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Bharti Airtel Financial Report 2008-2009
Bharti Airtel Financial Report 2008-2009
DIRECTOR'S REPORT
To
The Members
Dear Shareholders,
Overview:
* Year on Year (Y-o-Y) growth of total customer base by 50% resulted in 38%
increase in revenues and 23% increase in net profit.
* Made its television debut by launching Airtel Digital TV, its Direct-to-
Home (DTH) satellite TV service.
LIQUIDITY:
As on March 31, 2009, the Company has cash and bank balance of Rs. 27,660
mn and marketable securities of Rs. 23,422 mn. The Company actively manages
its short-term liquidity to generate optimum returns via investments made
in Debt and Money Market instruments including Bank Fixed Deposits &
Certificates of Deposits, Liquid and Income Debt Fund schemes, Fixed
Maturity Plans and other similar instruments.
TRANSFER TO RESERVE:
Out of total profit of Rs. 77,438 mn for the financial year 2008-2009, an
amount of Rs. 6,000 mn is proposed to be transferred to the General
Reserve.
DIVIDEND:
Your Board of directors in its board meeting dated 29th April, 2009, has
recommended a final dividend of Rs. 2 per equity share of Rs. 10 each (20%
of face value) for the financial year 2008-09. The total dividend payout
will amount to Rs. 4,442 mn, including Rs. 645 mn as tax on dividend. The
payment of dividend is subject to the approval of the shareholders in the
ensuing Annual General Meeting of the Company.
SUBSIDIARY COMPANIES:
Your Company has the following fourteen subsidiary companies (i) Bharti
Hexacom Limited (ii) Bharti Airtel Services Limited (iii) Bharti Telemedia
Limited (iv) Bharti Infratel Limited (v) Bharti Infratel Ventures Limited
(vi) Bharti Airtel (UK) Limited (vii) Bharti Airtel (USA) Limited (viii)
Bharti Airtel (Canada) Limited (ix) Bharti Airtel (Hongkong) Limited (x)
Bharti Airtel (Singapore) Private Limited (xi) Bharti Airtel Lanka
(Private) Limited (xii) Bharti Airtel Holdings (Singapore) Pte. Limited
(xiii) Network i2i Limited (xiv) Bharti Infratel Lanka (Private) Limited.
As per Section 212(1) of the Companies Act, 1956, the Company is required
to attach to its accounts the Directors' Report, Balance Sheet and Profit
and Loss Account etc. of each of its subsidiaries. As the consolidated
accounts present a complete picture of the financial results of the Company
and its subsidiaries, the Company had applied to the Central Government
seeking exemption from attaching the documents referred to in Section
212(1). In terms of approval granted by the Central Government under
Section 212(8) of the Companies Act, 1956 vide letter No. 47/212/2009-CL-
III dated 30-03-2009, a copy of the Balance Sheet, Profit and Loss Account,
Reports of the Board of directors and Auditors of the subsisting
subsidiaries for the year ended March 31, 2009 have not been attached with
the Balance Sheet of the Company. The Annual Accounts of these subsidiary
companies, along with the related information, is available for inspection
at the Company's registered office and copies will be made available to
Bharti Airtel's investors and subsidiary companies investors upon request.
The statement pursuant to the approval under Section 212(8) of the
Companies Act, 1956, is annexed as parts of the Notes to Consolidated
Accounts of the Company on page no. 191.
QUALITY:
BRANDING:
Brand Airtel moved closer to its vision to be the most admired brand by
2010. Airtel sustained its momentum in the telecom space by getting closer
to the 100 mn subscriber milestone and extended the brand to TV screens by
launching DTH TV services and IPTV.
The business's rural thrust was supported by network and handset bundle
campaigns to drive acquisition amongst non-users. The rural network
campaign positioned the role of the ubiquitous Airtel network as that of a
radar that allowed the rural youth to discover their aspirations that
stretched beyond their villages, while simultaneously being in touch with
their near ones back home.
Low cost handset bundles (Airtel connection with entry-level handsets) were
promoted through a national campaign supported by on-ground roll-out of
demonstration vans in the rural hinterland. The on-air campaign focused on
the need for owning a handset bundle and the on-ground vans focused on
driving activation through live demos and activation offers in village
haats and melas. For the urban centers, the brand's belief in a barrier
free world was extended to an on-ground manifestation through the ownership
of the Airtel Delhi Half Marathon. This brand asset strengthened the
brand's iconic leadership stature.
