Upload
trinhthien
View
241
Download
0
Embed Size (px)
Citation preview
SUNIL BHARTI MITTAL
Pratap Vijay Simha 2006045
Mayur Wadhwa 2007029
Rajesh Goli 2007044
K Md Feroz Irfan 2007088
Dipankar Datta 2004119
Ramesh Shanbhag 2006048
Sudhir Chandrappa 2006057
IS THIS HOW SUNIL MITTAL OPERATES?
His approach towards Airtel
Choose speed over perfection
First mover
“Get big fast”
The strategy in retail seems to be different!
ABOUT THE INDIAN RETAIL INDUSTRY
Largest industry in India – employment of 8% and contributing to around 10% of the GDP. Currently at $500 billion
The organized retailing sector in India is about 4-5% and growing.
Next wave of growth expected to be driven by semi-urban and rural India
Large number of retail players
Weak and fragmented suppliers
Regulation –
100% FDI is allowed in cash-and-carry wholesale formats
51% FDI is allowed in single-brand retailing
CRITICAL SUCCESS FACTORS
What are the critical success factors in retail?
Low cost
Scale
Location(s)
Ability to navigate through the system
Regional and cultural differences
WHAT'S THE RATIONALE?
Achieve low cost via
Develop ecosystem of suppliers
Better supply chain management
Logistics
Bargaining power with FMCG manufacturers
Scale
Leverage JV partner
Location
Bharti Realty
Acquisition of 10 million sqft by 2015
Low-key entry in a small way in Ludhiana, Punjab
WHAT'S THE RATIONALE?
This JV is a winning combination. Wal-Mart's logistics skill and Bharti's execution capability will create a potent force in the Indian market
He needed expertise more than money. Hence, Bharti is investing $2.5B
Contrast with Singtel: Money & telecom expertise
Contrast with Warburg Pincus: Money & financial expertise
Contrast with Subiksha
Went for low cost (good strategy, in principle)
Did not have mechanism to achieve low cost
(Assumption: No conspiracy)
AGAIN, NOT TYPICAL
Last mover in DTH.
DTH has adoption problems
Unrelated to Airtel’s existing businesses
What has GSM in common with Satellite DTH from an infrastructure point of view?
TELEVISION VIEWING MARKET
Total market - 70 million television homes catering to 400 million individuals
DTH INDUSTRY Big four private DTH players has made a head-start. DishTV, TataSky,
Big TV and Sun Direct
Intense price war
Weak financials (all are in loss)
Lack of exclusive content issue
Foreign Investment cap –
DTH: Foreign equity cap of 49% and within that FDI component cannot exceed 20%
Cable: Foreign equity cap on cable industry is at 74% with no limit on FDI
Satellite transponder capacity
Quality of service issue
THE LOGIC Current DTH market is 8 million subscribers and expected to
grow to 40 million by 2015
The industry is evolving
Airtel’s DTH strategy
Integrate its operations with mobile phone, internet and TV and bundle these services
Leverage existing distribution channels and customer service
Provide larger dish antenna to provide higher QoS
Customer switching from existing provider might be difficult
But, what about rural market?
Is it a strong logic for being a late entrant in DTH market? Did he miss the opportunity at the beginning?
THE RHETORIC
Airtel wants to be in all three screens
Mobile
PC
TV
Is it strategic or motto driven?
Or is it the market potential (just as in retail)?
1976 TO 1984 Very complex import and export policies, industrial licensing regime.
Licenses were required right from manufacturing a pin to manufacturing a car
People who found favor with the government could get industrial licenses. The entrepreneurs had to find out small openings in various government policies and move ahead, every now and then turn lucky.
In 1976, Sunil at age of 18, with a capital of 20K, started making Bicycle parts. From 1981 to 1984 he took an agency of Suzuki to import portable generators. Imports became very successful. Made a lot of money and more importantly, set up a large distribution system across the country
In 1984 due to lobbying two business houses(who managed to get licenses to manufacture generators) the government decided to ban import of generators. No amount of pleading or lobbying by a young entrepreneur would have made any difference. So overnight there was no business.
