STRATEGIC LEADERSHIP

A Project Report
On

Submitted to
Prof. J Ramachandran
On
Jan 14th, 2015

Submitted By:
DEEPTI TANDON 1311084
RAKESH RANGDAL -- 1311112
VINOTHKUMAR P -- 1311136
VIPIN M 1311137

STRATEGIC LEADERSHIP PROJECT

Table of Contents
INTRODUCTION .................................................................................................................................. 3
ABOUT BHARTI AIRTEL .................................................................................................................... 3
AIRTEL HISTORY ................................................................................................................................ 4
INFLECTION POINTS IN TELECOM INDUSTRY ............................................................................ 5
COMPETITIVE POSITIONING & GENERIC STRATEGY ............................................................... 7
GROWTH STRATEGY BCG MATRIX ............................................................................................ 7
STRATEGIC DECISIONS BY AIRTEL ............................................................................................... 8
PRESENT CHALLENGES AND THE WAY AHEAD ...................................................................... 13
Challenge #1: Market Saturation ...................................................................................................... 13
Key Recommendation.................................................................................................................... 13
Alternatives considered ..................................................................................................................... 13
Plan for implementation ................................................................................................................ 14
Challenge #2: Declining ARPU ........................................................................................................ 14
Key Recommendation........................................................................................................................ 15
Alternatives considered ..................................................................................................................... 15
Plan for implementation ................................................................................................................ 15
Challenge #3: Uncertainty in the African operations ........................................................................ 16
Key Recommendation.................................................................................................................... 16
Plan for Implementation ................................................................................................................... 17
Challenge #4: Feeble response to Airtel Money ............................................................................... 17
Key Recommendation.................................................................................................................... 18
Challenge #5: Net Neutrality Issue ................................................................................................... 18
Key Recommendation.................................................................................................................... 19
CONCLUSION ..................................................................................................................................... 19
REFERENCES ..................................................................................................................................... 20

STRATEGIC LEADERSHIP PROJECT

INTRODUCTION
India's telecommunication industry is the second largest in the world based on the total number
of telephone users. It has one of the lowest call tariffs in the world due to mega telephone
Network companies and hyper-competition among them. The total annual revenue of this
industry is USD 33,350 millioni. Major verticals of the Indian telecommunication industry are
telephony, internet and television broadcasting. The major players in this industry are Bharti
Airtel, Vodafone, Reliance, Idea, and Tata DoCoMo- to name a few. We have done our analysis
on Bharti Airtel, which is a market leader in the India's telecommunication industry. Scope of
our analysis is restricted to Voice & Text Services, Mobile Internet, and Value Added Services.

Market Share of Telecom Players as On 28th Feb, 14

Src: http://www.telecomlead.com/telecom-statistics/indian-telecom-market-share-report-february-2014-trai-85888-50423

ABOUT BHARTI AIRTEL

Bharti Airtel is an Indian Telecommunication Multinational company head quartered in New
Delhi. It has today evolved into a huge scale operating in nearly 20 countries. Bharti Airtel has
been credited with revolutionizing Indian telecom industry. Today Airtel has grown into the
Third Largest Telecom Company in the world. The following details give information about
the performance of Airtel in the near past

Highest market share in Indian Telecom Industry (~23%)

Largest customer base in India having nearly 275 million customers.
Highest Profit margin compared to other players in Indian Market with approximately
10% margin.
Better return on capital with a 12.07% ROC compared to the industry average of 9.72%

STRATEGIC LEADERSHIP PROJECT

AIRTEL HISTORY1
1976

Bharti Enterprises founded by Sunil Bharti Mittal

Bharti makes it entry into the telecom sector with Bharti Telecom.
1985-88 Bharti Telecoms Ludhiana factory commences operations for manufacturing push button phones

1989

Bharti ties-up with Takacom Corporation, Japan to become the first company in India to
manufacture telephone answering machines

Bharti ties-up with Lucky Gold Star, South Korea to become the first company in India to manufacture cordless
telephones.
Bharti Telecoms products reach international markets. Company signs OEM contract with Sprint, USA for
1990-95 manufacture and export of telephone sets.
Bharti Telecoms Gurgaon factory becomes the first manufacturer of push button phones to be awarded ISO
9002Bharti launches Delhis first GSM mobile services under the Airtel brand.
Telecom Italia acquires 20% equity interest in Bharti Tele-Ventures
British Telecom acquires equity interest in Bharti Cellular.
1996-99 Airtel becomes the first mobile service provider in the country to cross the 100,000 customers mark
Bharti becomes the first Indian company to offer telecom services in international markets

Bharti acquires majority stake in SkyCell, establishes presence in the Chennai circle
Bharti and Singtel, Asias leading telco, form strategic partnership. Singtel invests $ 400 million in
Bharti.