Airtel's mCommerce solution which won an award for simplicity of use and
inbuilt security features at the GSM World Mobile Congress, was launched
using impactful communication that clearly focused on how this new service
makes life simple. The service which transforms your mobile phone into a
payment device is now being adopted by consumers at an accelerated pace.
Communication for value added services like Voice Search for Hello Tunes
and Voice SMS drove brand affinity amongst the youth segment.
By the end of the year, the brand health scores reached an all-time high.
The year was dotted with multiple industry accolades including four ABBY
Awards, two EFFIES Awards, WOW Award for the Airtel Delhi Half Marathon and
the Singapore Outdoor Award for Airtel-Rajdhani Express.
The Economic Times (Brand Equity) featured Airtel as the best advertiser
for the year 2008 and agency faqs elected Airtel as the 'Buzziest Brand
2008' and the 'Brand with the Longest Buzz (three consecutive years)'. The
launch in Sri Lanka got extensive coverage and accolades from the country's
print and digital media and in India within four months of launch, Airtel
had become an established player in the DTH category.
During the year, the Company signed the following major agreements relating
to operations, customer service, innovation and technology:
* With IBM Daksh, to enhance its customer service experience for its top-
end Platinum customers through process and technology innovation. Under the
six-year contract, IBM's managed business services unit IBM Daksh will
provide voice and back-office services including customer service,
collections, and customer retention from its centers. IBM Daksh expects to
have over 700 employees in the first year focused on providing services in
over 11 languages to elite Airtel customers across the country.
* With Apple Inc. to bring the iPhone to India. iPhone 3G combines all the
revolutionary features of iPhone with 3G networking that is twice as fast
as the first generation iPhone.
* Bharti Airtel and RIM introduced the Blackberry Bold for its customers in
India. The Blackberry Bold smartphone is the first Blackberry smartphone to
support tri-band HSDPA high speed networks around the world providing
superior functionality and performance for business professionals and power
users
* With the country's flagship oil company - Indian Oil Corporation (IOC) -
that will enable Airtel to access 18,000 retail outlets and 5,500 Indane
cooking gas distributors of the oil giant to take the mobile opportunity
home to more customers. This is an exclusive alliance between Airtel and
IOC.
* With Australia Japan Cable (AJC) to interconnect their current and future
networks in Guam. This landmark agreement will allow both parties to offer
services from a number of locations including Singapore and the USA West
Coast to Australia. The innovative agreement will utilize the undersea
cable assets of Bharti Airtel and AJC. The joint network is expected to
carry commercial traffic by end of Q1 FY 09-10.
New products/initiatives:
During the year, the Company launched various new and innovative products
and services in the market. This enabled the company to strengthen its
leadership position despite intense competition. The following are key
launches and initiatives for the year:
* The Company made its foray into media and television by redefining home
entertainment with Airtel digital TV. The service is available to customers
through 31,000 retail points including Airtel Relationship Centres across
the country.
* Launched its virtual calling card service Airtel Call Home' in UK,
Singapore and Canada. The service is targeted at the huge Indian Diaspora,
Non-Resident Indians (NRIs) and Indian students in these markets.
* Launched its mobile services in Sri Lanka under the Airtel brand. The
Company has launched a suite of innovative services and redefined
affordability on a state-of-the-art 3.5G network. Bharti Airtel plans to
invest around USD 200 million in its Sri Lanka operations.
* Announced the launch of the world's first Windows based Online Desktop-
powered by Microsoft and Nivio, giving access to a personal virtual desktop
from any computer connected to the internet for Airtel broadband customers.
This initiative will pave the way for easy and affordable access to
computing and broadband in India. This service will be available to all
Airtel broadband customers across 95 cities in the country.
* Introduced calling rate of 1 cent per minute on its online calling card
service www.airtelcallhome.com. This will enable the Indian diaspora in US
to call friends and family back in India at the most competitive rates in
the market.
* With mChek to offer the toll tag recharge through Airtel mobile for the
Delhi Gurgaon Expressway.
