Professional Documents
Culture Documents
Bharti Airtel LTD
Bharti Airtel LTD
www.icmrindia.org
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Manish Sinha, Segmenting Indias Mobile Market, www.imediaconnection.com, March 18, 2008.
BatesAsia is a brand consultancy firm focused on the Asian market.
Sunil Bharti Mittal Awarded Global Telecom Sectors Highest Honour, www.bharti.com, February 13, 2008.
The GSM Association (GSMA) is the global trade association representing over 700 GSM mobile phone operators
across the world. GSM (acronym for Global System for Mobile Communications) is the most popular mobile
telecommunications standard used in the world.
Bharti Airtel Crosses 60mn Customer Mark, www.moneycontrol.com, February 13, 2008.
Darpana Kutty, Bharti Airtel among Top 10 Global Telecom Majors; Plans to Enter DTH, www.topnews.in,
October 1, 2007.
Cellular Operators Association of India (COAI) was the industry body for GSM operators in India.
M.Rajendran, The Great War, www.businessworld.in, February 15, 2008.
Surojit Chatterjee, Bharti Airtel among Top telecom Companies in the World with 50 Million Wireless Subscribers,
www.in.ibtimes.com, November 17, 2007.
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License to use for the MBA class of 2011, IBS, Hyderabad. Course: Business Strategy-I, Semester I.
BAL was the only small initial entrant in the Indian telecom market which managed to survive
consolidation in the sector. Despite tough competition from other private companies such as
Hutchison Essar Ltd10 (Hutch), Reliance Communications Ltd11 (Reliance), Tata Teleservices Ltd12
(Tata), and the state-owned Bharat Sanchar Nigam Ltd13 (BSNL), it emerged as the undisputed
leader in the Indian mobile telecom market. Over the years, it established itself not only as the
most dominant player in the Indian telecom market but also as one of the best telecom operators in
the emerging markets. Some analysts opined that with the developed markets in the West
approaching saturation and global operators moving toward emerging markets, BALs unique
business model would prove to be the new business model for telecom.
But BAL faced new challenges to its leadership position with the entry of strong international
telecom companies into the Indian market such as Vodafone Group Plc14 (Vodafone) in 2007. In
2007, the Indian government also allowed mobile operators such as Reliance and Tata, who had
been offering mobile services using CDMA15 technology, to use GSM. The entry of CDMA
players into the GSM space was expected to put heavy pressure on existing GSM players like
BAL. Also, the telecom market in India was expected to witness many changes as the growth
opportunities provided by it were attracting new players both from India and from outside. To
counter these threats, BAL was taking various initiatives which included massive expansion plans
in the rural areas. As of 2008, BAL, which already had a limited international presence, was also
readying itself to replicate its success story in some other emerging markets.
BACKGROUND NOTE
Mobile Telephony in India
The mobile telephony revolution started in India when the government decided to allow private
sector participation in the Indian telecom sector. In 1994, the Department of Telecommunications
(DoT), Government of India (GoI), issued licenses to private operators to start mobile services in
the four Metropolitan cities of Delhi, Mumbai, Chennai, and Calcutta (now Kolkata). In August
1995, 19 more circles obtained mobile licenses. Kolkata became the first city in India to get a
mobile network when mobile services were started there on July 31, 1995, by Mobile Net, a joint
venture between the Modi group of India and the Australian company Telstra.
In the initial days of mobile telephones being introduced, they were out of the reach of most
Indians as airtime charges were extremely high. But all this changed when the government
introduced the revenue sharing method in the National Telecom Policy announced in 1999.
Companies such as BAL lobbied heavily for the introduction of a revenue sharing policy. On
October 19, 2002, BSNL became the third operator to start mobile services in the country by
starting its cellular services in the country. The market became more competitive with the entry of
more players into the sector.
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Hutchison Essar Ltd was a major telecom company in India. It was a joint venture between the Hutchison Whampoa
Group of Hong Kong and the Essar Group of India. It was acquired by Vodafone Group Plc in 2007 and Vodafone
Essar was formed.
Reliance Communications Ltd is one of the major telecom companies in India and is headquartered in Navi Mumbai,
India. Its revenues for the fiscal year 2006 were US$ 4 billion.
Tata Teleservices Ltd is one of the major Indian telecom companies and is headquartered in Mumbai, Maharashtra,
India. Its revenues for the fiscal year 2006 were US$ 579.1 million.
Bharat Sanchar Nigam Ltd is the largest telecom company in India and is state owned. Its revenues for the fiscal year
2006 were US$ 9.04 billion.
