Various strategies adopted by Bharti Airtel group to sustain and enhance their business. In line with an MBA subject called: 'Strategic Management'

1. A Strategic Study about a
Telecommunication Company
in India
Analysed & Compiled by,
NAME PRN
Kashyap Shah 14020841136
Anubhuti Gupta 14020841123
Vrinda Jain 14020841171
Vinita Goswami 14020841170
Harsh Jain 14020841132

2. 2 | P a g e
Index
Sr No. Chapter Name Page No.
1
Introduction of a
company and its business
03
2
External Analysis :
Opportunity & Threat
04
3
Analysis: Porter’s Five
Forces Model
05
4
Internal Analysis:
Strength & Weakness
08
5 PESTEL Analysis 11
6 Industry Environment 13
7 Game Theory 16
8
Strategy in Global
Environment
19
8 Corporate Level Strategy 21
10
Corporate Governance &
Ethics
23
11 Bibliography/References 25

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Introduction
Bharti Airtel Limited, commonly known as Airtel, is an Indian multinational
telecommunications Services Company headquartered in New Delhi, India. It operates in 20
countries across South Asia, Africa, and the Channel Islands. Airtel has a GSM network in all
countries in which it operates, providing 2G, 3G and 4G services depending upon the
country of operation. It is the largest cellular service provider in India, with 192.22 million
subscribers as of August 2013. Airtel is the Second largest Asia-Pacific mobile operator by
subscriber base, behind China Mobile.
Airtel is the largest provider of mobile telephony and second largest provider of fixed
telephony in India, and is also a provider of broadband and subscription television services.
It offers its telecom services under the "airtel" brand, and is headed by Sunil Bharti Mittal.
Bharti Airtel is the first Indian telecom service provider to achieve Cisco Gold Certification. It
also acts as a carrier for national and international long distance communication services.
The company has a submarine cable landing station at Chennai, which connects the
submarine cable connecting Chennai and Singapore.
Bharti Airtel added 5.10 lakh subscribers to take its base to 20.97 crore at the end of
July,2014. Its market share in India is highest with a value of 28.41%.Airtel is credited with
pioneering the business strategy of outsourcing all of its business operations except
marketing, sales and finance and building the 'minutes factory' model of low cost and high
volumes. The strategy has since been adopted by several operators. Its network—base
stations, microwave links, etc.—is maintained by Ericsson and Nokia Siemens Network
whereas IT support is provided by IBM, and transmission towers are maintained by another
company (Bharti Infratel Ltd. in India). Ericsson agreed for the first time to be paid by the
minute for installation and maintenance of their equipment rather than being paid up front,
which allowed Airtel to provide low call rates of INR1/minute (US$0.02/minute).
Mission Statement:
“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”
Vision Statement:
“By 2015, Airtel will be the most loved brand, enriching the lives of millions.”

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External Analysis: Opportunity & Threats
Opportunities
1. Untapped voice market – Despite many believing that the voice market in India is
close to saturation, hundreds of millions remain without a phone. Recently, VLR
(Visitor Location Register) numbers released by the regulator TRAI showed that
around 730 million out of the total 870 million are active connections. Given many
people in India use multiple SIMs, it is safe to say that mobile phone penetration in
the country is less than 50%. The opportunity for Airtel is huge, especially in the rural
segment.
2. 3G and data revenue – Airtel’s 3G subscribers constitute less than 5% of its total
subscriber base. Apart from getting new 3G customers to join Airtel, there is
immense room for growth within its existing customers. The operator should be
more aggressive in marketing the benefits of high speed data access on phone.
Simultaneously, it must ensure faster and consistent data speeds on its network.
3. LTE – The whole wireless world is moving towards LTE. LTE for mobile broadband can
be a good solution for India where fixed broadband penetration is otherwise low.
Airtel has taken the lead with this version of LTE in 4 cities, but deployment needs to
catch up pace. Despite a weak LTE ecosystem in India, Airtel should portray itself as
the embracer of that technology. It must pursue the device manufacturers to
produce LTE capable phones for India and then take the lead in the deployment of
LTE for cellular networks too.
4. Mergers and Acquisitions – Unfortunately, the M&A rules in India are yet to formally
declared although recent media reports have suggested that companies may be
allowed to merge as long as their market share in every circle is less than 50%. Airtel
with a market share of 22.2% should be good to acquire smaller telcos to reduce
competition and add subscribers and spectrum. Such acquisitions will incur huge
spectrum costs, but it could be well worth it in the long term.
Threats:
 Unfriendly regulatory environment – The telecom industry in India has been
plagued by a hostile and unstable regulatory scenario. This has adversely affected
the industry sentiment and the wireless service providers. While some clarity has
begun to emerge, many guidelines are far from certain. Airtel has not remained
untouched from this chaos. And this threat would continue to linger for the next
few years.
 Spectrum Auctions and Refarming – Government of India and TRAI kept a high
reserve price for 3G, BWA and the recent 1800 MHz auction. Airtel had spent Rs. 123
billion ($2.7 billion per rupee to dollar conversion back then) for 3G airwaves. Since
the returns are slow due to low tariffs, buying the spectrum at high price is
detrimental for the telcos. Refarming 900 MHz is another terrible idea which would