2000-02 Bharti wins mobile service provider licences in 8 circles and fixed-line service provider licences in
4 circles. Bhartis mobile service provider licence in Punjab is restored.
Bharti launches mobile services in Gujarat, Haryana, Kerala, Madhya Pradesh circle, Maharashtra,
Mumbai, Punjab, Tamil Nadu, Uttar Pradesh (West).
Bharti acquires Spice Cell and enters the Kolkata circle
Bharti goes public, completes Indias first 100% book building issue and gets listed on the National
stock Exchange, Bombay Stock Exchange and the Delhi Stock Exchange on February 18, 2002.
2003-05 Airtel becomes Indias largest GPRS network.
Bharti becomes Indias first mobile service provider to complete a national footprint in all 23
telecom circles.
Bharti becomes the first Indian telecom operator to launch 3G services, starts 3G operations in
Seychelles
2006-07 Bharti becomes the fastest private telecom company in the world to cross the 50 million mark.
Enters the league of top 5 mobile companies in the world.
Bharti launches Mobile Money Transfer pilot project in India in partnership with GSMA.
Bharti received licence to offer Direct to Home (DTH) Satellite TV services in India.
Bharti Airtel launches its services in Sri Lanka (2G/3G network).
2008-10 Bharti crosses 60 million telecom customers landmark.
Bharti Airtel launches iPTV service; Digital TV interactive.
Bharti Airtel crosses the 100 million telecom customers mark. (2009)
Airtel launches 3G launch services in Bangalore
Bharti Airtel becomes the fourth largest mobile operator in the world
2011-14 Bharti Airtel crosses 200 million customer (mobile, fixed line & DTH) milestone in India
Airtel launches Indias first 4G service in Kolkata

1 http://www.bharti.com/wps/wcm/connect/BhartiPortal/Bharti/home/about_us/Milestones

STRATEGIC LEADERSHIP PROJECT

INFLECTION POINTS IN TELECOM INDUSTRY

1. Introduction of revenue sharing model
Governments decision to allow private sector participation in the Indian telecom sector that
started the mobile telephone revolution started in India. In 1994, the Department of
Telecommunications (DoT) with the support of Government of India (GoI), issued licenses to
private operators to start mobile services in the four major cities of Delhi, Mumbai, Chennai,
and Calcutta (now Kolkata).2 Nineteen more circles obtained mobile licenses in August 1995.
Kolkata became the first Indian city 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 telecom operator Telstra. During the first days of cell phones 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 like 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.

2. Lowering of license fee and entry of CDMA players (esp. Reliance)

The number of subscribers 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. The fixed
service operators were allowed to provide mobile services over a limited area using CDMA
technology in 1999. A bitter legal conflict arose between the fixed service operators and the
cellular operators when Reliance Infocomm3 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 Government of India 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. 4

http://cis-india.org/telecom/resources/licensing-framework-for-telecom
http://www.rcom.co.in/rcom/StoreLocator/press_release_detail.jsp?id=72
4
Bharti Airtel Limited and the Indian Telecom Sector, case study from www.icmrindia.org
3

STRATEGIC LEADERSHIP PROJECT

3. Consolidation of telecom sector

With intense competition 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/user (ARPU). Major players like BPL and Escotel who
had a strong presence in south India also entered into mergers with prominent players.5

4. Spectrum auctions
In 2010, 3G and 4G telecom spectrum were auctioned in a highly competitive bidding. The
government earned a total of 1062 billion from the auction. Department of Telecom auctioned
off 2g spectrum in both CDMA & GSM bandwidths in 2012. About 271 Mhz of spectrum was
put on sale. Government earned RS. 94 billion far less than its estimated target of RS. 280
billion. In 2014, the Dot auctioned 2G telecom spectrum in the frequency range of 900 MHz
and 1800 MHz Vodafone and Airtel had to renew their licenses in the 2014 bidding. For 3G
auctions, the highest amount paid by any player was Airtel (RS.122.95 billion). It obtained 3g
licenses for 13 circles in India: Mumbai, AP, Delhi, Tamil Nadu, UP, Karnataka, WB, HP,
Rajasthan, Assam, Northeast and J&K. Airtel also operates 3G services in Maharashtra & Goa
and Kolkata circles through an agreement with Vodafone and in Gujarat through an agreement
with Idea. This gives Airtel a 3G presence in 15 out of 22 circles in India. Airtel 3G services
are available in 200 cities through its network and in 500 cities through intra-circle roaming
arrangements with other operators. Airtel boasted about 54 lakhs of 3G customers, out of which
4 million are 3G data consumers as of Sept, 2012.
For 4G spectrum auctions, Airtel paid RS. 33.1436 billion (US$520 million) for spectrum in 4
circles: Maharashtra and Goa, Karnataka, Punjab and Kolkata. On 10 April 2012, Airtel
launched 4G services through dongles and modems using TD-LTE technology in Kolkata,
becoming the first company in India to offer 4G services. The launch in Kolkata was succeeded
by launches in Bangalore, Pune & Chandigarh, Mohali and Panchkula. Airtel received 4G
licences & spectrum in the telecom circles of Delhi, Haryana, Kerala and Mumbai after
acquiring Wireless Business Services Private Limited, a JV founded by Qualcomm, which was
victorious in winning BWA spectrum in all the aforementioned circles during the 4g auction.6
The spectrum auctions appear a real inflection point in the Indian telecom industry. The
industry, already deemed high on competition, struggled to straddle between low operating
margins and high capital expenditure. Airtel, who has a pan-India presence couldnt afford to
sit back and let others win the bid and had to pump out money from every possible pockets.

