A Report on
A PROJECT SUBMITTED IN PARTIAL FULFILLMENT FOR AWARD OF DEGREE OF POST GRADUATE DIPLOMA IN MANAGEMENT IN MARKETING MANAGEMENT
Submitted by : ANKIT KUMAR (2007-09) Final Sem. Marketing and Sales
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PREFACE The greatest challenge for any organization today is to survive in this era of cut throat competition. Any industry can not sustain itself in such competitive environment unless or until trying Something new which can not only be helpful in alluring new customers but to sustain existing customers also. It has become essential part for the upper level management to come up with the Strategies which can increase the market share and fetch revenues in long run. But it should always be kept in mind that business runs for profit and not for charity. Giving additional discounts, trade incentives can increase sales but keeping proper track, on these strategies is also very necessary so that the ultimate objective of the Organization is achieved.
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INDEX S.no 1 2
Content Introduction Evolution of Telecom In India
Page No. 4 5
3 4 5 6 7 8
Technology used Telecom ecosystem Top players Regulatory Framework Industry Analysis Vision
6 7 8 9 9 10
9 10 11
Mission Organization Structure Company History
10 11 12-14
12 13 14 15 16
Financials Growth rates Strategies adopted Porter’s generic model BCG Matrix
15-16 16-21 22-23 24-29 30
17 18 19 20
SWOT Analysis Future Strategies Conclusion Bibliography
31 32-35 35 36
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INTRODUCTION
The Indian telecommunications industry is one of the fastest growing in the world and India is projected to become the second largest telecom market globally by 2010. In April 2008, India overtook the US as the second largest wireless market, and as a pointer to the increasing global influence of Indian telecom companies, seven Indians have featured in the list of the world's 100 most influential telecom leaders, compiled by Global Telecoms Business, an industry magazine. According to CRISIL Research estimates, eight infrastructure sectors, which include the telecom sector, are expected to draw more than US$ 345.28 billion investment in India by 2012. With the rural India growth story unfolding, the telecom sector is likely to see tremendous growth in India's rural and semi-urban areas in the years to come. By 2012, India is likely to have 200 million rural telecom connections at a penetration rate of 25 per cent. And according to a report jointly released by Confederation of Indian Industry (CII) and Ernst & Young, by 2012, rural users will account for over 60 per cent of the total telecom subscriber base. Telecommunications industry deals with the activities and services of electronic systems for transmitting messages through cables, telephone, radio or television. Components and factors responsible behind the growth of telecommunications industry Two major factors responsible for the growth of telecommunications industry are use of modern technology and market competition. One of the products of modern technologies is optical fibers, which are being used as a medium of data transmission instead of using coaxial or twisted pair cables. Optical fibers can carry a high volume of data and are easier to maintain and install. Use of communication satellites make this telecommunications industry a booming industry. The use of mobile network has a crucial role behind the growth of an improved telecommunications industry. Leading companies are showing their interest to invest in this telecommunications industry. Telecommunications industry is going to be a digitized one. Use of ISDN (Inter Services Digital Network) makes this telecommunication industry a total digitalized system and eventually enhanced the speed and quality of digital communication.
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INDIA
Evolution of Telecom In India BSNL was ILD services Number Intra-circle Independent establishe was opened to portability was Private regulator, Calling Party merger competition d by DoT Attempted proposed players were TRAI, was Go-ahead Pays (CPP) was guidelines were to boost (pending) allowed in implemented established established to the Rural Value Added CDMA 1999 2007 1994 2002 2005 2003 2004 telephony Services technology 2006 2000 Unified Access 1992 Internet 1997 Licensing telephony (UASL) regime Broadband initiated Decision on was introduced policy 2004 National NTP-99 led to Reduction Reference FDI limit 3G services was Telecom migration from (awaited) of licence Interconne formulated was Policy (NTP) high-cost fixed fees ct order —targeting increased was license fee to was issued 20 million from 49 to 74 formulated low-cost revenue subscribers percent sharing regime by 2010 Department of Telecommunication (DoT) is the main body formulating laws and various regulations for the Indian telecom industry.