* CRISIL & ICRA have rated Airtel at the top end of their rating scales,
both for short term (P1+ / A1+) as well as long term (AAA/LAAA)
* International rating agencies, both Fitch Ratings and S&P have rated
Airtel at the level of the sovereign rating of India (BBB-)
While India's country rating has been put on a negative outlook by S&P, on
a recent review of Airtel by S&P, they have retained stable outlook' for
Airtel backed by the superior financial strength and positive business and
growth outlook.
SHARE CAPITAL:
During the year, the Company issued 238,942 equity shares on exercise of
stock options under ESOP Scheme 2005 of the Company.
The Company also allotted 93,408 equity shares upon conversion of Foreign
Currency Convertible Bonds (FCCBs). Due to these corporate actions, the
issued, subscribed and paid-up equity share capital increased from
1,897,907,446 (March 31, 2008) to 1,898,239,796 equity shares as of March
31, 2009.
In the Board meeting held on April 2009, subject to the approval of its
shareholders, the Board of directors has approved sub-division (share
split) of existing equity shares of Rs. 10/- (Ten) each into 2 (Two) equity
shares of Rs. 5 (Five) each. The Company is in the process of completing
all the procedural formalities to give effect to the sub-division of
shares.
CORPORATE GOVERNANCE:
DIRECTORS:
Since the last Directors' Report, Akhil Gupta relinquished the position of
Joint Managing Director of the Company and continues to be a non-executive
director on the Board. Francis Heng and Kurt Hellstrom have resigned from
the Board due to personal reasons. During the year, Manoj Kohli was
appointed as Joint Managing Director of the Company. Quah Kung Yang, Nikesh
Arora and Craig Ehrlich were appointed as additional directors. The Board
places on record its sincere appreciation for the services rendered by
Francis Heng and Kurt Hellstrom during their tenure on the Board.
Ajay Lal, Akhil Gupta, Arun Bharat Ram and N. Kumar, retire by rotation at
the forthcoming Annual General Meeting and, being eligible, offer
themselves for reappointment.
The Company has received notice from a member under section 257 of the
Companies Act, 1956 proposing the appointment of Quah Kung Yang, Nikesh
Arora and Craig Ehrlich as non-executive directors of the Company.
FIXED DEPOSITS:
AUDITORS:
AUDITORS' REPORT:
The Board has duly examined the statutory auditors' report to accounts and
clarifications wherever necessary, have been included in the Notes to
Accounts section of the Annual Report.
The Company values its human resource and is committed to adopt the best HR
practices. The employees of the Company are presently benefited from two
ESOP Schemes under 2001 and 2005, Employee Stock Option Policy. The policy
also helps in retention of well-performing employees, who are contributing
to the growth of the Company.
PARTICULARS OF EMPLOYEES:
(i) in the preparation of the annual accounts for the year ended 31st March
2009, the applicable accounting standards have been followed along with
proper explanation relating to material departures;
(ii) they have selected and applied consistently and made judgments and
estimates that are reasonable and prudent to give a true and fair view of
the state of affairs of the Company as at the end of the financial year and
of the profit of the Company for the year;
(iii) they have taken proper and sufficient care for the maintenance of
adequate accounting records in accordance with the provisions of the
Companies Act, 1956 and for safeguarding the assets of the Company and for
preventing and detecting fraud and other irregularities;
(iv) they have prepared the annual accounts on a going concern basis.
ACKNOWLEDGEMENTS:
Annexure B:
From time to time, the Company evaluates global innovation and technology
as a benchmark and wherever required, enters into arrangements to avail of
the latest technology trends and practices.
We have seen significant growth in our long distance business. With India's
increasing integration into the global macro economy, we anticipate
significant further growth in this domain. We have strong relationships for
under-sea networks and we will continue to invest in major cable systems to
increase our presence and share of the global traffic.
Annexure C:
7) Variation of terms NA NA
of option
8) Money realized by
exercise of options 16,70,45,342*** 35,69,99,122
(v) the price of the underlying : v) Rs. 616.80 to Rs. 832.55 per
share in market at the time equity share
of option grant
* Grants of 4,066,025 number of shares were made out of the options lapsed
over a period of time.
*** This include Rs. 1,540 thousand on account of money received against
6,075 options pending allotment.
Most of our welfare activities are routed through Bharti Foundation, the
philanthropic arm of the Bharti Group. Set up in 2000, the Foundation has
been working towards improving access to quality education in rural India.