5. 5 | P a g e
negatively impact Airtel’s finances, given that it will have to repurchase those
airwaves to continue 2G operations.
 Mobile Number Portability – MNP gives the customer independence to change the
service provider while retaining the number. With similar tariffs across various telcos
and satisfaction with the current service provider being low, consumers are willing to
jump ship. The larger incumbent operators are losing millions of customers to the
newer players who attract these customers with their freebies and innovative offers.
ANALYSIS: Porter’s five forces Model
1. Intensity of Competition among Rivals
Bharti Airtel has strong rivals in telecommunication sector of India like BSNL and Vodafone.
Initially, it had only two competitors but now this figure has jumped to more than ten. All
these companies are providing similar services with the same capabilities. Although it has
enhanced its investment in last few years and working hard to expand its network yet the
presence of strong competitors is a major threat for its successful survival.
The price war is really very fierce in this industry. Price war in telecom industry has
commoditized the market that branding has taken a backseat. New players are reducing
their tariffs to get better hold in the market and in turn the existing big players like Airtel
also have to compete by introducing low tariff new plans such as youth plan for younger
generation, ladies special etc.
2. Bargaining Power of Buyer
Although subscribers are not concentrated, not purchase in bulk but still can easily switch
for better quality, coverage and rates. In this context subscribers’ position is strong. Bharti is
the leading operator in Access segment in terms of number of subscribers. However, in term
of net additions during the quarter, Idea recorded the highest growth of 7.66 million,
followed by Bharti (6.29 million) and Vodafone (4.88 million).
The following points influence the buyer power:
 Lack of differentiation among the service provider: As telephone and data
services does not vary much regardless of which companies are selling them.
 Cut throat competition: Competition level has increased a lot with increase in
new foreign as well as domestic players in the industry. Operators are engaging
in an intense price war which is benefitting to the buyers in every way.

6. 6 | P a g e
 Customer is price sensitive: Every operator is offering low tariffs with better
services due to high level of competition among the operators which has made
customer more sensitive to price.
 Low switching costs from one operator to other operator.
 The consumer now has access to several means of communication like email,
instant messaging which are diminishing the importance voice services
 Attractive Schemes for new connections.
 Availability of all operators everywhere.
3. Threats from Substitutes
Presence and easy availability of substituted products is a great threat for the successful
survival of any organization since it can enforce the company to cut the price of its product.
The growth rate of reliance is more than Bharti and that of Vodafone is almost comparable
to Bharti.
The potential major substitutes for telecom industry are as follows:
 Products and services from non-traditional telecom industries pose
serioussubstitution threats. Cable TV and satellite operators now compete for
buyers. The cable guys, with their own direct lines into homes, offer broadband
internet services, and satellite links can substitute for high-speed business
networking needs.
 Wireless phones are also getting cheaper each year over the last decade; this has
provided consumers with more convenience and mobility, to the extent that the
younger demographic now considers a fixed line phone redundant.
 Just as worrying for telecom operators is the internet: VOIP i.e voice over ip
telephony is becoming a viable vehicle for cut-rate voice calls. Delivered by ISPs -
not telecom operators - "internet telephony" could take a big bite out of telecom
companies' core voice revenues. Applications like Skype have been extremely
popular among younger generation users and are fast emerging as preferred
means of communication.
4. Potential Entry of New Competitors Since current telecom technologies involve heavy
capital investment so chances of success for new entrants are very limited. Still it is seen
that few new entrant like Idea is growing very rapidly and the growth rate is much higher
than the top service providers.
The most common forms of entry barriers, except intrinsic physical or legal obstacles, are as
follows:

7. 7 | P a g e
 Economies of scale: In telecom industry the economies of scale exists from the
supplier side. That is why companies try to increase their subscriber base at
drastic rate.
 Distribution channels: Distribution channels are also providing a major
determining factor. These channels are not loyal to any company and
competitors can easily access them and make out work for them.
 Though huge licence fee to be paid upfront and high gestation period reduces
the threat of new entrant and discourages investment and infrastructure in the
telecom sector.
 Limited Spectrum availability, Regulatory issue which again leads to high licence
fee also restrict new players from entering into the market.
 Rapidly changing technology and setup the efficient Infrastructure for the same
accordingly is also the major factor which stops new player to enter into the
telecom sector.
 New entrants are ready to enter huge capital considering the attractiveness of
the market.
 Increase in FDI limits to 74% is bringing competition from foreign players. Huge
investments are being made by the foreign companies to setup better
infrastructure and getting latest technology into the country.
 Threat from the non-telecom background brand which could foray into the
telecom industry by the ease of outsourcing.
Customer switching cost is very low, as cost of new connection is really low. And
new connection offers more benefits to the customers
5. Bargaining Power of Suppliers
As far as the suppliers are concerned, the pros and cons to all service providers are equal
that may be in human resource or products
 Large number of suppliers: The industry basically has a large number of suppliers,
which helps them to choose from a lot of options. So they try to select the best
option to deliver the value to the customers and to have a competitive
advantage from their competitor.
 Shared tower infrastructure: Technology has helped them to share the tower
infrastructure. This basically helps them to reduce the initial investment a lot.
 Limited pool of skilled managers and engineers especially those well versed in
the latest technologies which put companies into weaker side in terms of hiring
and salaries.
 Medium cost of switching since changing their hardware would lead to additional
cost in modifying the architecture.

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Table: Analysis of the Porter’s Five Forces
Internal Analysis: Strength & Weakness
Strengths :
1. Biggest mobile service provider in world’s second largest telecom market – Mobile
phone subscriptions now follow the normal population trends around the world.
With about 870 million wireless subscriptions, India ranks second after China in the
wireless market. Airtel has a 22.2% share of that market.
2. Well-established nationwide infrastructure – Airtel has been in the market for 18+
years and thus has towers and backhaul all over the country. This is a major
advantage. Deployment of new technologies or increasing capacity at times requires
software and minimal hardware upgrade. Having infrastructure already on the
ground makes that process much faster and smoother. Secondly, it is easier to
capture new customers if a telco already has a network in place.
3. High brand equity – Airtel is among India’s most visible brands omnipresent in most
parts of the nation through television, print and various other forms of advertising.
Celebrity endorsements and innovative advertising that understand the pulse of
market are some of the assets of the Airtel brand.
4. Superior overall network quality and reliability – Bharti Airtel (along with Vodafone)
runs one of the better mobile networks’ in India. They have nationwide penetration
and although there is no dearth of consumer complaints regarding dropped calls and
slow data against Airtel, it still offers a higher quality telecom service experience as
compared to most other telcos.
5. Has established assets
a. Physical assets: Nationwide presence of offices has over 34,000+ towers, and
telecommunication equipment’s and hardware. This gives an easier
deployment of new technologies and softwares. Also helps in easier
customer acquisition when infrastructure is already in place.

9. 9 | P a g e
b. Intellectual and Human assets: An employee base of about 20,000
c. Financial Assets:
i. Bharti Airtel Pvt.Ltd went public in 2002
ii. Listed on NSE and BSE
iii. 1,415.98B Market Capital

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Weaknesses –
 High competition in the telecom market – Airtel, like all other service providers in
India, has been adversely affected by the extreme price competition. Although the
average voice call rates have gone up recently, they were as low as Rs. 0.6/min. (1
cent/min.) a few years ago. The story is similar with data and 3G tariffs. As a result,
the company has been reporting declining profits for many years. ARPU had been
decreasing too although it is showing signs of bottoming out now.
 Debt and finances – According to their latest quarterly report, Airtel is burdened by
$9.7 billion in net debt, which is a lot of money when converted to rupees. How can
Airtel repay this debt is the question? Possibilities include stake and equity sale or
spike in revenue. Depreciating rupee is also an issue since it results in foreign
exchange losses and increases the financing cost.
 Africa acquisitions and operations – Airtel acquired Zain’s Africa business for $9
billion in 2010. Since then, it has struggled to turn around those operations reporting
repeated losses from the continent. While the Africa operation has widened the
companies’ geography, it continues to be a drag on its balance sheet.
Late adoption of 3G and advanced wireless technologies – Due to various
regulatory uncertainties and delayed spectrum auctions, India and Airtel were late to
the 3G party. 3G services were launched by Airtel only in early 2011. The data tariffs
were high, speeds were unsatisfactory and customer acceptance of 3G was slow. The
company lacks nationwide 3G license with spectrum in 13 out of 22 telecom service
areas. Airtel’s LTE network for mobile broadband is still confined to only 4 cities in
India.