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Changing Demographics Demand for VAS & Broadband services Among Y outh 28 % Urban Population Rapid Urbanization Rising Income level
Source: Mckinsey Report
Technologies CDMA – Already there are big players in this segment Reliance , Tata 3G – Value added services potential still to be tapped fully 2G/3G – GSM Currently commands 70% of mobile subscribers in India
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TelecomEcosystem IndianTelecom TelecomIndustry IndustryFramework Framework Indian Indian Government Bodies
Independent Bodies
WirelessPlanning and Coordination (WPC)
Handles spectrum allocation and management
TelecomRegulatory Authority of India (TRAI)
Department of Telecommunications
DoT – Licensee and frequency management for telecom
TelecomDisputes Settlement and AppellateTribunal (TDSAT)
Telecom Commission
Exclusive policy making body of DoT
Association of Unified Telecom Service Providers(AUSPI)
Groupon Telecom and IT (GoT-IT)
Handles ad hoc issues of the telecom industry
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Independent regulatory bo
Telecom disputes settlem body
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The top players in the industry are: 1-Bharti Airtel Limited 2-Reliance Communications Limited 3-BSNL 4-MTNL 5-Hutchison Essar 6-Ericsson 7-Nokia 8-Siemens Communications 9-Idea Cellular Limited 10-Tata Teleservices
Regulatory framework 74% FDI Investment Lack of Transparency in Spectrum & License Allocation 3G Policy & MNP still Pending
GROUP 7
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Industry • • • •
• •
Subscriber base- 330m Wireless penetration- 14.7% CAGR (wireless)- 68% Second Largest Telecom Market – Lowest tariff charges in the world – Wireless Subscribers – 315.3 Mn – WirelineSubscribers – 38.4 Mn – Teledensity – 30.6 – Share in Asia Pacific mobile phone market- 6.4 – Mobile subscriber base growth rate- 82.2%, 42% of the population below 20 9 GSM and 5 CDMA players in 19 circles and 4 metro cities connecting 2000 towns Bharti Airtel largest player with presence in all 23 circles
Vision 2010 • By 2010 Airtel will be the most admired brand in India: – Loved by more customers – Targeted by top talent – Benchmarked by more businesses
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Vision 2020 • To build India's finest business conglomerate by 2020 • Supporting education of underprivileged children through Bharti Foundation • Strategic Intent: – To create a conglomerate of the future by bringing about “Big Transformations through Brave Actions.”
Mission • “ We at Airtel always think in fresh and innovative ways about the needs of our customers and how we want them to feel. We deliver what we promise and go out of our way to delight the customer with a little bit more”
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Organization Structure
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Company History • 1995 – mobile service brand in Delhi and HP and BT acquires a stake • 1996-97 – Formed Bharti BT VSAT Ltd • 1999-2000 Acquires J T Mobiles in Karnataka, AP and Punjab • 2001-02 – Launches IndiaOne , 8 new licenses in the East, becomes largest operator, launches Airtel tune • 2003-04 – Association with Ericsson, IBM, RIM • 2006-07 – Forays into Sri Lanka and US, tie up with Google and Microsoft
Subsidiary Companies • • • • • • •
Bharti Hexacom Bharti Comtel Bharti Aquanet Bharti Broadband Bharti Infratel Bharti Telemedia Bharti Airtel(UK,US,Canada, Hongkong, USA, Lanka)
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Airtel- SBUs Mobile • Service across 23 circles • 4676 census towns and 207327 non-census towns and villages covering 59% of population • Market share- 22.9% • 85mn subscribers from 25m in J ul 2006
Airtel- SBUs contd. Broadband & Telephone Services (B&TS) • Service across 94 cities across 16 circles • 1.75 m voice and 0.59 m broadband customers
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Airtel- SBUs contd. Enterprise Network -Carriers • 49000 kms of fiber • Submarine cable landing station at Chennai • Association with SEA-ME-WE-4 with 15 more operators