Here are some of the programs and projects that Bharti Foundation is
At the grassroot:
The Program operates with a two pronged approach. On the one hand, the
Foundation builds new primary schools from scratch and operates them on its
own with active support from local communities. On the other hand, it also
partners the State Governments to adopt already existing government primary
schools with the aim to improve their overall performance and functioning,
following the same curriculum philosophy and quality standards as their own
primary schools.
The Satya Bharti School Program has made significant progress since its
inception in 2006. In just two years, 158 primary schools have become
operational. Over 17,000 underprivileged children have been enrolled, of
which 48 per cent are girls.
Bharti Foundation has joined hands with premier institutes in the country
to further the cause of higher education and training in the area of
technology and management.
Bharti Centre for Communication in IIT, Mumbai, launched during the year
strives for excellence in research in communication theory and systems and
fosters technical collaboration between research and user groups.
Other initiatives:
26 Bharti Computer Centres and 104 Bharti Library and Activity Centres were
set up by the Foundation in partnership with other NGOs like Pratham,
Infotech, Kalakar Trust and Adarshila. Presently being run as independent
units, these centres aim to make books and technology accessible to
children in the rural pockets of the country.
The Foundation has also supported the Mid-Day Meal Program, in partnership
with Akshaya Patra.
Over the years, Bharti Foundation has successfully extended the ambit of
its programs to new areas. Its programs have directly and indirectly
impacted more than 150,000 children and youth so far. The Foundation
expects to reach out to more than 200,000 children through its Satya Bharti
School Program in the future.
Public Health:
We firmly believe that mobile telephony empowers users to connect with each
other in unheard of ways to overcome difficult situations. We have
discovered a novel way of extending our spirit of innovation in the area of
blood donation by finding a mode to connect the blood banks with donors and
users. Mobility Tamil Nadu extended its association with Jeevan Blood Bank
in Chennai under its Airtel Cares for Everyone' (ACE) project. This first
of its kind initiative enables people to get information on availability of
blood within minutes and access the real time stock of tested blood
components from Jeevan Blood Bank 24 hours a day. Airtel already has a
partnership with Jeevan, in which a few numbers have been provided free of
cost for Jeevan to stay in touch with people wanting to donate blood and
patients in need of blood. Mobility Karnataka too launched a virtual blood
bank to bridge the gap between donor and recipients.
Rural Empowerment:
Our rapid rural penetration enables us to impact lives in India's far flung
villages. Our connections have turned out to be key catalysts in the rural
areas both in terms of economic productivity and governance.
The E-Gram project initiated last year has already made a huge
transformational impact in rural Gujarat, as citizens no longer have to
travel long distances to get routine official work done. The initiative has
truly carried the government to the villager's doorstep. We are determined
to help initiate many such e-governance initiatives in the future as well.
Impact of our business on the rural economy has been quite profound. We
have successfully connected the rural farmers, the artisans and the small
entrepreneurs to their markets, raising their incomes substantially. During
the year we launched a path-breaking project in the shape of our joint
venture with IFFCO - IFFCO Kisan Sanchar Limited (IKSL). IKSL is making a
discernible impact on agricultural productivity through its timely
information offerings in the area of weather forecast, commodity rates and
farming techniques. To ensure rapid dissemination of the services we are
also providing affordable handsets to the farmers.
Employees across businesses and circle organizations have always been keen
to extend a helping hand to children from the poor and deprived sections of
the society. Through the year, several initiatives were undertaken by
employees, a handful of which are presented here:
On Children's Day they visited nearby schools with goodies and gifts for
the students and shared some warm moments with them. They engaged the
children with unfilled games, singing and painting competition. At the TNG
Head Office, the employees conducted a charity auction of children's
paintings. All collections from this were donated to the SOS Children's
Village.
Like last year Mobility Tamil Nadu joined hands with a local voluntary
organization on World Disability Day to organize a funfair to cheer the
exemplary spirit of individuals who have risen above their disabilities to
make a difference to their own lives and to the society. 'Gift A Smile' was
one more initiative for visually challenged children by CSR volunteers of
Bharti Airtel - Transport National Group. The volunteers visited National
Association for the Blind (NAB), a school for taking care and grooming the
visually impaired children to understand their disability and inspire them
to look at life more positively. Various fun-filled activities like Dancing
& Painting Competition, Poetry Recitation and Storytelling were organized
followed by a Prize Distribution ceremony.
