6-0

case study

Acknowledging all sources and copyrights

case study
AIRTEL
Understanding a case study
 Business Case Study What is it
What does it contain
What does one learn
What use is this learning

1.a process or record of research into the development of a particular person, group, or situation over a period of
time.
"the case study was undertaken over a period of two months through a series of visits to the school"

2.a particular instance of something used or analysed in order to illustrate a thesis or principle.
"airline deregulation provides a case study of the effects of the internal market"

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BCS vs BP  A business plan is a description of a business and its plans for the next one to three years. The plan
sets out the means by which an organization will achieve its objectives. Without a clear plan a
 To learn from a historical data of business will have little sense of direction. More specifically the plan explains what the business does
information about the success or (or will do if it's a new business); it suggests who will buy the product or service and why; it provides
failure of an idea, an entity, an financial forecasts demonstrating overall viability; and indicates the finance available and explains
the financial requirements.
organization, a movement or any
 The business plan is written for the owner to give a guide to run the business. It is also written for
event.
financial backers, and lenders of money such as banks. Business plans are drawn up when a business
 View the situation or climate under
sets up for the first time and are amended and revised when the business wants to change - typically
which the Business Plan was drawn. when it wants to expand.
◦What assumptions were made and  A simple business plan should be clearly set out under the following headings:
empirical data was considered  Owner details / Description of the business
◦What was the projected growth /  Outline of the market / Evaluation of competition
progress rate and what were the  How the business will be organized
actual outcomes  Proposed marketing mix / Premises and equipment
 Can the same be implemented in a  Sources of capital / Cash flow forecast / Future plans
different period, time or region  Business plans are particularly important for new start up businesses, because they provide a framework
◦Would the results be similar for the owner to work to. Also if the owner wishes to raise finance from a bank or other lender then it will
◦If not why would they be different be essential to provide a clear business plan, so that the bank can feel confident in making a loan.
 What was the reaction of the  Research shows that those businesses that produce detailed plans are far more likely to succeed than
when only a sketchy plan or no plan at all is prepared. Research also shows that entrepreneurs who make
competition then and how is it likely realistic predictions about cash flow, break even and profit and loss are far more likely to be able to raise
to react today. funds that those that make exaggerated claims. For established, larger organizations - the business plan
 How do you put to use this finding is typically called the 'corporate strategy'
in your Business Plan

This is my perspective and not necessarily a textbook definition

BCS Success and Failure – Personal Experiences

1996-
Bank account balances on your pagers
Message every time there is a bank transaction

2004/5-
TV on your telephone line
Movies on Demand

2008-
Content delivery over Mobile
Aspect Ratio management
Africa India
 Population  Population
◦ 1.2 B ◦ 1.2 B
 Area  Area
◦ 30.37 MSqKMs ◦ 3.3 MSqKMs
 Countries  States
◦ 54 ◦ 29+7
 GDP  GDP
◦ 2.3 T USD ◦ 1.8 T USD
 Telecom ARPU  Telecom ARPU
◦ $8+ USD ◦ 3.5 USD
 Mobile Density  Mobile Density
◦ 50% ◦ 90%

Dated slide !!!

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8
 6-0

Telecom Business
case study
The Airtel African Safari
Why Airtel Case Study
 Current – you watch plot unfurl
◦ 16-17-18-19 -20(times 3)
◦ Every term I had to edit the slides more information more data more
action
 Plenty happening in this space
 Hot sector
 ICE business
 Global
 Dynamic --- roller coaster
 Virtually covers every topic of Marketing, Global Business

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Personal connect to Airtel
 Small Telephone supplier to BSNL.. some CDOT
connections
 Opportunity to join them in late /early 80s/90s
◦ Revenue / Turnover considerations

 Business connections to DTH opportunities

 Business contacts….

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 EQUATOR

Movement of sun
12
Airtel Dreams Africa
 Why not
 Great. India going global
 It is time India spreads its wings and conquers the world
 If China is at it why not India
 Airtel knows mobile business best
 We sell it cheap and Africa ARPU is so high
 After we invented it – Minutes Factory Model
 India was facing dropping tariff and increased spectrum
cost

tariff spectrum

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9 June 2010
 Airtel Acquires Zain

 After two failed attempts to acquire MTN

 9B USD 15 countries 42M

◦ 8.5B USD in debt

What is debt
Who gives you debt
How do you service debt
What happens when you don’t
-Examples
Cost of money
Future cost of money
Present cost of money