Contd. -Corporates • •
Deep domain knowledge exploitation for Banking, BFES, IT/ITES, Media, Education, Retail Integrated services for key corporate accounts
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Financials___Share Capital • Rs 8,340.15 million raised through the IPO • 2002 Went Public • Shares in issue – 1,898,101,604 as at September 30, 2008
• Market Capitilization – Approx. Rs. 1,371 billion
• P/E – 19.98
• EPS – 36.16
Some K ey highlights… BalanceSheet Total Share Capital Net Worth
Amount in Rs. Cr 1897.91 20241.49
Total Debt
6570.34
Net Block
19030.65
Investments
10952.85
Net Current Assets
-5922.94
Total Assets
26811.84
Income Statement
(Sep '08)
(Mar '08)
Quarterly
Annual
8274.37
25703.51
28.43
235.86
PBDIT
3151.06
10736.89
Net Profit
1604.78
6244.20
Net Sales Other Income
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K ey Ratios Key Ratios - Airtel
Mar-08 Mar-07 Mar-06 Mar-05 Mar-04
Debt-Equity Ratio
0.38
0.54
0.83
0.6
0.07
Long Term Debt-Equity Ratio
0.35
0.5
0.76
0.5
0.03
ROCE (%)
34.88
34.07
22.55
23.96
0.16
RONW (%)
39.53
43.04
31.82
23.88
-0.27
Key Ratios - Industry Debt-Equity Ratio Long Term Debt-Equity Ratio ROCE (%) RONW (%)
2007 0.35 0.3 9.72 10.11
2006 2005 0.21 0.27 0.19 0.24 10.28 8.25 10.62 10.87
2004 0.34 0.29 8.43 6.76
2003 0.36 0.33 3.07 0.18
Subscriber Growth Group Company wise % market share - Nov'2008 Sr, No.
Name of Company
Total Sub Figures
% Market Share
1
Bharti Airtel
8,29,20,593
33.25%
2
Vodafone Essar
5,87,64,164
23.57%
3
BSNL
4,04,87,511
16.24%
4
IDEA
3,28,09,720
13.16%
5
Aircel
1,53,75,258
6.17%
6
Reliance Telecom
95,82,695
3.84%
7
Spice
37,05,894
1.49%
8
MTNL
38,21,277
1.53%
9
BPL All India
18,82,324 24,93,49,436
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0.75% 100.00%
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Customer Growth across the years Year
Overall Subscriber Base
Airtel Subscriber Base
Market Share
Mar-04
2,61,54,405
42,16,317
16.12087
Mar-05
4,10,25,940
1,04,78,585
25.54136
Mar-06
6,91,93,321
1,95,79,208
28.29638
Mar-07
12,14,31,166
3,71,41,210
30.58623
Mar-08
18,44,13,702
6,19,84,721
33.61178
Income and Expenditure(Rs. Cr)
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Operating Profit (Rs. Cr.)
Stock Movement
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Share Price Competitors Differentials Company Name
Last Price
% Chg
52 wk High
52 wk Low
Market Cap (Rs. cr)
Bharti Airtel
722.30
-2.69
1,063.00
484.00
137,107.31
Reliance Comm
249.20
4.18
844.00
148.60
51,435.55
Idea Cellular
53.50
0.09
148.90
34.05
16,585.51
Tata Comm
495.15
0.53
783.00
320.00
14,111.78
MTNL
74.85
-2.54
219.45
51.75
4,715.55
TataTeleservice
20.15
2.03
65.00
12.50
3,822.84
Spice Comm
36.00
10.43
77.30
23.25
2,483.73
Tulip Telecom
501.20
15.66
1,225.00
385.00
1,453.48
HFCL I nfotel
7.45
6.28
59.70
5.55
391.51
Net Sales Y ear End 2008 Company Name
Last Price
Change
% Change
Net Sales (Rs. cr)
Bharti Airtel
722.30
-20.00
-2.69
25,761.11
Reliance Comm
249.20
10.00
4.18
14,792.05
Idea Cellular
53.50
0.05
0.09
6,719.99
MTNL
74.85
-1.95
-2.54
4,722.52
Tata Comm
495.15
2.60
0.53
3,283.30
20.15
0.40
2.03
1,707.19
501.20
67.85
15.66
1,216.44
36.00
3.40
10.43
957.85
7.45
0.44
6.28
248.88
TataTeleservi ce Tulip Telecom Spice Comm HFCL Infotel
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Net Sales(Rs. Cr)
Net Profit Company Name
Last Price
Change
% Change
Net Profit (Rs. cr)
Bharti Airtel
722.30
-20.00
-2.69
6,244.19
Reliance Comm
249.20
10.00
4.18
2,586.45
Idea Cellular
53.50
0.05
0.09
1,044.36
MTNL
74.85
-1.95
-2.54
406.82
Spice Comm
36.00
3.40
10.43
380.13
Tata Comm
495.15
2.60
0.53
304.46
Tulip Telecom
501.20
67.85
15.66
187.27
Goldstone Infra
17.55
-0.40
-2.23
10.01
Northeast Sec
12.08
0.57
4.95
5.25
TataTeleservice
20.15
0.40
2.03
-125.74
7.45
0.44
6.28
-142.54
HFCL Infotel
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Net Profit(Rs. Cr)
THE FIRST MOVER ADVANTAGE • • • • • • • •
Electronic recharge Hello tunes Airtel Live! Portfolio manager Song catcher Easy music Black berry handsets M-cheques