Vodafone Group Plc is the largest mobile telecommunications company in the world and is headquartered in
Newbury, England, U.K. It revenues for the fiscal year 2006 were 31.104 billion.
CDMA (acronym for Code Division Multiple Access) is a mobile communication technology.
The subscriber numbers started to swell with tariffs falling due to the intense competition among
the players and the reduction in the license fees paid to the government. In 1999, the fixed service
operators were allowed to provide mobile services over a limited area using CDMA technology. A
bitter legal conflict arose between the fixed service operators and the cellular operators when
Reliance Infocomm Ltd. (now a part of Reliance Communications Ltd.), a fixed service operator,
started to provide virtually complete mobile services using CDMA-WLL (Wireless in local loop),
without a cellular license, allegedly by misusing the loopholes in the telecom policy of 1993.
Eventually the GoI stepped in and cleared up the mess by introducing the Universal service
telecom license in 2004. The Uniform telecom license did away with the practice of issuing
separate licenses for fixed, cellular, ISP, long distance etc. and introducing a single license
whereby the service providers could provide any service using the technology of their choice. This
further fuelled the growth in the sector with almost all the fixed service operators (including Tata)
starting to provide cellular services. The number of service providers increased to six in almost all
the circles. This also fuelled a convergence in the telecom services being offered as the service
providers started providing all the services. The number of mobile phone users overtook that of
landline users in October 2004, going up to 44.9 million.
With competition intensifying in this sector, small players like RPG cellular and Fascel sold out to
bigger players and exited from the sector as they could not infuse the capital needed. This resulted
in consolidation of the telecom sector, with only a few big players remaining in the market. During
the same period, some foreign players like AT&T exited the Indian telecom market citing reasons
such as lack of clarity in the policy regarding foreign investment in the sector and the falling
average revenues per user (ARPU).
As of January 2008, mobile subscribers accounted for 86% of the telecom subscribers in India.16
The mobile subscriber base grew from 10 million in 2002 to 150 million by 2007 (Refer to Figure
I for Growth of Mobile subscriber base in India). With the mobile sector growing at an average
rate of 90% year on year, India overtook China as the fastest growing mobile market in the world.
The GSM operators accounted for 74% of the mobile phone subscribers, while the rest were held
by CDMA operators.17
Figure I
Growth of Mobile Subscriber Base in India
300
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165
150
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76
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48
5.5
10.5
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*
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08
*
28
Year
* Figures for 2006, 2007 and 2008 are for March 2006, March 2007 and
February 2008 respectively.
Source: The Indian Telecom Services Performance Indicators July
September 2007, www.trai.gov.in, and other sources.
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TRAI, Information note to the Press (Press Release No. 20/2008), www.trai.gov.in.
The Indian Telecom Services Performance Indicators July September 2007, www.trai.gov.in.
In addition to the huge population and high growth rates, the attractiveness of the Indian telecom
market stemmed from the fact that mobile tele-density in the country still remained quite low as
compared to developed countries or China (Refer to Table I for tele-density figures). Though there
was still scope for further growth in urban areas, the huge rural population in India provided the
companies with a big growth opportunity. As of end-2007, rural consumers accounted for just
21%.18 According to leading information technology research and advisory firm, Gartner Inc.
(Gartner), the Indian mobile services market would witness a huge growth by 2012, with the
subscriber base increasing to more than 737 million and revenues exceeding US$37 billion.19 By
this time, rural telephony was expected to grow by four times.
Table I
Tele-density in India compared to that in China and the US
The overall tele-density in India stood at 24.63% as of January 2008.
The mobile tele-density in India stood at 21.2% as of January 2008.
The rural tele-density in India areas stood at 8% as of January 2008.
The urban tele-density in India stood at 60% at the end of 2007.
The mobile phone density in China stood at 41.6% as of February 2008.
The mobile phone density in the US stood at 84.2% as of February 2008. (Based on
the estimated US population of 304 million in 2008 and a mobile subscriber base of
256 million).
Source: Information note to the Press (Press Release No. 20/2008),
www.trai.gov.in; Bid to Close Tele-density Gap, www.thehindubusinessline.com,
March 1, 2008; India to Oust US in Number of Cell Phone Users,
www.computing.in.msn.com, March 26, 2008.