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PESTEL Analysis of Bharti Airtel Limited
Political
 The ministry of telecom industry hiked FDI limits from 49% to 74% which enabled
Indian promoters of telecom sector to spark off the competition and consolidation
by selling their stakes to foreign entities. Airtel already have tie up with foreign
partner SINTEL which is going to help in investing more in infrastructure and latest
technology to provide the best services to their subscribers. Also due to this increase
in foreign direct investment in telecommunication market, Airtel will be able to
modulate the foreign stakes in their companies that have already acquired a range
between 67-69 percent of their assets.
 With the increase in globalisation and tremendous growth of Indian
telecommunication sector, Airtel launched its mobile services in Srilanka in Jan 2009
and investing to.
 Recently Airtel have also acquired Zain for Africa operations which is the second
biggest overseas purchase by an Indian company.
Economical
 In telecom budget 2008, raw materials for the manufacture of specified electronic
hardware items have been exempted from excise duty which lowers the network
equipment costs to benefit major mobile services provider, so Airtel can expand
their network coverage to more rural areas at much cheaper cost.)
 During the recession period government policy to reduce the custom duty on
convergence product from 10% to 5% helped in establishing parity devices used in
communication sector, so this will help Airtel in lowering their cost for DTH
expansion
 Government has announced per second billing tariff for the subscriber along with
the per minute billing plan. Though the per second plan is not beneficial for the
telecom operators as this could reduce the sector's annual revenue by 10-
15%.Operators are already struggling with the low Average Revenue Per user
(ARPUs) due to high taxes (30 % of the gross revenue earned by the operators goes
as various taxes) levied by government will now struggle more with this new plan. To
overcome this situation Airtel has launched low tariff per minute plans along with
per second plan. As majority of the subscribers make longer duration calls and the
per second call could be detrimental for them with the new reduced per minute
plan. Airtel could also launch pay per character for SMS services to increase the VAS
revenue.

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Social
 Government has hiked FDI limits which would lead to better infrastructure in
telecom due to intake of more investment by the foreign investors. As 70% of Indian
population still resides in rural areas, improvement in telecommunication
infrastructure and services will reduce isolation, increase business viability, farming
productivity and access to educational and medical services. Airtel has already
announced to set up 100000 service centres and telecom infrastructure in rural India
by march 2010.
 Rollout of national rural employment scheme to all 596 districts in India with a
provision of Rs.160 billion, to aid faster penetration of mobiles and consequently
faster growth of Airtel as they hold major Indian telecom market with 24% growth at
the end of 31st March 2009.
 Government has announced the auction for 3G and BWA spectrum and Airtel is one
of the qualified bidders for the same and Airtel has already signed a deal with
Ericsson to upgrade their network for 3G . It will help Airtel to undertake social
initiatives of the government such as e-education, tele medicine, and e-health and e-
governance, providing affordable broadband and mobile services to sub urban and
rural areas.
 As demand for the value added services and high speed broadband is increasing
among the youth. Airtel being the leading private broad band service provider in the
country has introduced the ultra fast speed of 50 Mbps for the broadband users on
next generation VDSL2 technology which will allow users, the convenience to
download a full feature film in less than 3 minutes. Along with it is providing free
value add services like parallel ringing, website builder (Basic), PC secure (Anti-Virus
software), online storage, unlimited gaming on games on demand.
 Increasing competition with the entry of many new operators in the telecom
industry has forced in reduction of tariffs. So consumers get more options and can
change their network operator according to their need. In this Airtel has introduced
many low tariff plans like youth Plan for young people, ladies special, and friend's
prepaid plan, family celebration plan according to the requirements of the different
customer segments. Segmentation strategy aims towards understanding the need
gaps of specific consumer segments and creating special segmented products for
them.
Technological
 Increase in FDI limits also benefited inflow of latest technology with improved
infrastructure, as AIRTEL is well established with better infrastructure so it can
provide better services to its customers in urban and can expand its network in more
rural areas
 Introduction of Mobile Number Portability (MNP) which allows the consumer to
retain their existing mobile number, even when they change the service provider.

13. 13 | P a g e
This will increase the competition among the service providers as the subscribers can
change their network if they are not happy with the services of the existing service
provider. Airtel has the edge over his competitors as their services are much better
than other service providers.
 Government has announced the auction for 3G and BWA spectrum which will allow
telecom companies to offer additional valued services like high resolution video and
multimedia services with high data rate transmission capabilities. Airtel has already
qualified to bid for the auction.Also Airtel has signed a 1.3 billion deal with Ericsson
to expand and upgrade its network for 3G services in 15 of India's 22 telecom circles.
Environment and Legal:
 Radio frequency waves emitted from the mobile phones harms body cells and
damages the DNA. This is not yet proved that such changes were risk to human
health.
 Mobilenumber portability (MNP) implementation would enable subscribers to move
to different service provider retaining the original number. This implementation
would hamper Bharti Airtel as customers would keep switching to any possible
networks available.
 In India legal obligations are defined regarding 3G auction and bidding, which proves
to be in favour of Bharti Airtel as this auction is not available to the new entrants.
This political factor forbids the entry of new companies in to 3G services.
 Due to rising terrorist activities and hacking of confidential data on air, India
Department of Telecommunication (DoT) has made amendments related to security
features which states that telecom companies should have good policies for security
and they should be responsible for the security of the network.
Industry Environment
INDUSTRY STAGE
The industry growth stage lasted from 2005-2012. At this point the industry is almost at the
shakeout stage. The industry is rapidly approaching the matured market stage. But another
theory refutes the claim. The economic growth in India, currently the market is growing
more on the Network area growth, providers are moving to smaller cities from big cities,
demand is generated from ‗B‘ class & ‗C‘ class cities – middle class population. A major
section of middle class population of India in smaller cities couldn‘t enjoy the advantages of
Telecom service due to the Govt. monopoly, poor capacity, regulations; they are the
immediate customers of the Mobile operators.