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First Mover Advantage
RURAL STRATEGIES • Airtel follows “Match-box strategy” • The firm expands regularly in Bihar, piggybacking on 300 distributors and more than 50,000 retail outlets selling Airtel prepaid cards • Covers over 4,00,000 villages and hopes to expand to other 1,00,000 by 2009
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INTERNET ADVERTISING Massive advertising through • Google AdSense • BidVertisers • Sponsor online games at Zapak.com
Y outopia Special tariff plan for youth- Y outopia Reduced tariffs, access to cell phones 14-19 years of age Expand customer base (limited to the older age groups till now) • Deviation from earlier positioning for older people symbolizing dignity and power • Re 0.25 for 30 seconds- night!, special bidding portal, music download facilities, SMS at affordable prices • • • •
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PUBLICITY AND EVENTS Sponsored events • Delhi half marathon • Delhi golf tournament Sponsored TV shows • Big Boss • KBC • Indian Idol
Porters Generic Strategy Narrow Market Scope
Broad Market Scope
Differential Strategy
Uniqueness Competency
Cost Leadership
Low Cost Competency
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Porter’s 5 forces
1. Threat from Competition Wireless Market – Top 4 garnering75% market share HIGH
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Competitor Analysis
Best OP Margins & Net Profit Margins among Peers
Source: CMIE November 2008
2. Customer Bargaining Power • Lack of differentiation among Service Providers • Cut throat Competition • Low Switching Costs • Attractive Schemes for new connection • Availability of all operators everywhere • Difficulty to differentiate Brand • Number Portability will have –Ve Impact • Businesses & Consumers
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HIGH
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Market Scenario
Postpaid VsPrepaid
Q207
Q307
Q407
Q108
Customers & Market Share
Q208
Q207
Q307
Q407
Q108
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Q208
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3. Suppliers Bargaining Power LOW
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4. Threat of Substitutes •
Landline
•
CDMA
•
World Phone
•
Video Conferencing
•
VOI P - Skype, Gtalk, Yahoo Messenger
•
e-Mail & Social Networking Websites
HIGH
DIMINISHING MARKET
BROADBAND SERVICES
5. Threat of New Entrants Low Because • Huge License Fees to be paid upfront & High gestation period • Entry of MVNOs & WiMAX operators Previously • Spectrum Availability & Regulatory Issues Low, Now High • Infrastructure Setup Cost - High • Rapidly changing technology
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5. Threat of New Entrants High Because • Entry through 3G • New Entrants are ready to enter with Huge Capital Considering the attractiveness of the market • Increase Of FDI to 76% bringing competiton from Foreign players • New Entrants from Non telecom companies with the ease of Outsourcing Previously Low, Now High
HIGH
BCG Matrix for Bharti Airtel
Mobile Services DTH & IPTV
LOW
Broad Band
HIGH
LOW
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SWOT Strengths • • • • • • • • •
Largest Telecom Player in India ~80Mn, 22.6% Market Leader Strong Leadership – Sunil Bharti Mittal Recognized Globally Pan India Presence Strong Financials Focus on Core Activities – Outsource the rest Strong Brand Image – Marketing Team Strong New Business Development team
Opportunities • Bharti Infratel – Cutting Down cost in Rural area • Match Box Strategy – Scale of Penetration • Current Tele-Density – 30.6 is still low among developing countries • Low Broadband Penetration, Rural Telephoney
Weakness • Outsourcing of Core Systems • Network Coverage (earlier)
Threats • India centric – Major revenues from India • Falling ARPU & AMOU • Intense Competition & Shortage of Bandwidth • New Players coming in India • Uncertain Economic conditions
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Airtel – Strategy MANTRA : Focus on Core Competencies and Outsource the rest!