The GDP of the country was growing at a sound pace and the per capita income of India stood at
US$ 797 for the year 2006-2007 while it was US$ 460 in 2000-2001.20 Analysts felt that this
boded well for the companies operating in this segment. The rise in income of the people in India
coupled with the fact that call tariffs were the lowest in the country were expected to help the
market grow further. The blended ARPU per month for GSM operators stood at Rs. 275 while that
of CDMA operators stood at Rs. 173, as of January 2008.21 The ARPU was expected to fall further
in the future with the major telecom companies constantly engaging in price wars to drive up
volumes at the cost of margins.
The market was also expected to witness many changes with the introduction of new technologies
such as WiMAX and 3G22 in 2009 and mobile number portability23 some time later. Moreover,
with the developing market in the West reaching high levels of saturation (70% in US and 100% in
some European markets), many global telecom operators were looking toward emerging markets
for their growth.24 And with India witnessing the fastest growth in this sector, and the country
increasing the limit on foreign investment in it to 74% in 2007, many of these companies were
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The Indian Telecom Services Performance Indicators July September 2007, www.trai.gov.in.
Cellular Services Revenue to Cross $37 b, www.hindu.com, July 3, 2008.
Indias Per Capita Income to Touch $ 4,000 by 2025: Chidambaram, www.pratyush.instablogs.com, November 6,
2007.
Shobhana Subramanian, Spectrum: Why Reliance Comm has an Edge, www.rediff.com, January 19, 2008.
WiMAX and 3G refers to a set of technologies which provide faster Internet access on the mobile phones.
Mobile number portability allows customers to switch between service providers without changing their mobile
numbers.
The Cell Phone Megatrend: The Battle for Africa, www.theglobalguru.com, 2008.
eyeing the market keenly. However, analysts felt that the multinational companies entering India
would find the ground realities of operating in this market rather challenging. The Indian
companies operating in this market had a good understanding of the market and many of them
were being led by powerful people who had immense clout in India. Analysts felt that these people
would have no qualms about manipulating the public policy to their advantage.25
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RESULTS
BALs various initiatives helped it attain a dominant position in the market (Refer to Table II for
the top mobile telecom operators in India) As of March 2008, its ARPU was US$ 10, higher than
that of other operators in India. From a small company operating in only one circle, it had become
the market leader in India operating in all the circles. According to a report published by
management consulting firm Oliver Wyman, BAL had been the best performing communications,
media, and technology (CMT) company for five years (2001-2005), in terms of Shareholder
Performance Index30. According to the research firm, BAL had outperformed the average CMT
company by five times. 31 In 2007, a leading business magazine BusinessWeek ranked BAL third in
their ranking of infotech companies in terms of shareholder return.
Table II
Top Mobile Telecom Operators in India
Company
Subscriber Base
(million)
Approx. Valuation
(US$ billion)
Revenue
(Rs. billion)
Bharti Airtel
60
40
185.20
Reliance Comm
44
30
48.74
Vodafone Essar
44
28-30
NA
BSNL
33
55
397.50
24
16
NA
Idea Cellular
21
18
56.94
Spice Comm
3.5
1.5
285.22
12.20
Shyam Telelink
2.5
0.116
1.6
HFCL Infotel
0.4
0.090
NA
MTNL
Adapted from M Rajendran, The Great War, www.businessworld.com, February 15, 2008.
In addition to fuelling high growth, Airtels marketing strategy and its business model attracted the
admiration of many industry experts. In 2007, it was recognized as the Best Indian Emerging
Market Carrier in the prestigious Telecom Asia Awards 2007. In 2005 and 2006 too, it received
awards such as the Best Indian Carrier at the Telecom Asia Awards 2006 and the 2005 Indian
Mobile Operator of the Year by Asian MobileNews.32 In 2006, in the Frost and Sullivan Asia
Pacific ICT33 2006 awards, BAL bagged the awards for Wireless Service Provider and the
Competitive Service Provider of the Year, while its CMD, Mittal, won the CEO of the Year
award.34
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According to Oliver Wyman, the calculation of the Shareholder Performance Index enables consistent comparison of
shareholder returns by adjusting for the volatility of returns, differences in local interest rates, and mergers and
acquisitions.
Leaping Tigers, Roaring Dragons: Emerging Market Companies Take the Lead in Oliver Wyman Study of
Communications, Media, and Technology Industries, Business Wire. Feb 22, 2008. FindArticles.com. 01 Jul. 2008.
http://findarticles.com/p/articles/mi_m0EIN/is_2008_Feb_22/ai_n24320251
Keeping Pace with Customer Service in Indias Expanding Mobile Market, www.nortel.com, May 2006.
ICT is an acronym for information and communication technology.
Sunil Mittal is CEO of the Year, www.thehindubusinessline.com, June 19, 2006.