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What did Airtel see in Africa
 The logic was simple—the continent had over a billion people and they
needed telecom services,
 which were available only to a few, ranging from 14% to 32% people,
depending on the country. And those few people were paying a lot—the
average revenue per user (Arpu) per month was between $3 and $25,
huge when compared with the less than $1.5 a month in India.
 Arpu is a key yardstick for telcos. Tariffs in Africa were around 10 cents
a minute, compared with the less than 1 cent per minute in India.
 At the time, the mobile phone user base in Africa was growing at 20%
every year across the continent.
 Some of Zain’s portfolio countries in Africa already had 3G, the next big
thing in telecom, which India was just waking up to. (Third generation,
or 3G, technology based wireless telephony allows telcos to offer faster
data services, getting a greater share of a mobile user’s wallet.)
Technology obsolescence
5G

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2013
Projected
 100M 5B revenue 2B EBITDA

 Manoj Kohli moves to Nigeria

 Bitten more than one can chew

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What was their model
 The company’s plan was to leverage the now-famous
minute factory model, where the telco outsourced almost
all tasks, keeping with it only key functions such as
branding and billing. This practice in India had helped
Airtel keep costs to a minimum and let it offer what are
probably the lowest tariffs in the world. For Africa, Airtel
could also leverage its existing relationships in India to get
deals for equipment, network management and IT
infrastructure.

Suppliers as stakeholders in business

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Minutes Factory Model
 What is the Minutes Factory? First, here is what it is not. It is not
a “subscriber-led” model. The description comes from richer
economies of the developed world that were the first to launch
mobile phone services, Europe in particular. Since it was a new
technology, the cost of setting up a network was high. In the
1990s, most mobile operators wanted well-heeled customers
who would be willing to pay $1 a minute. They were also very
selective in rolling out the network. “Even today in many cities in
Europe you may not get a mobile signal if you are in a slightly less
frequented part of the city,” says Arvind Mahajan, executive
director, KPMG. Mobile companies then spent a lot of money
attracting high-paying customer. 
 For almost seven years, the Indian market and mobile operators
used the same “subscriber-led” model and nobody could make
money.  While the cost of setting up the network remained high,
very few subscribers signed up because the cost of making or
receiving a call remained very high: About eight rupees a minute. 

 Then in 2001-02, Bharti came up with the Minute Factory model.

Bharti outsourced network planning and IT backbone —
considered core to the business — and converted its fixed costs
to variable costs. Bharti was able to target millions of pre-paid
customers that the subscriber-led model didn’t allow it to. This
allowed it to invest a certain minimum amount to set up a
network that can handle a threshold level of calls and then wait
for the usage to build. Only when usage started increasing did
Bharti invest more in the network. 
 The beauty of the Minutes Factory is that it can add small
capacities fairly rapidly and economically. The key to this is an
array of partnerships that “manufacture” the minutes. The speed
comes because each partner is a specialist and can do its bit
better than anyone. Financially this works because Bharti doesn’t
have to invest in equipment and towers in advance.
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What went wrong ? Due diligence

 Things didn’t turn out quite according to plan.

 Analysts say Zain had not invested enough in its Africa assets and was
bleeding cash.
 Airtel pumped in some $5 billion cash (that’s in addition to $9.5M),
money that was spent reorganizing the networks and sales and
distribution infrastructure in the continent, among other things.
 At the end of the March 2013 —Airtel had 63.4 million
subscribers(projected 100M) from the 17 countries, with a net loss of
$345 million (projected $2B)from a revenue of $3.76 billion (projected
$5B)—missing its targets by quite a bit.
 Two years later, things are not much better.
 At the end of March 2015, the latest earnings available. Bharti Africa
netted losses of $585 million on a revenue of $4.2 billion. The subscriber
numbers stand at 76.2 million, at the end of March.

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Africa GDP and Airtel Markets

Maslow’s Pyramid
Needs and Wants

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 Time of entry

Further
 Their strategy at the time of entering was wrong.
 The understanding of the market was lacking.
 Costs were high and they were experimenting with tariff
cuts.
 The minute factory model works when the volumes (of calls)
are already there, which they did not have.
 Then there was the fact that India, the core market, was still
drawing too many management resources of the company.
 They got a very poor asset. Zain had not invested much in
key things such as brand and network, which made
integration more difficult.

Zain was an also ran in most countries

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And More
 The cut in earnings were bruised by heavy currency depreciations that have, since the
beginning of the year, patronised Africa with an average depreciation rate of more than 21.6 per
cent.
 For a telecom to operate and generate the much-needed revenue and profit, it needs some level
of economic stability in the various countries of operation. 
 Many economies across Africa have been facing headwinds since 2014.
 Oil prices were crashing 
 By June 30, 2015, Airtel’s earnings in all its 17 markets in Africa had been heavily eaten into
with currency depreciation
 Madagascar 37.5 per cent.
 Ghana 30.7 per cent
 Nigeria 28.3 per cent
 Uganda 26.9 per cent
 Seychelles 22.8 per cent
 Tanzania’s 20.9 per cent
 Zambia’s 19.2 per cent.
 Airtel conducts business in local currencies in all the countries it operates. However, it has debt
obligations in USD, equipment purchases and service providers that bill in dollars, hence the
rise in foreign exchange losses.