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Strategy • Partner with leading players in telecommunication across the globe. • Managed to work with the best of domain specialists globally and emerge as a world class entity. • Operational contracts with marquee vendors and strategic investors ranging from private equity investors to global telecom giants.
Outsourcing deals in 2004 • Ericsson was given the mandate to provide, manage and maintain the equipment as well as provide quality assurance in Airtel‘s then 13 mobile circles. • IBM was given the mandate to handle the back office requirements of Airtel’s presence in India
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Operational Strategies. • Higher emphasis on ARPU/min – stark contrast with other operators who concentrate on ARPU only. • Aim to be become a one stop shop for all telecommunication services under the Bharti umbrella. • Exploring opportunities in international markets. • Hived off tower infrastructure into a separate entity.
Performance till date • Bharti Airtel has enjoyed an excellent run ever since the telecom sector opened. • It has managed to hold on to its leadership position inspiteof the presence of other players with deep pockets – Ambani’s, Tata’s, Birla’s and Vodafone. • Has coped well with regulatory changes. • Continues to attract and delight customers.
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Future Strategies • Translate its expertise in Indian markets to other emerging economies. • This could call for acquisitions globally. • Technology leadership is a must – Airtel must ensure that its reliance on GSM technology does not render it obsolete. • Indian market inspite of being the worlds largest is still not matured. Opportunities abound in the hinterland which must be exploited.
Conclusion Airtel comes to you from Bharti Airtel Limited, India’s largest integrated and the first private telecom services provider with a footprint in all the 23 telecom circles. Bharti Airtel since its inception has been at the forefront of technology and has steered the course of the telecom sector in the country with its world class products and services. The businesses at Bharti Airtel have been structured into three individual strategic business units (SBU’s) - Mobile Services, Airtel Telemedia Services & Enterprise Services. The mobile business provides mobile & fixed wireless services using GSM technology across 23 telecom circles while the Airtel Telemedia Services business offers broadband & telephone services in 94 cities. The Enterprise services provide end-to-end telecom solutions to corporate customers and national & international long distance services to carriers. All these services are provided under the Airtel brand. The Company compliments its mobile and broadband & telephone services with national and international long distance services. It has over 35,016 route kilometers of optic fibre on its national long distance network. For international connectivity to east, it has a submarine cable landing station at. For international connectivity to the west, the Company is a member of the South East Asia-Middle East-Western Europe – 4 (SEA-ME-WE-4) consortium along with 15 other global telecom operators. "The players that will be amongst the successful 20 per cent will be the ones that provide a consumer-centric experience, for example, through interactive TV, where users will be able to chat online while watching their favourite TV programmes," "To uncover adjacent markets, carriers must leverage their unique assets, in areas such as billing, secure authentication and quality of service, and develop multiple partnerships to add creative talent to existing operational expertise," "The telecom industry in 2012 will be very different from the one we know today. Developing strong partnership skills, focussing on customer user groups, embracing Internet services and starting to talk the language of Web 2.0 will enable the carriers to thrive well into the future,"
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Bibliography Marketing Management -- Philip Kotler Strategic Management -Marketing of Services -www.airtel.in www.ibef.org www.google.com www.expresspharma.com www.slideshare.net
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