Think Green:
Bharti Airtel believes in the philosophy of 4Rs - refuse, reduce, reuse and
recycle. The philosophy extends to all our acts in our offices and on our
sites. We have stepped up our efforts towards energy conservation by
sharing infrastructure, using technology aids like video conferencing to
reduced travel and deploying green shelters. At our offices, we have
deployed waste water recycling, energy efficient lighting, the concept of
the energy wheel, air curtains on major office exits and disposal
mechanisms for discarded oil. We have also teamed up with global majors to
form teams focusing on energy optimization by way of introducing energy-
efficient equipment and exploring alternate energy sources like solar,
wind, bio-fuel / hydrogen etc. to reduce the environmental impact.
The World Environment Day was celebrated with much enthusiasm across circle
organizations. Each one Plant one', a campaign launched by Mobility Tamil
Nadu symbolized employee commitment to the cause. In Mobility Gujarat
employees celebrated by wearing green, and adopted car pooling to minimize
pollution.
Disaster Relief:
During the year states like Bihar, Bengal, Orissa and Assam faced several
natural calamities in the shape of floods. As a responsible corporate
Bharti Airtel and its employees rose to the occasion to support the flood
victims both in terms of financial contributions and donation of relief
materials. Employees in circle organizations and business units went on a
collection drive to raise substantial amounts of relief materials for the
flood victims. Bharti Foundation made a contribution of Rs. 30mn to the
Prime Minister's Relief Fund for supporting the government's relief work in
the flood affected areas.
Natural disasters are always better handled with an early warning system in
place. With this in mind Bharti Airtel has joined hands with Massachusetts
Institute of Technology (MIT) to develop an early warning system to predict
floods at least 15 days in advance. Under the agreement, we will provide
data about the water-levels of various rivers at different points and the
status of embankments to the institute, while MIT will analyze this data by
super computers vis-a-vis other references drawn in from satellites. This
novel approach follows encouraging results from a pilot project we
undertook in four districts of Bihar - Muzaffarpur, Vaishali, Samastipur
and Darbhanga in July 2008. We strongly believe the success of this early
warning system will open the door for many such initiatives across the
country, which has a topographical diversity that exposes it to a variety
of natural disasters.
Airtel Delhi Half Marathon was our biggest initiative on this front. The
mega event enabled Delhi's young and old to rub shoulders with professional
marathoners on Delhi roads to rediscover the joys of running. The event was
a rousing success, in which more than 30,000 participated. We are certainly
going to continue our association with this premier event in future.
Over the years Bharti Airtel has carved out an enduring relationship with
India's hugely diversified culture. We have built this relationship by
diligently investing in popular cultural events in different regions of the
country. These relationships continued through the year, be it the famous
Dahi handi festival in Maharashtra or for that matter the very popular boat
races in the Kerala backwaters.
Circle organizations have been actively promoting local music and dance
festivals. Mobility Orissa continued its association with the state's
premier annual cultural show, the Konark Dance & Music Festival. The
festival helps connect the wider public to the rich cultural tradition of
the state. Mobility NESA supported the annual Kameswari Dance Festival,
where noted classical dancers and singers from across the country
participated.
Bharti Airtel's continuous support to these events have kept the country's
rich cultural roots fresh in the public mind. Many struggling art forms
have received a new lease of life because of our associations with them.
The Indian telecom sector has seen a phenomenal growth and currently has
close to 430 mn telecom customers. The market surpassed the USA to become
the second largest market in the world after China. Notwithstanding this,
the telecom penetration is only 37% with a wireless penetration of 33.7%
and broadband penetration of 0.54%, thereby offering a good growth
potential.
Innovations like shared infrastructure, new low cost technology and energy
saving devices are critical to rural connectivity. On the other hand,
competition will intensify with entry of new players and interest from
global telecom operators, many of whom wish to re-enter India after an
earlier departure and participate in the success of Indian telecom.
Regulatory changes:
For cellular services, the benchmark for call drop rates has been revised
from the existing less than 3% to less than or equal to 2%. The condition
on accumulated downtime for community isolation has been replaced with a
new parameter on network availability, wherein network availability will be
assessed through two separate parameters - Base Transceiver Stations'
(BTSs) accumulated downtime and worst-affected BTSs due to downtime.