VALUABLE LESSONS LEARNT ?
Did Sunil learnt his valuable lessons from his initial ventures ?
“These were the times when entrepreneurs were at the mercy of government policy, and you always had to be prepared, sitting in your hot seat, to take a jump and plunge into something else as soon as the government hit you with a change in policy.”
WHY TELECOM? Mittal saw the huge gap between potential demand &
supply from state run telecom companies
Reforms in telecom sector began in 1980 followed by national telecom policy in 1994 & 1999
Technology advances in 1990s led to better quality of service at lower tariff rates – beginning of a service which could be marketed to the Indian urban masses, and then rural masses
NTP 1994 attempted to provide telephone on demand & telecom services at affordable prices to the Indian populace, and this policy further encouraged Mittal to get into telephony.
WHY TELECOM?
NTP 1999 further reformed the telecom sector with guidelines for internet telephony & broadband
Booming industry in India required high end services like leased lines, ISDN & videoconferencing
UNCONVENTIONAL WISDOM ?
OUTSOURCING OF NETWORK
When every one said network is the critical factor to a telecom service provider Bharti decides to outsource its networks
Do reverse of conventional Wisdom
Does Sunil know the Telecom Business like Baba Kalyani knew Forging ?
HOW MUCH DID AIRTEL OUTSOURCE ON
NETWORK? Sept 07 – Extended the contract with Ericsson
for $2B. This is Ericsson’s biggest contract award to-date
Ericsson will design, plan, deploy, optimize, and manage Bharti Airtel's GSM network across 15 regional "circles" in India, as well as its pan-India pre-paid platform across 23 circles
Sep ‘07 - Bharti Airtel revealed plans to award a $900 million GSM network expansion contract to Nokia Siemens Networks
GOAL IN 2004RAPID GROWTH
Airtel wanted to grow
From 8.2 million subscribers in 2004
to
25 million by 2007
QUESTION SET#1
How to drive down operating costs faster than rate at which ARPU will go down?
Can Bharti Airtel run the network and IT and still drive down costs?
Should they outsource? What are the risks? Is this core, non-core or something else?
QUESTION SET#2
If AirTel keeps Network in house, can it deploy and grow fast enough to keep pace?
Is outsourcing better suited for Growth?
OUTSOURCING: PRACTICE IN SEARCH OF THEORY
It is not about “core” vs “non-core”
Rationale
Cost minimization
Resource access
Resource leverage
Risk diversification
OUTSOURCINGDECISION RULE
If P market + TC > CP in-house + OC,
activities should be conducted in-house and
If P market + TC < CP in-house + OC,
activities should be outsourced.
Reputation capital can be used as a hedge against opportunism
RATIONALE FOR AIRTEL’S OUTSOURCING
DECISIONS
Cost minimization
Drive costs down faster than ARPU
Resource access
Ability of network vendors and IT majors to rapidly ramp up capacity (difficult to acquire for AirTel, might delay time to market)
DECISION RULE APPLIED
P is expected to be competitive. TC is non-trivial, at least initially
SLAs that are comprehensive Oversight bodies from AirTel. Reduced to extent that the vendors also want this
to work. CP in house is expected to remain above P. Deciding factor seems to be OC (in house).
Bharti needs to grow employee strength and network management capacities at break neck speed. Learning is impediment, may delay growth and therefore time to market. Vendors are good at this.
RISKS AND MITIGATION STRATEGIES
Risks: Being held hostage to vendors
If it fails – go back, loss of learning etc.
Mitigation: Use of reputational capital
Only biggies: IBM, Ericsson, Nokia Siemens, Alcatel-Lucent.
Oversight bodies Architecture review board Watertight SLAs
DID IT WORK?
We think it did : Operating cost as a percentage of average revenue per user is showing a steady downward trend.
If P market + TC > CP in-house
+ OC,
activities should be conducted
in-house and
If P market + TC < CP in-house
+ OC,
activities should be outsourced.
MTN Deal – Attempt I
May 2008 Time frame – First attempt
MTN Group is a South Africa-based multinational mobile telecommunications company, operating in many African and Middle Eastern countries.
