Esr On Airtel

Environmental Scanning Report on

Bharti Airtel • Incorporated on July 7, 1995 • Largest Private Integrated Telecom Company in India • 4th Largest Wireless Operator in the World • Largest Telecom Company listed on Indian Stock Exchange

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Milestones 1995-1996 2003-2004 • Launches Airtel in Delhi & HP • SA with IBM & Ericsson • BT acquires stakes in Airtel • Launches Blackberry • First private player to launch 1999-2000 mobile service in J&K • Becomes largest private telecom player 2006-2007 • JV with Singtel • SA with Google, • SA with Microsoft 2001-2002 • Launches Indiaone • Forays into Srilanka and USA • Launches India’s first private submarine cable • Initial IPO • Introduces AR Rehman Signature Tone • Airtel_Jingle_-_FluteOnly_-_Original.mp3

The Company is first : • To launch full roaming service on pre-paid in the country. • To launch 32K SIM cards. • In Asia to deploy the multi band feature in a wireless network for efficient usage of spectrum. • To deploy Voice Quality Enhancers to improve voice quality and acoustics. • Telecom company in the world to receive the ISO 9001:2000 certification from British Standards Institute.

Awards • • • • • •

CNBC-TV18 India Business Leader Award for the Outstanding Company of the year, 2007 Top honours at the NDTV Profit Business Leadership Awards 2007 Among the top 10 best performing companies in the world according to BusinessWeek IT 100 list "Indian Mobile Operator of the Year 2005” 'The Best Asian Telecom CEO' award. Asia's 'Best GSM Carrier’

Integrated Telecom Company Mobile Services

 Enterprise Services

– Mobile and fixed wireless service – GSM technology – Value added services like Hello Tunes, GPRS, Voice Mail, call conference, call wait, call divert, SMS

– – – – –

Internet VPN IPLC VSAT Audio & Video conferencing.

 Telemedia Services – Fixed Line – Broadband – DTH

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Business Segments

Indian Telecom Sector

250

24 18.3

200

50

16

12.8

150 100

19.9 20

9.1

225.21

7.0 5.1 53

76

98.4

140.3

206

12 8 4

0

0 2002–03

2003–04

2004–05

2005–06

Telecom Subscriber Base

Teledensity (in percent)

Fastest Growing Sector – CAGR 22% (2002-07) Second Largest Telecom Market Lowest Tariffs Low Teledensity Subscribers (in million)

• • • •

2006–07 2007–08 (as of June 2007) Teledensity

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INDIAN CONSUMERS GET THE WORLD’S LOWEST MOBILE TARIFFS

0.25

0.23

0.22 0.19

0.2

0.16

0.15 0.11

0.11

0.11 0.09

Source: Merrill Lynch Global Matrix - Q1 2007

0.03

0.02

India

0.04

China

Malayasia

Argentina

Taiwan

Philippines

Brazil

France

UK

Italy

Belgium

0

0.05

Pakistan

0.05

0.05

Thailand

0.1

Hong Kong

USD

0.17

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Health Indicators • Average Revenue Per User (ARPU) • Churn • Minutes of Usage • Total Customers

>>

ARPU TRENDS

HIGHEST MINUTES OF USAGE 461

315

159

320

323

326

179

84

Russia

M alaysia

Australia

Source: Merrill Lynch Global Matrix – Q1 2007

Korea

Singapore

China

Thailand

India

<<<

SUBSCRIBER BASE •

Average %age Growth =80%

•

<<<

70.00 60.00 50.00 40.00 30.00 20.00 10.00 0.00

Customer Base

20 03 20 04 20 05 20 06 20 07 20 08

Total Subscribers (in Mn)

Customer Base- Airtel

Year

Health Indicators Parameters

Unit

Customers

000s

Average Revenue Per User (ARPU)

Dec. 2008

Sept. 2008

Jun-08

Mar-08

88,270

79,988

71,777

64,268

INR

324

331

350

Minutes of Use (MOU)

Minutes

505

526

Post-paid Voluntary Churn

%

1.10%

Post-paid Company Initiated Churn

%

Pre- paid Churn

%

Dec. 2007

Sept. 2007

Jun-07

57,341

50,950

44,676

357

358

366

390

534

507

474

469

478

1.10%

1.00%

1.00%

0.90%

1.10%

1.10%

1.20%

1.40%

1.40%

1.50%

1.80%

2.10%

2.50%

2.90%

3.20%

3.80%

4.30%

3.90%

3.80%

4.00%

STEEP ANALYSIS Telecom Environment

Social Factors Demand for VAS & Broadband services Among Youth 28 % Urban Population Rapid Urbanization Rising Income level Out of town employment Outstation trips

