How did Bharti Airtel meet up to the challenges of the market?

Bharti Airtel was India’s leading private-sector providers of telecommunication services, was listed
among the ten best performing companies in the world with a market capitalisation of over US$17
billion making it the largest telecom operator in India in 2006. However, Bharti Airtel was to face
with a lot of challenges in terms of competition provided by cash-rich, erstwhile monopoly
government operators and the strong emergence of mobile services and related technologies.

The challenges faced by Bharti Airtel were as follows:

 Competition in the BTS (Basic Telecom Service) in India:

o BTS was largely a state run natural monopoly in most countries
o The primary reason for this was huge fixed and sunk costs associated with the
investment that made competitor duplication of the local loop uneconomical
o After long rounds of talks and multiple delays, private operators were granted
licenses to compete with government monopoly operators in six service areas of the
country
o Bharti was issued the license for the circle of Madhya Pradesh (“MP”) for a bid price
of US$182.82, the lowest bid made
 Challenges faced in Madhya Pradesh:
o The government-owned Bharat Sanchar Nigam Limited (“BSNL”) already owned
about 800,784 fixed-lines
o In order to attract subscribers, Bharti Airtel had to incur higher marketing and
administrative costs than BSNL
o Bharti Airtel had to bear the initial costs of setting up their operations and
developing their systems
o As they entered the market with minimal knowledge of local operating costs and
consumer demand, they faced a substantial risk of failure
 Challenges for Bharti Airtel in Broadband & Telephone Service
o Fixed-line services were quickly evolving into enablers of comprehensive solutions,
primarily to meet the growing data transmission needs of both business and
residential customers
o Though a separate business unit, Airtel Enterprise Services–Corporate, handled large
corporate customers, small and medium businesses (SMBs), which offered immense
business opportunities, were served by Airtel Broadband & Telephone Services
o Bharti Airtel also consolidated its mobile and fixed line businesses and announced an
integrated organisational structure in 2006
o Bharti bundled DSL connections to meet both the voice and broadband data
requirements of its customers
o To better serve its fixed-line broadband customers, Bharti Airtel launched its
“Broadband First” strategy in September 2006
 Saturation of the High-ARPU Segment
o As the high ARPU segment reached its saturation point, Airtel faced a difficult
decision whether to stick to the high-ARPU segment in select service regions or bring
service to the masses via large-scale deployment
o To remain competitive in the price-sensitive Indian market, Bharti Airtel had to
further innovate while, at the same time, earning enough revenue to be profitable
 Threat of Mobile Services
 o The growth of mobile services in India was also eating into Bharti’s share of fixed-
line services
o Bharti was the only BTO that maintained its position as a provider of fixed wire-line
service
o To reduce per-line cost and provide flexible services to its customers, Bharti decided
to offer certain circles, especially rural and remote areas, fixed wireless local loop
services via its cellular mobile infrastructure.
 Pressure on Bottom Line
o India’s telecom industry had one of the highest tax and levy structures in the world
o Telecom companies were required to pay annual license fees of 6–10% as well as
additional spectrum charges of 2–6% for mobile services
o All in all, telecoms in India surrendered between 30–35% of their profits to taxes and
levies
o With high-ARPU and high-bandwidth customers in select regions, Bharti Airtel was
able to achieve positive earnings before interest & taxation within six months and a
positive profit in about 18–24 months.
 Unfavourable Government Policies and the Power of Incumbents
o The financial burden and risk of deploying competitive networks outside key urban
business districts was high
o Replicating even a portion of the existing local telephone network was prohibitively
expensive
o Most of the broadband connections were in metros and large cities while
penetration was weak in smaller cities and outside urban areas where only
government operators provided fixed-line service
o The government’s LLU policy was expected to positively impact the growth of
Broadband & Telephone Services provided by Bharti Airtel
 Technology Advances
o Wi-Fi was the access technology that competed heavily with fixed-line service,
especially for broadband internet connectivity
o ISPs and other access service providers could provide Wi-Fi-based hotspot access in
public spaces for internet connectivity, thereby bypassing the need for fixed-line
access
o Bharti Airtel launched Wi-Fi access service at the very low rate of US$4 per month,
targeting college students, educational institutes and corporate users
o Bharti Airtel continually embraced cutting edge technologies in order to remain
competitive in the market place

Bharti Airtel was able to carve a niche for itself by adopting appropriate technology and marketing
and services strategies. During 1998–2006, Bharti was able to beat out the large incumbent
operators in select niche segments of the market by “cherry picking” high-revenue customers and
offering value added services. Thus it was able to meet up to the challenges of the market and stay
competitive and profitable.