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The Landline is no more the preferable choice for the new telecom users; people like to use
mobile phones because of its added advantages and easy subscription. Also the middle class
size is expected to grow in India in next decades, so the Mobile market in India will be
probably in Growth – Shakeout phase for a longer period. 8. Indian mobile operators
offerings are segmented in two broad categories – Pre-paid and Post-paid. Although mobile
market is growing positively, the Post-paid market is declining and prepaid market is
increasing by leaps and bounds.
The Indian telecom sector has witnessed tremendous growth over the past decade. Today,
the Indian telecom network is the second largest in the world after China. A liberal policy
regime and involvement of the private sector have played an important role in transforming
this sector. The total number of telephones as on 31st April 2013 was 897.02 million. The
telecom industry has witnessed significant growth in subscriber base over the last decade,
with increasing network coverage and a competition-induced decline in tariffs acting as
catalysts for the growth in subscriber base. The growth story and the potential have also
served to attract newer players in the industry, with the result that the intensity of
competition has kept increasing. Internet subscribers in India grew to 164.81 million as of
March 31, 2013, with as many as seven out of eight net users in the country accessing the
services via their mobile phones, according to telecom regulator TRAI. The total number of
mobile internet subscribers stood at 143.2 million at the end of the last fiscal.
The number of broadband subscribers increased to 15.05 million as of March 31, 2013, from
14.98 million as of December 31, 2012. The number of non-mobile internet subscribers in
the quarter ended March 31, 2013, grew to 21.61 million from 21.57 million, registering a
quarterly growth rate of 0.16 per cent.

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GROWTH IN TELECOM
Growth Drivers - Key factors, which will fuel the growth of the sector include increased
access to services owing to launch of newer telecom technologies like 3G and BWA, better
devices, changing consumer behaviour and the emergence of cloud technologies. A majority
of the investments will go into the capital expenditure for setting up newer networks like 3G
and developing the backhaul, among other things.
Subscriber Base - The mobile subscriber base in India is estimated rise by 9 per cent to 696
million connections this year, according to technology researcher Gartner. The mobile
service penetration in the country is currently at 51 per cent and is expected to grow to 72
per cent by 2016.
Mobile Value Added Services (MVAS) - India's current MVAS industry has an estimated size
of US$ 2.7 billion. The industry derives its revenues majorly from the top five to six products
such as game based applications, music downloads, etc, which continue to form close to 80
per cent of VAS revenues. The Indian MVAS industry estimated to grow to US$ 10.8 billion
by 2015, with the next wave of growth in subscriptions expected to come from semi-urban
and rural areas.
Mobile Number Portability (MNP) - Mobile Number Portability requests increased from
89.70 million subscribers at the end of March 2013 to 91.73 million at the end of April 2013.
Handsets - The mobile handset market's revenues in India will grow from US$ 5.7 billion in
2010 to US$ 7.8 billion in 2016, according to the study. India is the second largest mobile
handset market in the world and is set to become an even larger market with unit shipment
of 208.4 million in 2016 at a CAGR of 11.8 per cent from 2010 to 2016.The Indian mobile
handset market posted revenue of Rs 359.46 billion in 2012-2013, compared to Rs 313.30
billion in the earlier fiscal year on the back of increasing sale of Smartphone’s. In 2012-2013,
Karbonn grew 73.1 per cent, Samsung ended the year with revenue of Rs 113.28 billion
compared to Rs 78.91 billion last year showing a growth of 43.6 per cent. The iconic Apple