Its business model too attracted the attention of industry experts and competitors. In 2005 and
2006, this model received three awards from Asias leading IT management magazine MIS Asia MIS Asia IT Excellence Award for Best Change Management in 2005; the MIS Asia IT
Excellence Award for Best Bottom Line IT in 2006; and the MIS Asia IT Excellence Award for
Best Knowledge Management in 2006.35 In 2006, it also received the Nasscom36 IT Innovation
Award for the Business Model Innovation.37 Besides, BAL had been ranked among the top
innovative infotech companies by BusinessWeek magazine since 2004. For instance, in 2006 and
2007, it was ranked 10th and 14th respectively in the list of top 100 infotech companies, ahead of
many illustrious infotech firms.38 (Refer to Exhibit III for the top ten innovative infotech
companies)
For his contribution to the development of the Indian telecom sector, Mittal was awarded the GSM
Association Chairmans Award 2008, the highest honor in the global telecom sector. Analysts felt
that he had built up BAL from scratch with a business model that had become the benchmark for
emerging markets. They felt that the BAL business model had generated a lot of interest among
competitors and MNCs venturing into the emerging markets had a lot to learn from it. Some of its
competitors, particularly the Indian ones, had even started imitating this model.
However, some industry experts charged that BAL had grown by taking advantage of GoIs
ignorance of the telecom sector in the earlier years of the roll-out. Critics alleged that BAL had
manipulated the governments policy by acquiring the bulk of the scarce spectrum for a very cheap
price. Some experts also felt that despite its claims of providing excellent customer service, its
service quality was among the worst as its network was often clogged due to the huge number of
customers it had.39
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Many industry experts said that the entry of Vodafone would bring about dramatic changes in the
Indian telecom market. They felt that it would increase competition, bring global practices and
better services to the domestic market.42 Analysts said that Vodafone Essar could easily close the
gap with BAL in terms of reach and subscriber base once it started operating in all the 23 circles in
the country.
Meanwhile, the GoI allowed the telecom companies to offer mobile telecom services using both
CDMA and GSM technologies in October 2007.43 This helped CDMA players like Reliance and
Tata to provide mobile services using GSM technology. Reliance, which had been lobbying
heavily with the government to allow CDMA operators to operate mobile telecom services using
both CDMA and GSM technologies, was allotted a spectrum to offer nationwide GSM services on
January 11, 2008. Analysts said that the main reason for Reliances entry into the GSM mobile
telecom services was to target the lucrative high-end mobile customers whom it was losing due to
the scarcity of feature rich CDMA mobile handsets. Reliance said that its GSM rollout would
enable it to effectively target the fast-growing subscriber additions of 6 million GSM subscribers
every month.44 The entry of cash rich players like Reliance and Tata into the GSM mobile
telecom services was expected to break the oligopoly of the existing GSM players in the market.
Analysts said that Tata and Reliance would have an advantage over the pure GSM players as the
combination of CDMA and GSM would give them an edge in both voice (using GSM) and data
(using CDMA) services. In January 2008, BSNL, the only operator which had traditionally had a
presence in both GSM and CDMA, said it would offer roaming services to its CDMA WLL45
customers. BSNL, which had been offering only limited mobility services using CDMA till then,
rolled out an investment plan of US$ 500 million for its CDMA services.46 The GSM players, such
as BAL and Vodafone Essar, did not have any plans to start CDMA mobile telecom services as it
needed further heavy investments.
Reliance said that with its entry, it would further lower the tariffs of the GSM mobile services,
which were already among the lowest in the world. With the existing players earning good profits,
the Indian government too was keen to further reduce the mobile telephony tariffs by allowing in
more players. Companies such as Videocon, Unitech, and Russias Sistema were trying to enter
this market while AT&T was trying to stage a re-entry. But Mittal dismissed the threat from new
entrants, saying that minor players could not play the volumes game in the telecom business. He
said, Only six or seven operators, amongst whom two-three are still struggling, will share more
than 90 per cent of the market. That leaves little scope for a dark horse.47 But the confidence
shown by BAL notwithstanding, analysts felt that the telecom operator was facing real threats to
its leadership position. BAL also had to face a steady fall in its ARPU and the ARPU of the Indian
telecom market was expected to decline to US$ 6.79 by 2008-2009.48
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Bharti Airtel and Nokia Siemens Networks Sign Memorandum of Understanding for a USD 900 Mn. End-to-end
Network Expansion, www.nokiasiemensnetworks.com, July 3, 2007.