On March 19, 2009, TRAI released the new interconnection regulation for the
broadcasting sector wherein TRAI has not prescribed any limit / regulation
on carriage / placement fee, which distributors of channels charge from
broadcasters to carry their channels on its platform.
On March 16, 2009, TRAI released its QoS standards for DTH operators. As
per this regulation, DTH operators have been barred from amending the
composition of their subscription package during the first 6 months, if
such channels continue to be available on their platform. In case of
withdrawal of any channel within the first 6 months, the DTH operator has
to proportionately reduce the subscription charges and / or will have to
offer any other channel of the same genre and language.
Apart from the above, the operator will not be allowed to charge any fee
towards visiting or repair and maintenance charges of DTH Consumer Premises
Equipment (CPE) during the period of warranty for such DTH CPE acquired on
outright purchase basis.
* Interconnection Usage Charge (IUC) regime:
On March 9, 2009, TRAI issued a revised IUC regime wherein (i) Termination
Charge (TC) has been reduced from Re.0.30/- min. to Re.0.20/- min. (ii) TC
on incoming international calls has been increased from Re.0.30/- min. to
Re.0.40/- min.(iii) Transit Charge has been reduced from Rs.0.20/- min. to
Rs.0.15/- min.
The service providers now need to fulfill their 1st and 3rd phase of roll
out obligations within the 1st and 3rd year respectively from the date of
allocation of startup spectrum, as against from the effective date of the
licence agreement.
As per DoT, while computing the period of one year, the average delay in
SACFA clearance shall be excluded. Moreover, in-building coverage will not
be considered for roll out obligations for imposition of liquidated
damages.
On September 24, 2008, DoT introduced a new license regime for IPLC wherein
resale of IPLC has been permitted to provide end-to-end IPLC between India
and the country of destination for any capacity denomination. After
obtaining the IPLC from ILDOs, the licensee can sell the bandwidth on
retail basis with or without value addition to end customers and in this
regard can have agreement for leased line with Access Providers, NLDOs and
ILDOs. The licensee has also been allowed to provide billing services to
its customers either directly or through an Access Provider.
Regulatory work-in-progress:
On March 19, 2009, TRAI recommended separation of USO fund from the purview
of DoT so as to ensure efficient utilization of the funds collected to
enhance rural connectivity. According to TRAI, the USO fund administrator
should be effectively empowered with administrative and financial
authority. TRAI has further stated that the USO fund Act should be amended
so that the money accruing to the fund is directly managed by the
organization and is not routed through the budgetary process of the Union
Government.
As per TRAI, after fulfillment of roll out obligations and DoT's prior
approval, such promoters may be allowed to sell their equity within the
lock-in period as well. However, on such transactions, 50% of the profit
will have to be retained in the business as a special reserve and utilized
for telecom network expansion only and balance to be transferred to the
DoT.
* Spectrum Charges:
On December 10, 2008, TRAI gave its concurrence on DoT's various proposals
related to spectrum charging.
Annual Spectrum Charges: TRAI also endorsed DoT's proposal to increase the
annual spectrum charges for differential levels of spectrum i.e.
Apart from the above, TRAI also recommended an annual administrative charge
of 2% of the highest bid amount during the validity of 3G spectrum. This
charge would be over and above the annual spectrum charges. This proposal
is yet to be endorsed by DoT.
* Mobile Virtual Network Operator (MVNO):
On August 6, 2008 and by means of its subsequent amendment dated March 12,
2009, TRAI recommended the entry of MVNOs in India.
As per TRAI, MVNO should be free to choose its business model (Full or
Intermediate or Thin). Typically, a Thin MVNO would offer services in its
own brand without any infrastructure and a full MVNO could set up its own
HLR, VLR, IN switches, MSC etc. but not the Radio Access Network (RAN).
TRAI has also recommended that at present, one MVNO may be restricted to
get parented to one telecom operator only in any service area.
On August 20, 2008 TRAI issued the direction that in today's context
Carrier Selection is not justifiable on need & cost benefit basis'.