The structure had envisaged Bharti Airtel becoming a subsidiary of MTN and exchange of majority shares of Bharti Airtel held by the Bharti family and Singtel, in exchange for a controlling stake in MTN
Pulled out because
Structure proposed by the MTN board would not have been in the interest of Bharti Airtel's minority shareholders and
Obstacle to its plans for growth as an Indian telecom multinational.
MTN Deal – Second Attempt
Particulars BHARTI MTN
SALES ($bn) 7.25 12.42
PAT ($ bn) 1.66 1.85
MKT CAP ($ bn) 34 27
May 2009 Time frame – Second attempt – $23Bn merger
Create a company with Annual sales of $20 billion and 200 million subscribers.
MTN would take a 36% stake in Bharti, which would hold 49% of MTN.
Bharti would have substantial participatory and governance rights in MTN enabling it to fully consolidate the accounts of MTN
Companies continue to operate under their respective managements
MTN Deal - Structure
Bharti had said it would acquire approximately 36% of the currently issued share capital of MTN from MTN shareholders for a consideration of 86 rand in cash and 0.5 newly issued Bharti shares in the form of Global Depository Receipts for every MTN share acquired
In combination with MTN shares issued in part settlement of MTN's acquisition of approximately a 25% post-transaction economic interest in Bharti, would take Bharti's stake to 49% of the enlarged capital of MTN.
Each GDR would be equivalent to one share in Bharti and would be listed on the securities exchange operated by Johannesburg Stock Exchange.
MTN Deal – Going Global
Indian market at its peak, Boom in telecom sector but perceived to decline in 2-3 years
BAL as the Indian leader wants to continue to grow
Emerging S Africa Markets very similar to India 6-7 years back. Mobile telephony is in nascent stage. ARPU Higher.
So, great potential to grow into S Africa and the Middle east. MTN in 21 countries.
Increase the reach. Be the Biggest telco in the world.
Limited integration risk as the two companies have almost no overlapping operations
Bharti - Synergies
Combined Co to benefit from economies of scale as it would become a leading emerging market telecom operator
MTN's operating experience in 3G and
Number portability
Help him avoid the clutches of Indian telecom regulators Rows over the matter of spectrum allocation remain
unresolved and the rollout of 3G services is long delayed. MTN would benefit from Bharti's experience of growing
market Share and maintaining operating margins in a highly competitive environment – cost efficiencies
MTN Deal – Going Global - Hurdles
Counter Offers by Competition.
RCom was also bidding for Merger with MTN.
Similar deal in Vodacom, which is owned by Vodafone
Unions against it in S Africa
Foreign holding stake is 65+% Limit is 75%
$4Bn for the deal. 3G bid also needs this much
Debt Pressures in short term
1985 TO 1991 – TELEPHONE
MANUFACTURING 1985 - Entered into technical tie-up with Siemens AG of
Germany for manufacture of electronic push button telephones 'Beetel‘ and reached a peak sales of 5 million
1989 - Tied-up with Takacom Corporation, Japan, for manufacture of telephone answering machines
1990 - Tied-up with Lucky Gold Star International Corporation of South Korea for manufacture of cordless telephones
1991 - OEM Contract with Sprint, USA for manufacture and export of telephone sets
1992 TO 2001 – FORMATIVE YEARS OF
TELECOM MAJOR 1992 - Formed a consortium with SFR-France, Emtel-
Mauritius and MSI-UK, to bid for cellular licenses for metropolitan circles under Bharti Cellular.
1994 - Cellular license for Delhi circle obtained. Launched AirTel next year. Launched cellular services in Himachal Pradesh in 1996
1995 - Formed a consortium with Telecom Italia-Italy to bid for cellular and fixed-line services under Bharti Telenet.
1996 - Telecom Italia, Italy acquired 20% equity interest in Bharti Tele-Ventures.