Nokia Siemens Bags $ 900m Bharti Deal, www.hindu.com, July 4, 2007.
Manikandan G, Airtel + Nokia, www.financialexpress.com, September 21, 2007.
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BAL also reduced its overall tariffs to woo its low-end users. On January 15, 2008, BAL reduced
its tariffs to Re. 1 (around 2 cents) for its lifetime prepaid users -- a reduction of 50% when
compared to the previous rate of Rs. 2 per minute.52 It even reduced the fixed charges for lifetime
validity for prepaid subscribers to Rs. 495 from Rs. 999. BAL also introduced a number of
postpaid plans like the Airtel Supersaver-399 which provided users with free talk time equal to
the value of monthly rental paid by them. This brought the effective recurring monthly rental
charges to zero. BAL aimed at removing the entry barriers and reducing the recurring maintenance
charges for consumers so as to create a whole new customer base to feed its growth. The reduction
in the tariffs and the lowering of the fixed and recurring charges were intended to increase the user
base by further expanding the market. Analysts said that reduction in the entry as well as monthly
recurring charges was the key to expanding in the rural markets. BAL also started new advertising
campaigns to reposition the Airtel brand.
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Airtel Chants its Affordability Mantra to the Masses, www.moneycontrol.com, January 23, 2008.
Mobile Phones Widen Market, Raise Incomes for Rural Poor, www.indiaprwire.com, September 9, 2007.
Darpana Kutty, Bharti Airtel among Top 10 Global Telecom Majors; Plans to Enter DTH, www.topnews.in,
October 1, 2007.
Mandi is a market center found in an urban area for trading agricultural products, generally having storing and
warehousing facilities.
IFFCO and Bharti Airtel Join Hands to Usher in the Second Green Revolution to Benefit Millions of Rural
Consumers, www.bharti.com, May 2, 2008.
GovindKrishna Seshan, Airtel & How to Sell a Message, www.rediff.com, April 10, 2007.
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that the nationwide mobile network of BAL provided. The advertisement featured a divided family
reuniting after a gap of 22 years. The ad depicted a young man, who comes to his ancestral village
to meet his grandparents for the first time. His father had left the village 22 years ago apparently
due to some differences with his father, never to return. The grandfather refuses to talk to the boy
first but relents later after speaking to his son on the mobile phone with BALs network. Not being
purely emotional like its earlier Express Yourself campaign, the new advertisement campaign
highlighted the capabilities of BALs mobile telecom network.
BAL launched another major advertising campaign in December 2007 called Barriers break when
people talk. The theme of the new advertisement was that communication dissolved boundaries
and barriers broke down when people started communicating. The advertisement was shot in
Morocco and the characters in it spoke a French dialect. The ad was based upon the story of two
boys separated by border fencing. When one of the boys starts playing with a football it falls on
the other side of the fence. Hearing the sound, the boy on the other side of the fence comes out of
his house. The first boy persuades him to kick the ball over the border fence. Eventually, the two
boys crawl under the fence and start playing football with each other. No celebrities were used in
the film and the two protagonists in the advertisement were picked up from the streets of Morocco.
This new advertising campaign from BAL was considered one of the most creative advertising
campaigns in the Indian telecom sector. Marketing experts said that the main aim of this new
advertisement campaign was to bring iconic status to its Airtel brand. As BAL was expanding into
foreign telecom markets, the ad campaign also aimed at projecting Airtel as a global brand. The
campaign aimed to achieve this by making the advertisement in a foreign land. The need to project
Airtel as a global brand was felt more urgently as it had to face competition from global brands
such as Vodafone, they said.
New Technology
The next generation 3G services were another area on which BAL decided to focus so as to retain
its dominant position in the Indian mobile telecom services market. It also planned to start the next
generation 3G mobile services as and when GoI declared its policy and allotted the spectrum.
Analysts said that 3G could help BAL to increase its revenues in view of its steadily falling ARPU
and that 3G could also be a new growth engine in saturated circles like the big metros. Mittal said,
Bharti wants to be an early player in 3G and as and when the auction for spectrum is announced,
Bharti will participate in the process.58
Bharti Airtel Chalks Out $3.5 billion Investment Plan, www.thehindubusinessline.com, April 28, 2007.
Bharti Becomes the First Indian Telecom Operator to Launch 3G Services, www.bharti.com, December 21, 2006.
Bharti Expands Telecom Footprint in the Channel Islands, www.bharti.com, March 26, 2008.
Surojit Chatterjee, Bharti Airtel Begins Sri Lankan Foray with $150 Million Investment, http://in.ibtimes.com, May
17, 2007.