16. 16 | P a g e
posted revenue of Rs 12.93 billion in FY 2013 in the country compared to Rs 2.50 billion in
the previous financial year
GAME THEORY
India’s telecom Industry, an oligopoly, has witnessed significant price-cutting since 2005. A
metric called Average Revenue per user (ARPU), which defines a company’s per subscriber
monthly revenue, has fallen from ₹370.01 in December’05 to ₹128.25 in December’13. This
implies that either people lowered usage of cell phones drastically or call rates fell over the
period.
TABLE 1
The former is unlikely in a growing economy and the phenomenon actually resulted due to
aggressive price cutting by firms during this period.
Currently Airtel, Vodafone and Idea control 70%+ of the industry’s market share. Table 1
shows the ARPU and subscriber base (in Crores) of these 3 over the past 6 years. The
average subscriber base for a particular year is shown in the table. Table 2 shows % change
in ARPU of the three companies over the past 5 years and their respective individual share
of the total subscriber base of these 3 companies.
Quarter
Ended
December
Airtel's
ARPU (in
₹)
Airtel's
subscribers
Vodafone's
ARPU (in ₹)
Vodafone's
subscribers
Idea's
ARPU (in
₹)
Idea's
subscribers
2008 260.59 6.11737305 227.92 4.323223725 215.41 2.689632113
2009 200.58 7.982973638 170.55 5.97358665 172.09 3.668136038
2010 153.98 10.49672524 130.05 8.423015475 127.82 5.366251725
2011 136.4 12.82383818 117.42 10.74420281 114.86 7.323344775
2012 136.67 13.99592696 121.92 11.48899553 107.2 8.723590463
2013 143.54 14.41124333 138.5 11.64663934 122.49 9.457361213

17. 17 | P a g e
TABLE 2
TABLE 3
Why are the companies cutting their prices? Game theory is at work here. Airtel (A),
Vodafone (V) and Idea (I) respectively had 47%, 33% and 20% market share in 2008. During
this period, all companies in the industry were reducing their rates. Given this scenario, I
assume that companies that didn’t reduce their rates during this period would not have
gained more customers (they would have actually lost customers, but for sake of simplicity, I
don’t take this into account). Also, I assume that proportional price cuts by all companies
would have resulted in no change in their relative market shares during these years.
Airtel Vodafone Idea
Year % Change in
ARPU
Relative
Market Share
(%)
% Change in
ARPU
Relative
Market Share
(%)
% Change in
ARPU
Relative
Market Share
(%)
2009 -
23.02851222
45.2942479 -25.171113 33.8932742 -
20.11048698
20.812478
2010 -
23.23262539
43.2213148 -23.746702 34.6826077 -
25.72491138
22.0960776
2011 -
11.41706715
41.5126672 -9.7116494 34.7805789 -
10.13925833
23.7067538
2012 0.197947214 40.913579 3.83239653 33.5851943 -
6.668988334
25.5012268
2013 5.026706666 40.5776274 13.5990814 32.7933531 14.2630597 26.6290195
Situation V reduces rates V doesn’t reduce
A Reduces Rates A and V retain market share V loses market share
A doesn’t Reduce A loses market share A and V retain market share

18. 18 | P a g e
In such a case, A and V would have faced the following situation at the beginning of 2009.
This is a variant of the classical prisoner’s dilemma (say A and B) wherein two prisoners are
separately asked about the true culprit. The situations that A and B face is shown below:
TABLE 4
In this scenario, no prisoner can trust the other one and the optimal solution for each one
would be to betray the other. Similar is the case in Telecom industry. No company can trust
the others. In a bid to save their respective market shares, companies kept cutting their own
rates. Each set of companies, each year, would have faced a situation similar to the one in
table 3. If A didn’t reduce its rates in 2009, its market share could have fallen to 38.8%
under the assumptions made at the beginning of analysis. Hence, A decided to cut prices.
Similarly, all firms in the industry decided to reduce rates. Another question that I seek to
answer is what the ideal action for these firms would have been during this period? Did they
make a mistake due to these price wars?
In the case of the prisoner’s dilemma discussed above, each prisoner’s ideal choice is to stay
silent and spend a year in jail instead of 3 that would result if they betray each other. Would
the telecom companies also have achieved better results if they had not indulged in price
wars? No. The subscriber base of the 3 companies discussed above increased at a
compounded rate of 37% from 2008-2012 (Table 1). It would be reasonable to attribute this
change to the falling prices given that the economy was performing poorly during this
period. Again taking into account the assumptions made in deriving Table 3, the revenues of
A and V in 2013 could be demonstrated by the following table:
TABLE 5
Situation V reduces rates V doesn’t reduce
A Reduces Rates ( 2068, 1400) (2068, 984)
A doesn’t Reduce (1590, 1400) (1590, 984)
Situation B betrays A B stays silent
A Betrays B A and B imprisoned for 2 years A goes free and B imprisoned for 3 years
A stays silent B goes free and A imprisoned for 3 years A and B imprisoned for 1 year