1992 TO 2001 – FORMATIVE YEARS OF
TELECOM MAJOR 1997 - British Telecom joined the consortium by
acquiring equity interest in Bharti Cellular. Formed a joint venture, Bharti BT, for VSAT services. Bharti BT Internet, for providing ISP services In 1998. BT consolidated its shareholding in Bharti Cellular to 44%
1998 - First Indian private fixed-line services launched in Indore, Madhya Pradesh
1999 - Warburg Pincus, invested in in Bharti Tele-Ventures and acquired a controlling 32.26% effective equity interest in Bharti Mobile (formerly JT Mobiles), the cellular operator in Andhra Pradesh and Karnataka
1992 TO 2001 – FORMATIVE YEARS OF
TELECOM MAJOR 2000 - SingTel invested in Bharti Telecom and Bharti Tele-
Ventures. Entered into joint venture with SingTel for a submarine cable landing station between India and Singapore
2001 - SingTel, Warburg Pincus, AIF, IFC, NYLIF and Seejay Cellular made equity investments, of approximately US$ 481.30 million in Bharti Tele-Ventures and through Bharti Telecom
Acquired licenses for eight cellular circles , four fixed-line circles , three additional ISP
Restored the Punjab cellular license, Acquired 100% equity interest of Bharti Mobitel (formerly Spice Cell), the cellular services operator in Kolkata circle and 95.3% Bharti Mobinet
Acquired back all equity from British Telecom in Bharti Cellular
2002 TO 2009 – GROWTH STORY
2002 - Bharti Tele-Ventures files for Initial Public Offering
2003 - Airtel becomes India’s first mobile service to cross the three million customer mark
2004 – Outsourced IT to IBM, first-of-a-kind business transformation agreement in global Telecommunications industry
Bharti migrates all 15 cellular licenses to Unified Access Service License
Bharti Tele-Ventures crosses Rs. 5,000 crores revenues for the year - Earns net profit of over Rs. 600 crores for the year
2002 TO 2009 – GROWTH STORY
2004 - Bharti & Siemens join hands to build & manage AirTel networks in three circles
2005 - Airtel completes its 23 circle all India footprint
Bharti announces agreement with Vodafone marking the entry of the World's Largest Telecom Operator into India
Bharti Enterprises & DE Rothschilds announce a 50:50 JV for export of fresh fruits & vegetables
2002 TO 2009 – GROWTH STORY
2006 – Gets into AXA life and general insurance
2007 - Partnership with Vodafone to roll-out telecom services in Channel Islands (Europe)
Bharti Airtel awards network expansion contract to Nokia Siemens and Ericsson
Bharti Enterprises and Wal-Mart join hands in wholesale cash-and-carry to serve small retailers, manufacturers and farmers
2008 - Airtel makes its television debut - Set to redefine home entertainment with Airtel digital TV
Bharti Airtel launches Triple Play with Airtel digital TV interactive – Telephone, Broadband and now TV on a single line
Bharti Airtel and Alcatel-Lucent form Managed Services Joint Venture for Broadband and Telephone Services
“Hello Sri Lanka” says Airtel
2002 TO 2009 – GROWTH STORY
2009 - Bharti Airtel launches Triple Play with Airtel digital TV interactive – Telephone, Broadband and now TV on a single line
Bharti Airtel and Alcatel-Lucent form Managed Services Joint Venture for Broadband and Telephone Services
Bharti Group Companies
Bharti Airtel
Bharti Teletech
Telecom Seychelles
Comviva Technologies Ltd
FieldFresh Foods Pvt. Ltd
Bharti Retail
Bharti AXA General Insurance
Bharti Group Companies
Bharti AXA Life Insurance
Bharti AXA Investment Managers
Centum Learning Limited
Jersey Airtel
Guernsey Airtel
Bharti Foundation
Bharti Realty
Bharti Infratel
Bharti Airtel Ltd Bharti Airtel is India's largest telecommunications company by subscriber
base, which stood at 85.7 million in December 2008, and total revenues, which were Rs. 270 billion in 2007/08
Started July 07, 1995, as a Public Limited Company
Globally, Bharti Airtel is the 3rd largest in-country mobile operator by subscriber base, behind China Mobile and China Unicom
In India, the company has a 24.6% share of the wireless services market, followed by 17.7% for Reliance Communications and 17.4% for Vodafone Essar.[4]
Bharti Airtel has 5 business segments:
(i) Mobile Services; (ii) Telemedia Services; (iii) Enterprise Services - Carriers; (iv) Enterprise Services - Coprorates; and (v) Passive Infrastructure Services.