Source: Mckinsey Report

Technology  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  Threat from VOIP  Next Generation

Economic Factors GDP growth rate - Averaged around 7.9 % from 20022008 Growing per capita income/disposable Income Rs 18,885 in 2002 to Rs 38,084 in 2008 Falling Handset Prices (ASP= INR 3150) Falling Tariffs

Regulatory Framework TRAI, DoT, TDSAT 74% FDI Investment High taxes etc in the telecom industry : 17-26% Lack of Transparency in Spectrum & License Allocation  3G Policy & MNP still Pending    

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COMPETITOR ANALYSIS

Major Players

Customer Base Comparison

Financial Comparison

Competitors Information

Net Sales (INR billion

OperatingProfit (INR billion)

Net Profit (INR billion)

Total Assets (INR billion)

Earnings per Share (INR)

Bharti Airtel

257. 61

106.62

62.44

268.12

32. 9

Reliance Communications

147. 92

61.73

25.86

451.26

12. 53

Idea Cellular

67. 2

24.91

10.44

100.61

3. .96

Tata Communications

32. 83

6.45

3.04

73.25

10. 68

Porter’s 5 Forces

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1. Threat from Competition Wireless Market – Top 4 garnering 75% market share

HIGH

25

2. Customer Bargaining Power  Lack of differentiation among

HIGH

Service Providers  Cut throat Competition  Low Switching Costs  Number Portability will have –ve Impact

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3. Suppliers Bargaining Power LOW

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4. Threat of Substitutes  Landline

DIMINISHING MARKET

HIGH

 CDMA  Video Conferencing

BROADBAND SERVICES

 VoIP – Skype , Gtalk, Yahoo Messenger  e-Mail & Social Networking Websites

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5. Threat of New Entrants  Huge License Fees to be paid upfront  High gestation period  Highly regulated

LOW

 Spectrum Availability & Regulatory Issues  Infrastructure Setup Cost - High  Rapidly changing technology

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SWOT ANALYSIS Strengths

Weakness

• •

•

•

• • • •

Pan India Presence Largest Telecom Player in India Strategic Alliance with Sony-Ericsson, Nokia - and Sing Tel Strong Financials Very focused on telecom. Leadership in fast growing cellular segment. The only Indian operator, other than VSNL, that has an international submarine cable.

• • •

Outsourcing of Core Systems Price Competition from BSNL and MTNL Untapped Rural Market Absence of own towers.

Source: CMIE Report NOV 08

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SWOT ANALYSIS Opportunities • Rural Markets • International Markets • 3G/ Wimax • Current Tele-Density is still low among developing countries • Low Broadband Penetration

Threats • Introduction of MNP • Intense Competition & Shortage of Bandwidth • Substantial payment for 3G licensing • Saturation point in Basic telephony service

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HIGH

BCG Matrix for Bharti Airtel IPLC CELLULAR SERVICE ISP BROADBAND

LOW

BASIC TELEPHONE (Fixed Line)

HIGH

LOW 32

ANSOFF MATRIX MARKET PENETRATION

Existing Market

New Market

PRODUCT DEVELOPMENT IPLC PRODUCTS

ENTERED IN BROADBAND AND FIXED LINE MARKET

MARKET DEVELOPMENT

DIVERSIFICATION

LOOKING FOR OVERSEAS MARKET AND RURAL MARKET

OUTSOURCING

Existing Product

New Product

FINANCIAL REPORTS

REVENUE TRENDS •

Financial Metrics -Airtel 300,000

Revenue (in Mn)

250,000 200,000 150,000

Series1

100,000 50,000 0 2003 2004 2005 2006 2007 2008 Year

Average %age Growth =55%

EBITA TRENDS • Financial Metrics-Airtel 120,000

EBITDA (in Rs Mn)

100,000 80,000 60,000

Series1

40,000 20,000 0 2003 2004 2005 2006 2007 2008 Year

Average %age Growth =76%

FINANCIAL GROWTH

Financials Snapshot-Performance Indicators

Particulars

2008

Revenue (in Rs Mn)

2,70,122

EBITDA (Rs. Mn)

114,018

PAT (Rs. Mn)

63,954

EPS (Basic) Rs.

34.23

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Financial Snapshot - Ratios

Key Ratios

Airtel

Telecom Industry

Debt-Equity Ratio

0.38

0.35

Long Term Debt-Equity Ratio

0.35

0.3

ROCE (%)

34. 88

9.72

RONW (%)

39. 53

10.11

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Growth Factors

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Road Map – Growth Path VPN & VoIP

WiMAX

3G

2G/2.5G

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THANK YOU !!

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