direct competition with BSNL and
MTNL, with both state-owned operators having already launched IPTV services in
select cities, such as Pune and Delhi. Bharti's major rival, Reliance
Communications, also has targets for IPTV services.
The operator boosted its broadband speeds in September 2009, for customers
of its IPTV service in Delhi, Gurgaon and Noida. Magic@home Freedom offers
broadband speeds of 1Mbps with capacity of 1MB at a cost of INR1899 per month,
while Magic@home Turbo offers broadband speeds of 512Kbps, which doubles
broadband speeds to 1Mbps at night and charges INR1499 per month.
International Operations
As well as growing its domestic market, Bharti has an international
strategy, as illustrated by its launch of commercial 2G and 3G mobile services
in Sri Lanka, where it is set to become the South Asian country's fifth
operator. The operator will invest US$150mn towards its network roll-out, but
will avoid some northern and eastern districts of the country for security
reasons. It is confident that it can make a mark in Sri Lanka, where
penetration is about the 30% figure. Bharti Airtel aims to continue its
investment in the region and is hoping to launch networks in due course in
Bhutan, Nepal, Bangladesh and the Maldives, but it has ruled out entering
Pakistan.
Airtel is currently executing an agreement with Malaysia's Global Transit,
Google, KDDI of Japan, Singapore's Pacnet and SingTel to build a high bandwidth
undersea fibre-optic cable linking Asia with the US. Through Airtel's CallHome
service, the operator already connects 2.5mn expats in the US back to India.
Bharti also has an agreement with eight carriers -- Etisalat, France Télécom,
Ogero (Lebanon), PTCL, STC, Telecom Egypt, TIS Sparkle of Italy and VSNL -- to
build a fibre-optic submarine cable stretching from India to France via the
Middle East.
The operator launched global wholesale services in August 2009, providing
international operators with access to its fibre network, spanning 50
countries. It spent US$500mn on boosting cable capacity and PoPs. Its wholesale
portfolio includes MPLS, ethernet IP and IPLC services.
In September 2010, Bharti launched its Global Data portfolio in Thailand and
Malaysia as part of its global expansion strategy and to serve the growing
bandwidth demands of customers in the region.
In November 2010, Bharti Airtel rebranded its operations in 19 countries
across Asia and Africa and the unveiling of the new identity airtel, coincides
with the group's 200mn subscriber milestone.
Strategy
A central element of Bharti Airtel's strategy involves the continuation of
network investments, in order to ensure that it is able to serve its rapidly
expanding customer base. In support of this strategy, Bharti has established a
major outsourcing relationship with IBM, which gives IBM full control and
ownership of Bharti's IT infrastructure and associated processes. The
relationship with IBM enables Bharti to focus its energies on growing, serving
and retaining its customer base.
Another element of Bharti's strategy has been its drive to become a
converged services provider, with the ability to cater for all the
communications needs of its customers. In August 2008, Manoj Kohli, joint
managing director and CEO of Bharti Airtel, described Bharti's 'three-screen
strategy', by which it aims to give consumers a uniform and consistent
experience. The three-screen strategy refers to the consumer accessing TV at
home through Bharti's IPTV and DTH offerings, the mobile phone in the car
through the company's mobile telephone services, and content on the PCs through
Airtel's broadband services. Kohli has also indicated that, in the long term,
Bharti is interested in the possibility of entering the digital cinema business
(a fourth screen). The operator is also looking beyond the telecoms sector,
expanding its Global
Data portfolio in South East Asia.
Meanwhile, Bharti continues to invest in other emerging markets and sees
this expansion as a way of supplementing its domestic activities. Bharti has
ambitious plans in neighbouring Sri Lanka and also states that it sees Africa
as representing a huge opportunity.
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