5
6

http://archives.digitaltoday.in/businesstoday/20050925/cover3.html
http://en.wikipedia.org/wiki/Indian_Telecom_Spectrum_Auction

STRATEGIC LEADERSHIP PROJECT

COMPETITIVE POSITIONING & GENERIC STRATEGY

Airtels generic strategy can be stated as Cost Leadershipii. Supported by a solid customer
base, Airtel is able to provide services at prices below-par of competitors. The company gives
a broad focus on all segments, restricting itself from particular segments (e.g. Virgin mobiles)
and the various innovations and differentiations the company follows are short and are
immediately imitated by the competitors. The following figure gives a better picture of the
current strategy.

GROWTH STRATEGY BCG MATRIX

To understand the growth strategy for Airtel it is imperative to use the BCG matrix. Using the
data collected above and plotting the various businesses of Airtel, the BCG matrix is as follows:

STRATEGIC LEADERSHIP PROJECT

STRATEGIC DECISIONS BY AIRTEL

1. Entry into Telecom industry and redefinition of cellular services
The launch of cellular services in Delhi in 1995 marked the entry of Bharti in the Telecom
industry. The telecom arm of the business group was under the tutelage of Bharti tele ventures
(BTV). The cell phone services in Delhi was launched under the brand name Airtel by Bharti
cellular limited, a subsidiary of Bharti tele-ventures. Indias mobile telephony owes to Airtel
for setting many benchmarks in its history which in fact redefined the way cellular services
operated in the country till then. Airtel opened Airtel connect in Delhi in December 1995.
Airtel Connect indeed was a one stop shop for cell phones where users could buy phones, get
new subscriptions, make use of various value added services (VAS), and defray their phone
bills.7
2. Expansion and Acquisition
The expansion of BTV in other telecom circles was through securing licenses in those areas
and through acquisitions. A few of the prominent ones in this regard were Skycell in Chennai,
JT Mobile in Andhra and Bangalore and Spice cell in Calcutta. The business was further
expanded through fixed line services under the brand name Touchtel. BTV started expanding
by offering fixed line services in 2001 under the brand name Touchtel.8 It also launched the
long distance services in the same year under the brand name IndiaOne. BTV further
widened its portfolio by offering Internet Services under the brand name Mantra in late 2001.
With the introduction of the revenue sharing model between the Gol and operators under the
New Telecom Policy (NTP) of 1999, the cellular services grew quite rapidly. BTV initially
targeted the premium segment however soon it reduced the tariffs to make the services
affordable to the masses. It went in for an Initial Public Offer (IPO) in 2002 through a 100%
book building process which helped bring in the funds that proved vital in expanding the
companys business in India.9
3. Building a strong brand
Bharti Airtel, right from the inception, recognized the significance of creating a mighty brand
through various innovative promotional strategies. Some of the strategies adopted by BAL
were enrolling celebrities as its brand ambassadors to appeal to the masses. It initially used
cricket star Sachin Tendulkar and later Bollywood stars like Shahrukh Khan and Kareena
Kapoor as brand ambassadors for promoting its products and services. Shahrukh Khans
popularity proved to be very successful, especially for its former prepaid mobile services brand
Magic.10 The iconic musician A R Rahman composed special ringtones for Airtel which
became a huge hit among the masses further strengthening the brand. Campaigns such as
Express Yourself launched in the year 2003 proved very effective in making Airtel a big
brand in India. By the mid-2000s, the company had gone on to become one of the biggest

http://www.icmrindia.org/free%20resources/casestudies/Airtel.htm
http://www.airtel.in/about-bharti/media-centre/bharti-airtel-news/telemedia/bharti-launches-touchtel-in-delhi
9 http://www.airtel.in/about-bharti/media-centre/bharti-airtel-news/corporate/bharti-tele-ventures-public-offer-receivesexcellent-response
10 http://www.rediff.com/money/2002/jun/27airtel.htm
8

STRATEGIC LEADERSHIP PROJECT

advertisers in India, with total expenditure on marketing, distribution, and advertising of INR
12.55 billion (INR 4.02 billion on advertising alone) in 2006- 07
4. Innovative Business Model
Bharti Airtel Limited (BAL) was one of the first Telecom companies to adopt the idea of
becoming a lean organization. Towards this, it performed outsourcing of its network
deployment (to Ericsson and Nokia), IT services (to IBM), and customer contact centres (to
Nortel). It utilized different payment models from revenue per share to cost per call. This
helped BAL to cut down on its operational expenses and save on capital expenditures.
According to management consulting firm Oliver Wyman, BALs operating expenses as a
share of revenue had declined 8% annually since 2003. This enabled BAL to offer services to
its customers at a low cost and focus on its core business. We were seeing people laugh at us,
saying, how you can give away your lifeline to vendors? We were very clear that the technology
was not something we need to focus on. Technology is something we buy to sell to the customers.
Ericsson, Nokia, and IBM do technology for a living, so lets give it to them because they know best. It
has made the business model of Bharti very, very sustainable, said Mittal.11Along with that, BAL