Stock Perforarmce
BAL has been growing at an exponential rate in terms of subscriber base, revenues and Net profits
SUBSCRIBER & P&L DATA
Annual Data[2] Units 2004 2005 2006 2007 2008
Total Customer Base 000s 7,141 11,842 20,926 39,013 64,268
Mobile Services 000s 6,504 10,984 19,579 37,141 61,985
Telemedia Services 000s 637 857 1,347 1,871 2,283
Based on Statement of Operations
Revenue Rs. million 50,369 81,558 116,641 184,202 270,122
EBITDA Rs. million 17,055 30,658 41,636 74,407 114,018
Cash Profit from Operations Rs. million 14,363 28,219 40,006 73,037 111,535
Earnings before Tax Rs. million 5,527 15,832 23,455 46,784 73,115
Net Profit Rs. million 5,387 12,116 20,279 40,621 63,954
Key Ratios
Return on Equity (ROE) % 12.00% 23.70% 32.00% 43.10% 38.50%
Earnings per Share (EPS) Rs. million 3.15 6.53 10.78 21.43 34.23
BHARTI AS AN EMPLOYER
In 2004, Bharti Airtel was ranked the No. 2 best employer in India by Hewitt Associates; in 2006 it was ranked No. 10 in BusinessWeek's IT 100 list.
The company's other benefits include half days on birthdays, gifts for anniversaries, no meetings on weekends, flexible work time, gym, yoga classes and regular health checks on campus
SUNIL MITTAL: MANAGEMENT STYLE
Ability to navigate through the socio, legal processes
Entrepreneur style at the early stages and then evolved to professional management style
Ability to convince lenders to provide him capital
Hands-on – himself tests out Airtel’s IPTV
Known to routinely travel to remote areas around India to boost the morale of his sales troops as well as to experience firsthand how good or poor his company’s telecom services are
SUNIL MITTAL: MANAGEMENT STYLE
Agile decisions: “Speed over perfection”
Sets clear and bold targets for the organization
His ability to rope in big players with deep pockets (like SingTel, Vodafone, Warburg Pincus & Siemens)
Ability to collaborate - sharing towers, network with competitors
At the age of 50, he stepped back to delegate operational control to the professional Managers to lead the various entities
Ability to attract and retain the best management team
His ability to think big and execute it flawlessl
INFLEXION POINTS
BAL has been growing at an exponential rate in terms of subscriber base, revenues and Net profits
Outsourcing
MTN
Pan India presence
FUTURE
Enter into Education. Mittal’s vision of building a knowledgeable society in India
Advocates CSR
Seeking reforms in Insurance and Retail sectors
Grow the diversified businesses
Protect Airtel’s market share
Foray into Global markets
Wants to be the most respected conglomerate by 2020
FIXED LINE IN INDIA Market Value : The Indian fixed line telecoms market grew by 6.1% in 2007 to reach a value of
$8.9 billion.
Market Value Forecast : In 2012, the Indian fixed line telecoms market is forecast to have a value of $11.1 billion, an increase of 25.2% since 2007.
Market Volume : The Indian fixed line telecoms market grew by 5.1% in 2007 to reach a volume of 55.1 million fixed-line phones.
Market Volume Forecast : In 2012, the Indian fixed line telecoms market is forecast to have a volume of 64.8 million fixed-line phones, an increase of 17.5% since 2007.
Market Segmentation I : Voice only telecoms sales dominate the Indian fixed line telecoms market with 84% of the market's value.
Market Segmentation II : India generates 5.5% of the Asia-Pacific fixed line telecoms market's revenue.
Market Share : Bharat Sanchar Nigam Limited (BSNL) generates 46.7% of the Indian fixed line telecoms market's value.