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In what was viewed as BALs attempt to make its first major foray into international markets,
BAL and Africa-based MTN Group (MTN), which had a presence in 24 African and Middle East
countries, initiated talks on BALs possible takeover of the African telecom major in February
2008. In May 2008, the companies announced that they were considering a deal valued at US$40
billion, the biggest in the emerging market. Analysts said that the deal would propel the merged
entity to the sixth position among the top telecom companies in terms of subscriber base, which
would touch 130 millions with MTN bringing in 68 million subscribers. Madhudusan Gupta,
telecoms analyst at Gartner, said, This would give the combined entity a footprint in one of the
least penetrated mobile markets.62 With the market in Africa experiencing high growth (and
projected to grow at 11% through 2010, according to Gartner), and there being a huge disparity in
income like in India, analysts expected that BAL could replicate the success achieved in India in
Africa.63
However, on May 24, 2008, BAL pulled out of the deal, as MTN allegedly went back on an inprincipal merger agreement and proposed that BAL become a subsidiary of MTN instead. Earlier,
BAL had pushed for a 51% stake in MTN, but MTN insisted on a 100% buy out. It was then
agreed that 50% of the deal amount (US$40 billion) was to be paid in cash and the rest in shareswaps.64 Analysts felt that BAL would face regulatory hurdles in India as such an arrangement
would lead to the merged entity exceeding the foreign stake allowed in the sector (74%).65 But
later, with MTN changing its terms, BAL pulled out of the deal saying that it would not be in the
interests of its minority shareholders. Bhartis vision of transforming itself from a home-grown
Indian company to a true Indian multinational telecom giant, symbolizing the pride of India, would
have been severely compromised and this was completely unacceptable to Bharti Group,66 said
Mittal. According to some industry experts, the other roadblocks in the merger attempt were
decisions such as the degree of control to be vested with both the parties, location of the
headquarters, and the price component.
OUTLOOK
Analysts felt that its success notwithstanding, BAL faced some challenges to its leadership
position in the Indian telecom market. It had to focus on devising aggressive strategies to continue
its dominance and grow at the same rate at which it had been growing. Industry experts said that
the key to future growth lay in making the Airtel brand attractive to both the tech-savvy urban
population and the rural masses where the bulk of the future growth was expected. This in itself
was a big challenge. Gopal Vittal (Vittal), Director, Marketing and Communication, BAL, said,
The challenge before us was in having just one brand that had to address many different customer
profiles, from peons to executives, from rural to urban.67 The entry of youth-specific telecom
brands into the Indian market such as Virgin Mobile68, which entered India in March 2008 under a
brand franchise agreement with Tata, too put heavy pressure on BAL to tone up its branding
strategies.69
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65
66
67
68
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Bharti-MTN Tie-up a Win-Win for Both Companies: Analysts, http://economictimes.indiatimes.com, May 8, 2008.
The Economist, Eyes on Africa, www.economist.com, May 6, 2008.
Prabhakar Sinha, Bharti's MTN Chase Hits Hurdle, http://timesofindia.indiatimes.com, May 17, 2008.
Foreign investors including the Singapore-based Singapore Telecommunications Ltd. already held 65 percent of
BAL.
Sandeep Joshi, Bharti Airtel Disengages Merger Talks with MTN, www.thehindubusinessline.com, May 25, 2008.
Mobile Industry Overtakes FMCG in Advertising, www.economictimes.indiatimes.com, December 15, 2007.
Virgin Mobile was a worlds first Mobile Virtual Network Operator which operates by buying airtime form other
operators and owns no infrastructure and telecom license.
COAI Seeks Clarity From DoT on Virgin Mobile Entry into India, www.economictimes.indiatimes.com, March 4,
2008.
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Finding alternate revenue streams in view of the rapidly falling ARPUs was one more significant
challenge that lay before BAL. The company also had to expand in other countries to achieve scale
and compete with global players like Vodafone. Many analysts predicted that BAL would maintain
its leadership position in the Indian telecom market despite the fact that the sector was on the verge
of another round of consolidation. But there were others who were skeptical about it. They felt that
the market was still in its early stages of maturity and the real challenge lay in competing with new
entrants into the market. BAL, however, said that it was prepared to meet the challenge. Regarding
the competition from Vodafone, which was being viewed as the biggest threat to BALs leadership
position, Mittal said, I will say that (Vodafone CEO) Arun Sarin has already won his quarter-final
and semi-final matches, as Vodafone has emerged as the number two cellular operator in India.