countered challenges put forward by new entrants like BSNL in the mobile phone market quite
deftly. BSNL was the first company to introduce free incoming calls to its mobile phone users.
BSNL capitalised on its strong fixed line customer base, by providing free incoming calls to
its mobile phone users from its fixed line users. BAL however couldnt afford to imitate
BSNLs strategy as it had to pay interconnection charges. But BAL later lobbied heavily
through the COAI to get the GoI to reduce the interconnection charges and made the incoming
calls free across all operators & the services offered.

5. Network Expansion
Foreseeing the competition, Airtel planned to expand its network coverage all over the country
to gain a sustained competitive advantage ahead of other players. In February 2008, it
announced an annual investment plan of US $ 2 billion to expand its network over the next 3
years12. It also mooted to augment its base stations by another 30000 transceiver stations over
existing 40,000 base stations in the year 2007 thereby covering 70% of the country. Bharti
Airtel Limited (BAL) aimed to achieve a target of 97% coverage by 2010. 50-60% of this
expansion was targeted at rural parts of India. . In July 2007, BAL entered into a memorandum
of understanding (MOU) worth US $ 900 million with Nokia Siemens Networks (NSN) for an
end-to-end network expansion across all of BALs mobile, fixed, and intelligent network
platforms. As part of the deal, NSN was to expand BALs GSM network in 8 circles in 2 years.
This strategic move by BAL was to increase its foothold in rural India and increase its network
capacity to face the increasing competition from other players. This was one of the greatest
expansions in the GSM domain of the country.
6. Targeting all the segments
With respect to Value Added Services, Airtel launched Mobile payment services, Money
transfer etc. Airtel also expanded its m-commerce services facilitating lot of online purchases.
11

http://globalens.com/DocFiles/PDF/cases/inspection/GL1428864I.pdf
http://www.icmrindia.org/casestudies/catalogue/Business%20Strategy/Bharti%20AirtelIndian%20Telecom%20Sector%20Case%20Studies1.htm
12

STRATEGIC LEADERSHIP PROJECT

In 2007, Airtel tied up with Nokia to offer entry level handsets to users. It was an effort to
bundle the handset with Airtel services at subsidized prices. This move was also aimed at
countering self-branded phones released by Vodafone and Tata at low costs, generally to appeal
to the rural masses. Through this tie-up Airtel and Nokia combined their advertising and
marketing initiatives to focus on the lower part of the pyramid. It was also an era where Airtel
did away with single strategy to target all customer segments. High-end customers were
segmented into a separate category called, funsters.13 Industry experts said that as the mobile
telecom domain attained maturity, a single strategy for all was no more the reliable technique.
Proper segmentation of the market was adjudged the key for better targeting. Airtel planned to
intensify its marketing campaigns on tech savvy VAS users who fell in the age group of 18-35
years. To improve its revenues and deal with the steadily falling ARPUs, Airtel decided to get
into tie-ups with leading manufacturers of high-end hand-held devices such as HTC and RIM.
Through these tie-ups, products of the likes of Blackberry & HTC Touch were launched which
provided handy features like touch screen interface, doc support, push email etc. These
products were aimed at high-end corporate users whose ARPUs were high. Airtel hoped to
increase its falling ARPUs through a slew of such high-end offers. Airtel also decreased its
overall tariffs to lure its low-end customers. On January 15, 2008, Airtel reduced its tariffs to
Re. 1 for its lifetime prepaid users -- a reduction of 50% when compared to the previous rate
of RS. 2 per minute. It even reduced the fixed charges for lifetime validity for prepaid
subscribers to RS. 495 from RS. 999.14 Airtel also introduced a number of post-paid 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. Airtel planned at deleting the entry barriers & bringing down the recurring maintenance
charges for consumers in order to create a new customer base to fuel its growth. The slash in
the tariffs & decrease in the fixed & recurring charges were aimed at increasing the consumer
base by further stretching the market. Analysts opined that reduction in the entry as well as
monthly recurring charges were the hotspots to market expansion in rural India. Airtel also
started new advertising cum promotional campaigns to reposition its brand.
7. Appealing to the Rural Masses
Market penetration for mobile companies in rural India has always been a daunting task. Low
ARPUs were a key concern as the customers were low income people. More towers and that
too taller ones had to be installed to cater to the higher population density. Uninterrupted power
supply was also challenging to achieve. All these aspects raised the costs. Multiple language,
numerous dialects and various scripts made the provision of mobile services further difficult.
In what analysts saw as another innovative approach to rural markets, Airtel started to tie up
with shop owners in remote areas of India and bundled information on issues important to the
rural population (such as weather, crop yield, fertilizers, etc.) with the mobile phone. It also
began providing economical plans (with handset bundling) to rural people to betters its value
proposition. Our next 50 million will largely come from rural India as our plan is to reach
5,200 census towns and over five lakh (500,000) villages, covering 96 per cent of the Indian
population, said Mr. Manoj Kohli, the then MD of Airtel. In 2008, Airtel launched a joint
venture company, IFFCO Kisan Sanchar Limited (IKSL) with Indian Farmers Fertilizer
13
14

http://www.slideshare.net/karanjaidkakj/airtel-marketing-insights
http://www.seminarsonly.com/Engineering-Projects/Marketing/Lifetime-Plans-of-the-Cellular-Companies.php