* Internet Telephony:
As per TRAI, ISPs should not be subject to any QoS norms and also may not
During the year, DoT initiated the process of auction of 3G and BWA
spectrum but the auction date was deferred with no definitive announcement
on dates. It is expected that it will take place after the formation of the
new central government. Meanwhile, a Group of Ministers has been
constituted to decide on the issue of pricing of 3G spectrum and BWA
licenses.
Opportunities:
The telecom industry plays a pivotal role in transforming the lives of the
rural households which account for 70% of India's population. An increasing
number of rural customers is contributing to the growth in telecom sector.
The rural segment is witnessing a growth of 8-10% every month - giving a
substantial boost to the telecom sector.
With rural teledensity still below 15%, the opportunities are immense and
Airtel is leveraging its fast mover advantage to reach the hinterlands.
Currently, more than 60% of our new customers come from rural India.
Triple Play services (Voice, Data and Video) will gather momentum with
telecom operators getting into media space through DTH and IPTV platforms.
The DTH market will evolve further as the low levels of reach, quality and
service standards of existing cable operators, coupled with growing demand
for digital content and introduction of CAS (conditional access system) by
the Government of India will all work together give a boost to this
segment. Airtel will strengthen its position as an integrated player
through offering services across all technologies.
Our entry into the Sri Lankan market for telecom services in January 2009
is very encouraging. Our experience in the Indian Market and unique value
based low cost business model is suitable for the Sri Lankan customer and
we hope and expect to establish a strong presence in Sri Lanka, and create
value for the Sri Lankan customers.
We are considering a joint venture with Alcatel Lucent for managed services
for our broadband and fixed line/telephone services. This is the first
Managed Services partnership for Broadband and Telephone Services in India.
The joint venture when executed will provide services for Airtel's
migration to Next Generation Networks (NGN) to offer advanced services like
highspeed internet, Triple Play, media-rich VAS, MPLS, VPN for both retail
and business customers.
Threats:
Economic Meltdown:
There is a global economic slowdown that has severely impacted the largest
economies and the effect is cascading down to the smaller and emerging
economies. Governments across the globe are offering bailout packages to
stimulate growth, infuse consumer confidence and provide employment
opportunities. Large multinational corporations are struggling to grow
their top-lines. As a result, the Enterprise business may be affected by
this but we expect revival of this segment in the second half of this
fiscal year. However, the India growth story continues, backed by a strong
rural economy.
The wireless market in the year 2008-09 saw the entry of many existing
players into newer circles along with operators migrating to GSM from CDMA
technology. The coming year will see competition intensify as the market
will grow to 550 mn customers.
The market also saw the entry of many international and national long
distance operators. This may lead to some tariff erosion and pressure on
marketing expenditure in the coming year. Bharti Airtel, with its
integrated portfolio of product and service offerings will emerge stronger
and retain its leadership.
Mobile Services:
The Company offers mobile services using GSM technology on 900MHz and
1800MHz bands, and is the largest wireless service provider in the country,
based on the number of customers. This segment constitutes the largest
portion of the Company's business, both in terms of total revenues and
total customers. The company's 93,923,248 mobile customers accounted for a
customer market share of 24% of the wireless market, as on March 31, 2009.
The Company offers post-paid, pre-paid, roaming and value added services
through its extensive sales and distribution channel, covering 1,191,323
outlets.
During the financial year, the Company expanded its operations to 5,060
census towns and 414,906 non-census towns and villages in India, thus
covering approximately 81% of the country's population. Post the Company's
launch on January 12, 2009, our services are now operational in Sri Lanka.
These services have been launched on a state-of-the-art 3.5G network.
The revenues from the mobile services for the financial year were
Rs.304,188 mn, a growth of 39% over the revenues in the previous financial
year. The mobile services business contributed 81% to the consolidated
revenues. The growth in revenues happened despite reductions in tariffs and
intense competition. With mobile tariffs in India being among the lowest in
the world, the Company's prime focus is on ensuring customer satisfaction
through network quality, superior customer service and continuous
innovation in value added services that would help expand its mobile
subscriber base and drive up volumes. The key financial results of the
mobile segment for the year ended March 31, 2009 are presented below:
Telemedia Services:
The Company provides broadband (DSL) and telephone services (fixed line) in
15 circles spanning over 95 cities with growing focus on new media and
entertainment solutions such as DTH and IPTV. As on March 31, 2009, the
Company had 2,726,239 customers (a growth of 19.3%), of which 39.3% (~10,
71,412) were subscribing to broadband / internet services.