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Table 5 shows the approximate monthly revenues (in Rupees Crores) of the two firms under
different situations with respect to price. In the above table both the Nash equilibrium (the
action point from which no company has an incentive to deviate given the action of the
other company) as well as the ideal equilibrium is for both companies to reduce rates. Thus
the telecom industry didn’t necessarily suffer due to price cuts, at least in terms of
revenues. However, this strategy would have remained profitable as long as the price
elasticity of the industry’s demand remains greater than 1. In 2012, a rise in prices
(indicated by ARPU) led to an increase in the three companies’ revenue. Thus, this year
marked an end to the telecom industry’s price-cutting strategy.
Why is it that the automobile Industry in India, another oligopoly, has not faced similar price
wars? It is so because companies cut prices only if the price-cut doesn’t result in economic
losses for them. Return on assets is already low in automobile industry (about 10%). The
telecom industry has also had very low (9-10%) returns during the past 2 years. This also
explains why that the effect of game theory has disappeared in 2012 and 2013. Young
Industries (such as e-commerce) earning economic profits may witness a similar price-
cutting and erosion of economic profits in the future.
Strategy in Global Environment:
BAL's telecom model was considered as the new model for telecom and effective for
emerging markets like India. BAL had established itself as a dominant player in India with its
innovative business processes and strong brand, but was witnessing tapering growth
because of increasing competition and saturation of the more lucrative urban markets.
While more and more players were eyeing the fast-growing Indian mobile market which was
experiencing high growth, BAL put its sight on foreign shores. BAL realized that its extensive
experience in India, coupled with its unique business model, would help it tap the

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opportunity provided by other developing and emerging markets and create value for its
customers.
Acquisition of Zain Group's telecom business in fifteen African counties gave it a boosted
start in the African continent. There were talks about BAL having paid higher for the deal.
Even though, BAL was in the process of giving shape to its strategy for the African markets:
the critical success factors in emerging markets.
» BAL was trying to understand the importance of business process innovation and strategic
partnerships.
» Appreciate the role of tailoring strategy to fit a specific industry and business
environment.
» Analyze BAL's internal and external environment..
» Understand and discuss cross-country differences in Cultural, demographic and market
conditions and its possible impact on business.
» Probe the role, importance and pros and cons of legal and regulatory framework.
» Explore the ways a business can be successful in international markets.
Though BAL was able to acquire a global footprint and a much larger customer base through
this deal, industry experts believed it would be difficult for it to leverage on the business
model and strategies which had kept it afloat and ahead of the competition in India.
Jaydeep Ghosh, Executive Director of KPMG 7
, said, "Bharti has replicated the low-cost
model through outsourcing in India, but depending upon different geographies (in Africa), it
will not be easy
BAL also acquired stake in Bangladesh’s Warid Telecom. The Company has used its
successful ‘minute factory model’ (lowest-cost/min) in these territories. Bharti Airtel has
about 271.2 million subscribers worldwide – 199.6 million in India, 6.2 million in Bangladesh,
1.7 million in Sri Lanka and 63.7 million in Africa as of the end of March 2013.Telecom
penetration is low in Africa and hence, huge opportunities are available for Bharti Airtel. So
far, turning around the African operations has been a challenging task for the company in
the past three years. This is due to the high competition, currency movements and political
unrest in some countries and regions. However, the African operations offer good
opportunities and it can be expected that these acquisitions will enhance the company’s
global presence in telecom space and will help it to increase its profitability in the coming
years.

21. 21 | P a g e
Data business expected to be a future growth driver: - The data business is expected to be
the next phase of growth for telecom operators. Data services usage and penetration in
India is very low when compared to other countries. However, the data usage and
penetration has been on a rising trend. The trend is expected to continue with availability of
affordable smart phones and tablets, popularity of applications, coupled with the expansion
of 3G networks and introduction of 4G networks.
Concerns: -
Africa operations concerns: - The African operations have been a drag on the company’s
overall performance. The performance has been below par because of high competition,
currency movements, political unrests, regulatory issues, etc. The company could not
turnaround the African operations in the time it expected to do so. The performance in
Africa has a bearing on the company’s value creation potential in the future.
Falling market share: - Bharti Airtel is a market leader both in terms of subscriber base and
market share. Although the company has maintained its leadership position, it has been
losing market share to other players like Idea and Vodafone, which is a cause of concern.
Corporate Level Strategy
Corporate level Strategy for India:
Division of various business unit segments:
• Mobile Services Division
• Tele-media services Division
• Enterprise division unit
• Corporate Business unit
• Carrier business unit
1) Mobile Services Division:
• The Mobile Services division is probably the most valuable division of Bharti Airtel.
• Airtel offers GSM mobile services in all the 23-telecom circles of India and is the
largest mobile service provider in the country, based on the number of customers.
• It provides numerous value added services such as mobile apps, hello tunes, m-
commerce, wireless internet etc.
2) Tele-media services Division:

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• The Airtel Telemedia Services division provides high speed broadband internet and
related services.
• Airtel Provides landline service in 93 cities across India.
• It launched its DTH services in 2008 and is present in more than 150 cities now.
3) Enterprise division unit:
• The Enterprise Services division provides a diverse portfolio of services to large
Enterprise and Carrier customers.
• Further divided into two units:
 Carrier business unit .
 Corporate business unit.
4) Corporate Business unit:
• The Corporate Business Unit provides end to end telecom solutions to India’s large
corporate.
• It specializes in providing customized solutions unique to each industry.
5) Carrier business unit
• The Carrier Business Unit provides long distance wholesale voice and data services to
carrier customers as well as to other business units of Airtel.
International Corporate level strategy:
• Need for Cost responsiveness
• Need for local responsiveness also known as multidomestic strategy
1) Cost responsiveness:
• Local Pricing strategy.
• Varies from country to country as well as state to state.
• Depending upon the needs of the customer segment.
• Depends on the demographic conditions.
2) Local responsiveness:
• It Focuses on the needs of customers and provide solutions to customers according
to their requirements.
• The kind of services, offers, plans and value addition that they offer in India is very
different than what they offer in other nations.
• For Airtel, need to address local responsiveness have always been of the utmost
importance.
Value Creation through Diversification:

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• Airtel seeks to create value through diversification by moving across businesses that
are both operationally and corporately related.
• Main objectives
 High resource sharing
 Significant cost reduction.
Operational Similarity
• It looks at operational relatedness since a number of its businesses operate across
similar technologies and thus the platform for a given product can be used directly
for extending the service from a completely new product.
• For example, the cables for a telephone connection provided by Airtel can be used
to provide broadband service to the customer without any significant change in
infrastructure.
• The skills required from the technicians are also not very different and thus
economies of scale are quite possible.
Targeting the same industry:
• In pursuing this strategy, Airtel will have to be conscious of the fact that it can lead
to diseconomies of scope.
• This can arise primarily from the very factor which Airtel is banking on – similarity
across its businesses. This is the very reason that Airtel just cannot afford to ‘go easy’
on any of its domains and needs to keep up to speed in all its businesses.
Corporate Governance & Ethics
Corporate Governance is defined as a set of systems, processes and principles, which ensure
that a company is governed in the best interest of all stakeholders. It is the system that
directs and controls respective companies. It is about promoting corporate fairness,
transparency and accountability. In other words, ‘Good Corporate Governance’ is simply a
‘goodbusiness’.
Corporate Governance consists of procedures and processes, according to which an
organization is directed and controlled. Its structure specifies the distribution of rights and
responsibilities among different pan-organizational participants, such as the Board,
managers, shareholders and other stakeholders.
The objective of Good Corporate Governance is to ensure the Board’s commitment towards
transparent management to maximize long-term value for the Company’s shareholders and

24. 24 | P a g e
all other partners. It integrates all the participants involved in a process, which is economic
and, at the same time, social.
At Bharti Airtel, Corporate Governance practices are aimed to adhere to the highest
governance standards through continuous evaluation and benchmarking.
At Bharti Airtel, Corporate Governance practices aim to adhere to the highest governance
standards through continuous evaluation and benchmarking. Hence, they are based on the
following broad principles:
 Bharti Airtel maintains a well-experienced and diverse Board of Directors, with
experts across banking, administrative services, finance, telecommunication, and
consulting.
 Bharti Airtel follows transparent practices and arrives at decisions based on depth
research.
 Ensures compliance with regulatory and fiduciary requirements in letter and spirit.
 Adopted policies on tenure of Directors, rotation of Auditors and a Code of Conduct
for Directors and senior management.
 Creates various committees for audit, senior management compensation, HR policy
and management compensation, employee stock option plans and investor
grievances. Keeps in place a well-defined corporate structure that establishes checks
and balances and delegates decision making to appropriate levels in the organization
though the Board remains in effective control of affairs at all times.
 Complete and timely disclosure of relevant financial and operational information to
allow the Board to play an important role in the guiding strategy.
 Organizes informal meeting of Independent Directors without the presence of any
Non-Independent/Executive Directors to identify areas where they need more clarity
or information, and then put them before the Board or management.
 Offers high levels of disclosures to disseminate corporate, financial and operational
information to all stakeholders.
 Offers a formal induction schedule for new Board members that enable them to
meet individually with the top management team.
 Reviews regularly and establishes effective meeting practices that encourage active
participation and contribution from all members.
 Ensures independence of Directors in reviewing and approving corporate strategy,
major business plans and activities as well as senior management’s appointments.

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