10

STRATEGIC LEADERSHIP PROJECT

Cooperative Ltd (IFFCO) to provide VAS and voice services to farmers throughout India.15 In
addition to the low tariff of RS. 0.50 per minute between IFFCO members, it planned to offer
economical handsets bundled with attractive offers and connections. Voice message were
broadcasted on a daily basis on mandi prices, weather forecast, rural health programs, farming
techniques etc. The farmers would also have access to a dedicated helpline managed by experts
from various fields to address their queries. Airtel said that the initiative would help in the up
lift of the agrarian community and the rural economy.
8. New Advertising Strategy
As many players started competing in the telecom domain, branding played a crucial role and
Airtels efforts towards that were truly commendable. It also helped to convey the brand to
position itself in the minds of people. From early 2007, it began to roll out some new
promotional campaigns, one of the important ones being the Kuch Bandhan atoot hote hain
[Some bonds are unbreakable] campaign launched in March 2007. The campaign stressed the
wide coverage that the nationwide mobile network of AIRTEL provided. The advertisement
displayed a divided family coming together after long 22 years. The advertisement depicted a
young man, who comes to his parental village to meet his grandparents for the first time. His
father had left the village 22 years ago apparently due to arguments with his father & never
returned. The grandfather is disinterested to talk to the boy first but gives in after speaking to
his own son on the mobile phone with Airtels network. Not being purely emotional like its
earlier Express Yourself campaign, the new advertisement campaign highlighted the
capabilities of Airtels mobile telecom network. Airtel launched another major advertising
campaign in December 2007 called Barriers break when people talk. The theme 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. Finally, 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 Airtel 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 Airtel 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. After the mobile revolution, Airtel realised a huge potential
in the youth of the nation and network externalities brought by it. Ads like Har ek friend
zaroori hota hain, Jo Tera hain wo mera hai etc. entirely capitalised on this concept.16 The

15

http://www.airtel.in/about-bharti/media-centre/bharti-airtelnews/corporate/pg_iffco+and+bharti+airtel+join+hands+to+usher+in+the+second+green+revolution+to+benefit+millions+
of+rural+consumers
16

http://www.slideshare.net/manigarg211/airtel-advertisement-analysis

11

STRATEGIC LEADERSHIP PROJECT

new Ad of Airtel focuses on One-Touch internet to rope-in elderly customers as well to the
data revolution.
9. Early adoption of new technology
The 3G and 4G services were another area on which Airtel decided to focus so as to retain its
dominant position in the Indian mobile telecom services market. It started the next generation
3G mobile services as and when GoI declared its policy and allotted the spectrum. Analysts
say that this move helped Airtel to increase its revenues in spite of its falling ARPU and that
3G also proved a new growth engine in saturated circles like the big metros. The same trend
continues with 4G as Airtel has launched the countrys first 4G services in Bangalore and
Kolkata. Airtel has launched multiple initiatives to leverage on its mobile data capabilities
Tie-ups with major phone manufacturers17 Airtel, following the western model of
carrier backed purchases, tied up with Apple during its launch of iPhone 3, 4 and 5 in
India. Also with the high end Samsung Galaxy models, they followed the same tactics.
Launch of mobile radio
Special packages for Facebook, WhatsApp etc.
Pact with Opera for Opera mini browsers for Airtel users
Launch of education portal
Applications like smart drive and wynk music18 to promote data expenditures by
consumers
Launch of 4g dongles and devices
Airtel being the market leader and having the highest network presence and customer base,
couldnt shy away from the spectrum auctions that decided the future of Indian telecom
industry. Bidding for a great number of circles & spending a whopping figure in the auctions
were indeed a bold move. The sustainability of such a huge capital expenditure is yet to be
tested and proved in the highly competitive, saturated and low margin Indian context. The
innovative thinking, ultra-modern services and high diversification are definitely raising rays
of hope.
10. Entry into emerging markets
By 2008, Airtel not only established its dominance in the Indian market but also had a
prominent presence in Seychelles through its subsidiary Telecom Seychelles Ltd., and Europe
(Channel Islands) through its subsidiaries Jersey Airtel Limited & Guernsey Airtel Limited.19
It has been rendering cellular services in Seychelles from 1998. In 2006, it became the first
Indian telecom operator to launch 3G services in Seychelles. In May 2007, JAL & GAL entered
into a partnership with Vodafone to launch mobile services in Channel Islands under the AirtelVodafone brand. In the subsequent month, telecom services were launched in Jersey. The
Guernsey services started in March 2008. By middle of 2007, Airtel also made an entry into
17

http://www.airtel.in/about-bharti/media-centre/bharti-airtel-news/mobile/bharti-airtel-to-bring-iphone3gs-to-india-on-march-26
18
http://lighthouseinsights.in/airtel-launches-cross-operator-music-streaming-app-wynk-but-why-will-otheroperators-follow.html/
19
http://www.icmrindia.org/casestudies/catalogue/Business%20Strategy/Bharti%20AirtelIndian%20Telecom%20Sector%20Case%20Studies1.htm