We also remain strongly committed to our focus on Small and Medium Business
Enterprises. We provide a range of customized Telecom / IT solutions and
aim to achieve revenue leadership in this rapidly growing segment of ICT
market.
The revenues from the Telemedia services were Rs. 33,426 mn, a growth of
17% over the revenues in the previous financial year. The key financial
results of Telemedia Services for the year ended March 31, 2009 are
presented below.
Enterprise Services:
The Enterprise Services group has two sub-groups, viz. Carriers and
Corporate business units.
Carriers - the Carrier business unit provides long distance wholesale voice
and data services to carrier customers as well as to other business units
of Airtel. It also offers virtual calling card services in the overseas
markets. The business unit owns a state of the art national and
international long distance network infrastructure enabling it to provide
connectivity services both within India and connecting India to the world.
The key financial results of the Carriers division for the year ended March
31, 2009 are presented below:
Particulars FY 2007-08 FY 2008-09 Y-o-Y
Growth
Indus Towers has built 14,484 towers during the financial year ended March
09 and has a portfolio of 95,154 towers including the towers under right of
use.
OUTLOOK:
The India growth story continues and we expect revival of the economy in
the second half of this fiscal year. We have no doubts that the telecom
sector will lead the economic revival and Bharti Airtel will be at the
forefront. We are the first private mobile GSM operator to have an all
India footprint and operations in Sri Lanka. We believe that we are in a
strong position to enhance our leadership, based on:
* the ability to leverage on the strengths of our business partners and our
integrated player status.
We are an innovative company and our products and services are based on
deep customer understanding. We believe that customer value management,
market planning and our strong partner ecosystem will be the key drivers
for success.
We maintain insurance for our assets, equal to the replacement value of our
existing telecommunications network, which provides cover for damage caused
by fire, special perils, and terrorist attacks. Technical failures and
natural disasters even when covered by insurance, may cause disruption,
however temporary, in our operations.
The growth of the Indian economy has led to an increased requirement for
talented managerial personnel. We believe that talented manpower is a key
strength. Given the track record and success of our employees, other
companies often look to Bharti Airtel Ltd as a hunting ground for talent.
With the 2010 vision of being the most admired brand in India targeted by
top talent' as a constant theme, Airtel has a long-term human resources
strategy in place to attract, retain and get the best talent; to build the
right capabilities in current and new businesses and strengthen its
competitive advantage. We have focused on intensive training and
development for employees at all levels aimed at grooming our people to
take larger responsibilities and newer challenges. Career progression and
succession planning has been the key to build a robust leadership pipeline.
While a large number of key leadership positions were filled in from our
large internal leadership pipeline, we have also focused on acquiring new
competencies required for new business opportunities. Airtel also brought
in high quality people from the best companies across the globe.
At the end of March 31, 2009, Bharti Airtel had a total of 24,538
employees; 10,357 were on the rolls of Bharti Airtel Limited, 14,181 were
on the rolls of Bharti Airtel Services Limited.
COMPETITION:
Competition is not new to the Indian telecom industry and the Industry has
witnessed the launch of new circles by existing players and migration to
GSM technology by CDMA players. Many mobile players are also entering the
Enterprise business by launching their NLD/ILD operations.
KEY STRATEGIES:
In the year gone by, Bharti Airtel has focused on making telecom services
affordable through a dedicated effort of rationalizing and simplifying
tariffs. The Company will continue to pursue this strategy of
affordability, availability and simplicity. The customer has been at the
centre of our strategy and going forward our full focus will be, and remain
on customer service. The Company believes that infrastructure sharing will
provide a boost to managing efficient operations, resulting in significant
cost savings. We will explore the extent of active infrastructure sharing
based on guidelines issued by TRAI. We recognize the potential offered by
the rural Indian market. Significant expansion, both of network and
distribution, is being planned. In the coming year, the Company expects
more than half of its new business to come from rural customers.
The coming year will see a stronger emphasis on non-mobile business with
Direct -to- home (DTH) services and IPTV services. The Company will
increase investments in the area of broadband to enhance penetration and
usage of broadband services. The Company will focus on non-voice business
by developing customized solutions in the B2B space.