But his final match is with us and I am sure to win that.70
As regards its plan for international expansion, BAL said it was on the look out for an acquisition
target in the developing and emerging markets. It was looking for a firm with the right fit and over
US$500 million in size.71 BAL felt that its extensive experience in India coupled with its unique
business model would help it tap the opportunity provided by other developing and emerging
markets and create value for its customers.
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71
Airtel Will Continue Ruling Indian Mobile Phone Space: Mittal, www.thehindu.com, February 14, 2008.
www.businessweek.com
15
Exhibit I
The Worlds Top 10 Wireless Telecom Operators
Rank Operator
Country
Subscriber Base*
China Mobile
China
31,61,20,000
China Unicom
China
14,68,82,000
Cingular Wireless
US
6,12,43,694
Verizon Wireless
US
6,07,16,000
Sprint USA
US
5,36,42,000
NTT DoCoMo
Japan
5,26,21,000
Mobile TeleSystems
Russia
5,15,00,000
Vimplecom
Russia
4,83,45,308
America Movil-Telcel
Mexico
4,49,46,000
10
Bharti Airtel
India
3,71,41,210
Exhibit II(A)
BALs Consolidated Balance Sheets
(Amounts in thousands of Indian
rupees, except per share data and as
stated otherwise)
March 31,
2006
March 31,
2007
US$, 000
ASSETS
Cash and cash equivalents
2,649,379
7,463,632
173,171
10,573,690
13,092,524
303,770
3,629,076
4,889,563
113,447
381,320
912,142
21,164
2,526,649
2,003,609
46,487
1,562,481
1,178,404
27,341
531,815
728,969
16,913
Restricted Cash
188,958
133,672
3,101
9,589,918
13,711,376
318,130
625,022
728,637
16,905
32,308,308
44,842,528
1,040,429
16
March 31,
2006
March 31,
2007
142,411,233
210,603,768
4,886,399
14,872,964
14,115,568
327,506
Goodwill, net
23,687,179
23,683,549
549,502
189,566
182,237
4,228
Investments
500,000
500,130
11,604
56,058
53,687
1,246
19,522
453
3,217,853
3,886,776
90,181
217,243,161
297,887,765
6,911,548
12,892,457
10,925,150
253,483
Trade payables
14,129,534
16,877,498
391,587
25,041,000
42,632,682
989,157
Accrued expenses
8,312,982
12,523,244
290,564
Unearned income
12,690,393
17,034,522
395,233
335,763
335,763
7,790
1,582,559
1,981,046
45,964
49,921
30,406
704
2,945,689
4,294,648
99,644
13,836
321
77,980,298
106,648,795
2,474,447
34,502,503
41,535,506
963,701
3,508,024
3,616,335
83,906
4,135,804
3,800,040
88,168
Other liabilities
3,981,186
4,933,225
114,460
124,107,815
160,533,901
3,724,682
957,136
1,800,825
41,783
Total Liabilities
Contingencies and commitments
Minority Interest
(Amounts in thousands of Indian
rupees, except per share data and as
stated otherwise)
2006
17
2007
March 31,
2006
March 31,
2007
Stockholders Equity
Common stock, par value Rs.10 per
share*
18,938,793
18,959,342
439,892
56,363,471
56,644,900
1,314,267
(419,339)
Treasury stock
(215,539)
(133,793)
(3,104)
17,510,824
60,082,590
1,394,028
92,178,210
135,553,039
3,145,083
217,243,161
297,887,765
6,911,548
Retained earnings
Total Stockholders Equity
Total liabilities and Stockholders
Equity
*2,500,000,000 equity shares authorized; and 1,893,879,304 and 1,895,934,157 issued and
outstanding as of March 31, 2006 and march 31, 2007, respectively
Exhibit II(B)
BALs Consolidated Statements of Operations
(Amounts in thousands of Indian
rupees, except per share data and
as stated otherwise)
March 31,
2005
March 31,
2006
March 31,
2007
US$, 000
Revenues
Services
Indefeasible right to use sales
Equipment
Total Revenues
March 31,
2007
(Unaudited)
78,726,865
114,638,009
184,152,362
4,272,677
209,257
417,683
436,299
10,123
1,091,654
1,159,761
607,331
14,091
80,027,776
116,215,453
185,195,992
4,296,891
(2,476,652)
Operating Expenses
Cost of service*
Cost of equipment sales