12

STRATEGIC LEADERSHIP PROJECT

neighbouring Sri Lanka, which had around 45 lakhs of mobile users by the end of 2006. The
company entered into an agreement with Sri Lankas main foreign investment promotion body
to invest US$150 million in the country. In what was viewed as Airtels attempt to make its
first major foray into international markets, Airtel and Africa-based MTN Group (MTN),
which had a presence in 24 African and Middle East countries, initiated talks on Airtel 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
million 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. 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 Airtel could repeat the success achieved in India in Africa.
Airtel, in connection to its global entry, underwent a Rebranding exercise. The A in the name
has been turned to lower case with a curvy design. AR Rahman has once again associated
with the brand to release a new jingle. The exercise, altogether, was aimed at bringing
dynamism, energy and appeal. Again, the deep red colour portrayed in the new symbol was
targeted to the African markets where the same stands for hope. The rebranding exercise, in its
entirety, was an ambitious journey by airtel to increase its international appeal and way for the
world to recall their brand. Analysts are also of the opinion that this exercise was aimed at
countering the global aura brought into the Indian market by Vodafone.

PRESENT CHALLENGES AND THE WAY AHEAD

Challenge #1: Market Saturation
One of the biggest problems faced by Bharti Airtel is market saturation in urban region. The
urban tele-density has reached 146%. The company should tap into the relatively under
penetrated markets so that it sustain its growth.

Key Recommendation
The tele-density in rural India is assumed around 33%. The rural India is comparatively
kept virgin by the telecom revolution witnessed in the last few years. A huge 'digital divide',
which is reflected by the enormous difference of more than 100% between the urban and
rural tele-density, reiterates this factiii. Bharti Airtel should target the rural market and
generate more revenues.

Alternatives considered
The other alternative considered was to gain market share in urban location instead of entering
rural market. As market has reached saturation, the only way to gain market share is by taking
it from competitor. For this to be possible, Bharti Airtel has to cut down its prices. But price
war will be very harmful for this industry and company as it is already facing hypercompetition.
13

STRATEGIC LEADERSHIP PROJECT

Plan for implementation

Bharti Airtel should target the rural India and deploy scalable network. It should also carry
out cost-effective sales and marketing, and establish distribution channel to provide service
promotion and customer support.
Infrastructure: Deployment of telecom infrastructure in rural areas could be one of the major
expensesiv; hence infrastructure sharing among player would reduce the cost. Initial set-up
costs for new service providers and existing service providers planning to enter new service
areas are very high. Infrastructure sharing will reduce their operating costs. Infrastructure
sharing will reduce the time required to roll out the service.
Affordability in Rural Area: To create affordability in rural India, Bharti Airtel should
collaborate with mobile device manufacturers and dealer and also microfinance institution.
Bharti should provide subsidized tariffs and subscriber identity module cards to rural users,
device manufacturers and dealers should provide subsidized handsets, and micro financing
institution should provide small loans.
Increase ARPU: Rural Telephony faces the problem of very low ARPU. Bharti Airtel should
provide Value added services by collaborating with federation relevant to rural market like
IFFCO Kisan Sanchar which has deep penetration in rural area(80% of rural India), and use its
appeal among the rural agricultural community to create a Brand value.
Sales and Marketing: Marketing content in local language will be most effective in rural
area. Bharti Airtel should set up Service Centres in villages to address customer queries which
will even act as sales and distribution outlets. Therefore, integrating sales & marketing with
distribution channels will bring down cost.

Challenge #2: Declining ARPU

With advent of new mobile applications which enables user to communicate, share files
through data which costs much lesser than voice call, the revenues generated out of voice calls
have been dwindling. Also revenue from messaging service (SMS) has also diminished
considerably. This has created an impact on Airtels revenue last quarter and their ARPU fell
from Rs.200 to Rs.192. The main component Airtels ARPU voice calls came down from Rs.
166 to Rs.160v.

14

STRATEGIC LEADERSHIP PROJECT

Revenue from SMS and VAS as a percentage of total revenue has reduced from 8.2% to 6.7%v,
though the loss was compensated by the increase in data usage with increase of revenue from
7.4% of total revenue to 9.2%. Airtel has an ARPU of Rs.70 for Data which is half as that of
voice. This trend has created a negative impact on Airtels financial performance; however
there are scopes for development in the Data domain

Key Recommendation
Airtel should focus on data as it has huge potential for growth in the future. With increase
in smart phone usage, mobile applications and free services, data usage is going to skyrocket
in the next 5 years. With Airtels dominating presence in India and existence in Africa they
have huge opportunity for capturing this space in the future.

