IIPM - Admission ProcedureBharti Airtel has added 24.81 million subscribers during just the past year while none have managed even 20 million! Where’s the competition?!Proof, if proof were needed to justify the overwhelming power that the Chairman and CEO of Bharti Enterprises Group, Sunil Bharti Mittal yields in the Indian sub-continent’s telecom space during the present times – his telecom empire has grown by a blinding 186.9% during just the past two-and-a-half years and today commands a handsome 31.7% of the Indian GSM pie with a phenomenal 46.81 million telecom subscriber base as Harit Shah, Telecom Analyst, Angel Trade elaborates, “It is the only service provider to have operation in all 23 circles – the maximum number of circles possible. Execution has been top-class with the top leaders doing excellently well and that has helped Airtel maintain its top position. Its brilliant strategic moves like IT and network expansion in collaboration with Nokia and Ericsson have helped Airtel expand so fast. They have focused on their core business and left the backend to the experts in the field like IBM.” Sure enough, the world was taken aback when Bharti spoke of its innovative outsourcing model as Sunil recalled, “People gasped in horror. I got calls from around the world saying, you’ve gone nuts, this is the lifeline of your business, it’s something you can’t afford to lose.” But he went ahead with it, and has become more than just ‘successful’!
Talk about it and it seems no less a wonder that he was the very young 18-year-old entrepreneur whom – thirty-one long years ago – critics had given no more than a chance of survival than a young sapling’s god-forsaken fortune in a hurricane. But stand he did, and grew his venture like nobody’s business. And today, after gaining a foothold over the domestic telecom market, he is moving on to establish his authority in overseas war-zones. He’s also become the first Indian telecom operator to initiate operations in Europe, the first Indian operator to be granted a licence to deliver 2G & 3G GSM services in Sri Lanka and the only Indian bidder to qualify for the $300 million telecom services provision license in Qatar – on September 21, 2007– thus holding a mighty sword over the neck of global giant bidders like Vodafone, Verizon, at&t and other regional operators.
Of late, the Bharti brand has also become a symbol for successful diversifications. However, there is little doubt that his telecom business has remained his mainstay. Further on, the fact that India is at present the third-largest telecom market in the world with 230.2 million subscribers – after US & China – and that we still have 81% of our population untouched by the telecom revolution, telecom will for good reasons, remain the most-critical venture for years to come! Undoubtely, this alumnus of HBS and a Padma Shree who was also honoured with the ‘Asia Businessman of the Year, 2006’ recognition by Fortune, ‘Asia Pacific CEO of Year, 2006’ award by Frost & Sullivan (and many other honours) displays that grit to make his $44.32 billion Bharti empire (in terms of Mcap) grow in leaps with every passing day. So the question remains – what makes Bharti invulnerable?
When asked, Saurabh Mittal, CEO, Swadeshi Credit (P) Ltd. commented, “Dynamic management is the first factor that comes to my mind when I think of factors that has helped Airtel sustain its leadership position in the telecom sector. The other being customer focus, advertising campaigns and state of the art technology.” Clearly, as unveiled during the current financial year 2007-08, the top level structure and governance model of Bharti Enterprises holds out Sunil Mittal’s strategic intent to strengthen Airtel’s position as a leader in all businesses and build newer ones on a stronger governance platform, which has further ensured a continued leadership pipeline – succession planning at its best! So while the Indian telecom sector is forecasted to witness a rainfall in capital investments – up to a smashing $25 billion over the next half-a-decade (as per E&Y), while the telecom market in India is expected to grow to a sizzling 425 million in subscriber base by March 2010 with Bharti Airtel on top (as per CII), what are the challenges that lie ahead of Sunil Mittal?
First, with private equity and many investors taking care of the investment capital need problems, convergence of services – the missing ‘link’ when it comes to the last mile access for Bharti Airtel on the networks of state-owned operators and the need for 3G spectrum for extra voice capacity is weakening the potential of this giant. The first problem becomes grave as rural penetration stands at a pathetic 4.92% even as the urban figure has frog-leaped to 43.88%! This calls the need for greater investments in rural India – which would account for 40% of the next 250 million mobile connections (as per TRAI in August 2007) – on the part of Bharti. Also, with Hutch being rechristened Vodafone on September 21, 2007, its mighty plan to invest $2 billion during 2007 alone will push Sunil Mittal to ramp up his acts which needless to say, calls for a considerable investment capital as Harit Shah feels, “Vodafone is an able competitor and has ample experience of the European market. Also, it has various strong points like VAS and data, so Airtel should lay more emphasis on it now...” Then there are threats from other operators planning huge investments – Virgin Mobile’s 50:50 JV entry planned with the Tata Group, Aircel’s $400 million pan-India network expansion over the next two years, BPL’s strategy to expand to 23 circles and many new names all set to see daylight. To this, Harit Shah adds, “To sustain its leadership, entering into partnerships would be vital for Airtel. With the urban markets getting saturated, the focus at present should be ‘rural’ India. It would have to take it to about 70-80% in the next 2 years.”
However, with Bharti Airtel today making a mockery of competition, the challengers would inevitably have to pull-off a more than-a rabbit out of the hat to displace it from the numero uno spot. And today, while many are gasping for capital needed to set their dreams on wheels, the critical challenge to Airtel remains a shrewd strategy to spend it... But as long as Sunil is around, Airtel’s shareholders needn’t worry that this ‘hare’ will lose the long race!
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IIPM Editorial, 2008
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penetration of the insurance industry has increased. From 1.6% of GDP, the penetration has risen to 3% of GDP. Also, the reach in terms of life covered per year has grown around 20-30% per annum since opening up. We see the penetration of GDP to rise to about 5% in the next five years.