Selling, general and
administrative expenses**
Pre-operating costs
Total Operating Expenses
(1,020,564)
(1,168,771)
(588,569)
(13,655)
(13,029,106) (19,145,884)
(28,564,086)
(662,740)
(8,565)
(199)
(3,153,246)
(533,326)
(119,670)
Operating Income
18,190,087
27,486,059
49,291,087
1,143,645
(3,114,323)
(2,958,039)
(3,044,252)
(70,632)
1,118,765
446,045
1,605,930
37,261
(37,662)
(5,039)
(2,379)
(55)
18
March 31,
2005
March 31,
2006
March 31,
2007
March 31,
2007
(Unaudited)
Other income
478,580
499,225
1,064,165
24,690
(31,137)
(102,534)
(54,140)
(1,256)
16,604,310
25,365,717
48,860,411
1,133,653
(1,527,944)
(2,539,495)
(5,821,692)
(135,074)
(98,477)
(259,512)
(466,953)
(10,834)
14,977,889
22,566,710
42,571,766
987,745
Basic
8.12
12.04
22.50
0.522
Diluted
7.96
11.97
22.47
0.520
1,844,414
1,873,890
1,891,840
1,891,840
1,881,433
1,892,344
1,894,132
1,894,132
Minority interest
Net Income
Earnings per share for profit
attributable to common
shareholders
* including depreciation and amortization of Rs. 10,963,977, Rs. 15,375,585, and 24,825,118
for the years ended march 31, 2005, 2006, and 2007, respectively
** including depreciation and amortization of Rs. 377,384, Rs. 234,233 and rs. 147,924 for the
years ended march 31, 2005, 2006, and 2007, respectively
Source: Bharti Airtel Limited and Subsidiaries, Consolidated Financial Statements for the
Years Ended March 31, 2005, 2006, 2007, www.bhartiairtel.in
19
Exhibit III
The Top Ten: Most Innovative Infotech Companies
Rank
2006
2007
Telefonica (Spain)
Softbank (Japan)
Telenor (Norway)
Telefonica (Spain)
Nintendo (Japan)
Nokia (Finland)
10
20
26. Joji Thomas Philip, BSNL to Invest $500 mn for CDMA Services,
www.economictimes.indiatimes.com, January 14, 2008.
27. Shobhana Subramanian, Spectrum: Why Reliance Comm has an Edge,
www.rediff.com, January 19, 2008.
28. Airtel Chants its Affordability Mantra to the Masses, www.moneycontrol.com,
January 23, 2008.
29. Bharti Airtel Crosses 60mn Customer Mark, www.moneycontrol.com, February 13,
2008.
30. Airtel will Continue Ruling Indian Mobile Phone Space: Mittal,
www.thehindu.com, February 14, 2008.
31. M.Rajendran, The Great War, www.businessworld.in, February 15, 2008.
32. Leaping Tigers, Roaring Dragons: Emerging Market Companies Take the Lead in
Oliver Wyman Study of Communications, Media, and Technology Industries,
Business Wire. Feb 22, 2008. FindArticles.com. 01 Jul. 2008.
http://findarticles.com/p/articles/mi_m0EIN/is_2008_Feb_22/ai_n24320251
33. Bid to Close Teledensity Gap, www.thehindubusinessline.com, March 1, 2008
34. COAI Seeks Clarity From DoT on Virgin Mobile Entry into India,
www.economictimes.indiatimes.com, March 4, 2008.
35. Manish Sinha, Segmenting Indias Mobile Market, www.imediaconnection.com,
March 18, 2008.
36. India to Oust US in Number of Cell Phone Users, www.computing.in.msn.com,
March 26, 2008.
37. The Economist, Eyes on Africa, www.economist.com, May 6, 2008.
38. Bharti-MTN Tie-up a Win-Win for Both Companies: Analysts,
http://economictimes.indiatimes.com, May 8, 2008.
39. Prabhakar Sinha, Bhartis MTN Chase Hits Hurdle,
http://timesofindia.indiatimes.com, May 17, 2008.
40. Sandeep Joshi, Bharti Airtel Disengages Merger Talks with MTN,
www.thehindubusinessline.com, May 25, 2008.
41. Cellular Services Revenue to Cross $37 b, www.hindu.com, July 3, 2008.
42. The Cell Phone Megatrend: The Battle for Africa, www.theglobalguru.com, 2008.
43. Bharti AirTel Limited and BM India Private Limited,
http://www.nasscom.in/upload/51252/Bharti%20and%20IBM.pdf.
44. www.airtel.in
45. www.bharti.com
46. www.businessweek.com
47. www.en.wikipedia.org
48. www.moneycontrol.com
49. www.trai.gov.in
22