Fig. Mobile data traffic growth 20112012 and CAGR 20122018, by regionvi 2013

Alternatives considered
It is to focus on voice and SMS services. But as gradually the industry is going to evolve with
data as the key entity, the strategy of concentrating on voice & text would fail in long term.

Plan for implementation

Mobile data usage is exploding and the traffic is doubling every year for the past few years.
Under this situation it would be ideal for Airtel to have partnership with leaders in Data Traffic
like Qualcomm, Siemens, Huawei, etc. to gain competitive advantage and possess the best
technology before the competitors.

15

STRATEGIC LEADERSHIP PROJECT

Along with the above mentioned recommendation, in order to improve data usage they can
provide,

Customized Data plans for only for specific apps

Customizable mobile plans (Pipeline)
Flexibility, Millions of Combinations
Premium pricing for premium segments E.g. LTE Data plans

Challenge #3: Uncertainty in the African operations

Airtel is yet to make a turnaround in all the markets except India. In the July-September quarter
2014, Bharti Airtel reported a net profit of INR 1,383 crore, a 170 per cent rise from the
corresponding quarter of 2013-14.20 It could have reported a much stronger result if it did not
have to suffer the mounting pressure from Africa, Bangladesh & Sri Lanka. India has generated
a net profit (before exceptional items) of INR 2,449 crore; however, it generated a loss of INR
753 crore in Africa and INR 153 crore in Bangladesh and Lanka. The figure for these countries
previous year was a loss in Africa at INR 288 crore and one of INR 133 crore in Bangladesh
and Lanka. In July-September, capital expenditure in Africa rose to INR 1,602 crore, a 166 per
cent jump from INR 964 crore, while operating cash flow was barely INR 28 crore, as
compared with INR 936 crore in July-September 2013. However, capex in Bangladesh and
Lanka together almost halved to INR 66 crore from INR 132 crore and operating cash flow
almost doubled. Analysts have remained sceptical about Bharti Airtels operations abroad. At
this stage, it would be very difficult to correct operations in Bangladesh. Sri Lanka never paid
back. And, pressure in Africa has been increasing. Bharti has been looking for a buyer for its
Sri Lanka operations for quite a long time but is yet to find a suitor. The way Bangladesh is
going, it might have a similar fate, said a top analyst with a global management consulting
firm, with experience of working for a rival Telco.

Key Recommendation
Airtel has to leverage on its key capabilities which include outsourcing important operations
in Africa and change from volume based service to value based service.

20

http://www.business-standard.com/article/companies/bangladesh-goes-africa-way-for-bharti-airtel114110400936_1.html

16

STRATEGIC LEADERSHIP PROJECT

Plan for Implementation

Airtel should shift its focus from low price high volume strategy to high value model
Airtels low tariff strategy for voice has improved the minutes talk time revenue in India and
other Asian markets but this strategy has not resulted in the talk time improvement in Africavii
and on the other hand non-voice revenues that has grown 65% in the last two years but it
contributes to only 13% in the overall revenues in Africa. So, Data services like Airtel money
and VAS which fall under the category of non-voice revenue would hold the promise to
improve revenues owing to its exponential growth. viii
Airtel should pursue the infrastructure sharing model like it did in India
Airtel had to spend 50% more capital expenditure in the African operations than originally
estimated in the last financial yearix. Airtel underestimated the complexities in the operations
like lack of proper electric power in the network tower areas and overestimated the Zains
investments in the infrastructure. So Airtel has to aggressively pursue the infrastructure sharing
model that it pioneered in India, in Africa as well.
Airtel should outsource the key operations
Airtel is quiet successful in outsourcing its major operations previously to IBM, Nokia
Siemens, Ericson etc. in fact it has remarkable reputation in managing the outsourcing partnersx
well to improve quality of operations and services. So it has to implement the outsourcing in
its African business as well.

Challenge #4: Feeble response to Airtel Money

Airtel money, Indias first mobile wallet service is adjudged as one of the notable innovations
in the m-commerce domain. The new service, aimed at increasing loyalty, retention and
customer base was launched in 2012 across 700 cities. Airtel money is advertised as a swift,
simple and safe service that permits users to load cash on their phones to pay utility bills and
shop at 10,000 plus merchandises across the country. It also offers convenient transfers
between two mobile wallets. Many brands have endorsed Airtel money so far such as The
brands include utility provider such as Reliance Energy, Tata Power Company, Maharashtra
State Electricity Board, BSNL,LIC, Aviva, ICICI, SBI, PVR, DT Cinemas, Fun Cinemas,
Fame, INOX, mutual funds, retailers like Megamart, Walmart etc. Airtel money is also touted
as an alternative to debit and credit card transactions over online platforms like Flipkart,
amazon, yatra etc.21 Though Airtel money invoked lot of initial response, the response
paralysed after losing the initial momentum. For taking the scheme ahead, Airtel has to analyse
the pros and cons involved with it

21

http://www.mydigitalfc.com/personal-finance/airtel-money-enrolls-50000-subscribers-within-first-10-days-319

17

STRATEGIC LEADERSHIP PROJECT

Pros
Airtel has a huge customer base and is widely renowned as a trusted brand. The initial
momentum that it achieved is also testimony to the same.
Telecom infrastructure to facilitate payments (USSD,SMS or 3G) is already in place for
Airtel
Airtel also enjoys a huge network of dealers and distributors.
Cons
Debit/ Credit card is preferred over Airtel money.
Payment of utility bills, recharges etc. are not compelling enough to attract users
Transaction limits imposed by RBI is much lesser compared to debit/credit card
transactions.
No merchants/Few merchants- Its a catch 22 situation. Merchants dont adopt this
mechanisms as not many users are there and users dont adopt it as many merchants are not
there.
M-Pesa, a similar initiative in Nigeria by Safaricom has been a huge hit and airtel money has
also been able to emulate its success in Nigeria and certain other African economies whereas
in India the growth has been withheld by the aforementioned drawbacks.

Key Recommendation
Make Airtel money more attractive through loyalty points and discounts on e-commerce
platforms.
Incentivize merchants and bring in more players to the network
They should exercise pressure on RBI to increase the transaction limits to be at par
with card transactions.

Challenge #5: Net Neutrality Issue

Adoption of messaging services like WhatsApp and WeChat has totally replaced SMS services
which was a great revenue generator for service providers. Now, with VoIP services like Skype
and Viber gaining traction and also the message services like WhatsApp mooting the
integration of voice calls with the existing services, telecom operators like Airtel has grown
vigilant over the future. With decrease in revenues becoming a routine affair, Airtel was forced
to rethink their existing strategy. The increasing usage of messaging apps like WhatsApp has
resulted in easy communication to any corner of the world with minimum cost. The status of
telecom operators has drooped to that of a pipe for retrieving such web based services. The
acceleration in adoption was so rapid that Airtel had to announce change in pricing for VoIP
services on 27th Dec 2014. This led to outburst in social media, with @neutrality_in handle
being retweeted more than million times accompanied with numerous status updates on
Facebook against Airtels announcement. This was considered as the violation of net neutrality
(i.e. all data should be treated equally by Internet Service Providers). After consultation with
TRAI regarding this issue Airtel retracted their decision to charge for VoIP services within two
days after the announcement.
18

STRATEGIC LEADERSHIP PROJECT

Key Recommendation
Price of data packages to be incremented over a course of time. Addiction to the data
enabled services are increasing and the same can be capitalized for enforcing the price hike.
As the issue is pestering all the service providers and none can sustain the loss of revenue in
the low margin telecom industry, a possible collusion among the fellow players can be
contemplated.
The existing players are already blaming the new age apps like WhatsApp and Viber to
be free-riders as they escape the high capital investment in spectrum auctions and also
save their business from any form of taxation. Consequently, they are able to provide
free/cheap services that attract customers in large numbers. Airtel shall collude with the
fellow players and pitch before TRAI regarding this uneven ground of competition and
enforce tax and associated payments from all these VoIP and messaging apps.

CONCLUSION
The telecom industry faced various inflection points which were introduction of revenue sharing

model, lowering of license fee and entry of CDMA players (esp. Reliance), consolidation of
telecom sector and Spectrum auctions. Bharti Airtel has tackled these inflection points
successfully to a great extent by various strategic decisions like expansion and acquisition,
building a strong brand, innovative business model, network Expansion, appealing to the rural
Masses, new advertising strategy, early adoption of new technology and entry into emerging
markets. The current challenges which Bharti Airtel faces are market saturation, declining
ARPU, uncertainty in the African operations, feeble response to airtel Money and net neutrality
Issue. Our key recommendations to face these challenges are rural India penetration; focus on
its data services, outsourcing operations in Africa. Just as in past, with the right mix strategic
leadership and decision making, Bharti Airtel shall emerge as winner by facing its current
challenges.

19

STRATEGIC LEADERSHIP PROJECT

REFERENCES
ii

http://www.ukessays.com/essays/business/the-strategic-management-process-in-airtel-businessessay.php#ixzz2l7xHSrC7
iii

http://www.dnb.co.in/IndianTelecomIndustry/issues.asp
http://www.cisco.com/en/US/solutions/collateral/ns341/ns525/ns537/ns705/ns1186/Cisco_BhartiAirtel_CS.
html
vhttp://www.business-standard.com/article/companies/bharti-airtel-s-numbers-highlight-threat-for-thesector-113103100410_1.html
vi
Source: Analysis Mason, 2013.
vii
http://ovum.com/2012/03/09/airtels-african-safari-turns-into-a-hard-expedition/
viii
http://www.nyasatimes.com/2013/12/03/airtel-money-registers-500000-customers-transacts-12-millionmonthly/
ix
http://www.telecomlead.com/telecom-services/airtel-telecom-infrastructure-capex-touches-438-million-inq4-2012/
x
http://www.researchomatic.com/Strategic-Outsourcing-At-Bharti-Airtel-105185.html
iv

20