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Diverted Attention
 In Nigeria, Airtel is still engaged in legal disputes since the Zain acquisition.
 This is compounded by other challenges such as capital controls on dollar
purchase, and the drop in oil prices is draining people’s expenditure power.
 In Kenya, Adil El Youssefi, the country’s Airtel chief executive officer,
warned recently that investors in the telecom could be forced to quit the
market “if government does not curb ‘anti-competitive’ behavior by the
market leader (Safaricom) which has condemned competitors to
losses”. However, the response was outrageous as the country’s telecom
regulator told Airtel to compete or exit the market.

 Airtel exiting Uganda? Nigeria? Rumours ? Churn ….

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Frameworks for Global business

Institution based view

Resource based view

P&S
Fig 1.3
24
Institution and Resource Based Views
o re g
Institution Based g ap on
K
 Fair Laws Sin ng ?
Ho bai
 Friendly Environment Du ??
US
 Level Playing Field

Resource Based
ie s?
 Uniqueness n
pa
 Against Odds i C om
eps ma
P ar
Ph
 Rare and powerful specific resources

25
Frameworks for Global business

Institution based view

Strategy based view

Resource based view

P&S
Fig 1.3
26
Institutions and their Role

Degree of Formality Examples Supportive Pillars

Formal Institutions Laws Regulatory
Regulations
Rules
Informal Institutions Norms Normative
Cultures Cognitive
Ethics

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Institutions and their Role..contd

n ess
busi
h ich
s w
v e
o dri
Wh
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Rumors and Reality
 In Q3 2015, Bharti Airtel completed the sale of mobile towers in
five countries in Africa for $1.3 billion to cut its huge debt. It is in
the process of selling tower assets in six other countries in Africa.
At the end of the day, Bharti Airtel planned to divest 15,000
towers in 13 countries.
 But in the bid to dilute the rumour of its exit in the face of the
assets sale in the four countries, Airtel issued a statement saying:
"Airtel is well positioned in the remaining 13 countries and there
is significant upside available. We remain fully committed to our
Africa operations and will continue to invest in its growth and to
build a profitable business and accordingly have no plan to exit".
The company also insisted that the four countries represent a
relatively small percentage of its overall Africa business.

29
India model in Africa
 In its global operations, India still remains its best in the
pecking order.
 Little surprise Airtel also followed a low tariff strategy in
Africa, similar to India. This did not translate to the level of
success achieved in India with the same tariff strategy.
 This only showed that the market dynamics and
fundamentals are not exactly the same with the different
continents.
 Bharti Airtel paid Zain $252 per subscriber when the
average minutes of use per subscriber in a month was just
100 compared to 350-400 in India.

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Kannada Ad Bhojpuri Ad

what’s wrong

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One size fit all??
 When a television advertising campaign of Bharti Airtel in Africa fell flat a few years ago, the
marketers went back into the cutting room to work out why.
 Images of the savannah, actors from South Africa, along with the use of coins – when many
Africans use only paper money – had limited the advert’s appeal in some parts of the continent,
no good for a company with business in 17 African countries.
 “This is where multinational companies go wrong. They come with their global brand positioning
and they want to cut and paste,” says Bharat Thakrar, head of Nairobi-based Scangroup, Africa’s top
marketing services agency. “They think everybody looks the same but just having black models is no
longer enough. It’s like putting a Thai, a Chinese and an Indian in the same Asia ad. People can
recognise themselves,” he adds.
 Just as US megastore Walmart and UK supermarket Tesco found expansion into China tougher
and slower than expected, global companies – whether new or old entrants to Africa – face
similar headwinds if they fail to adapt their advertising to the continent.
 The potential consequences of failure are significant as multinationals from Heineken to Unilever
and from Nestlé to L’Oréal turn their attention to cracking Africa, investing millions of dollars
over the past five years to tap a market with a billion people, a rising consumer class and some of
the fastest growing economies. And the arrival of foreign mobile phone and consumer companies
to Africa has led to an explosion in advertising on the continent. The surge in marketing, however,
is in some cases failing to deliver returns, as companies have been too quick to characterize the
continent as a single entity and, as a result, have failed to connect with consumers.

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More of MNC Local adaptations
 Nestle makes Portuguese-language adverts depicting traditional chicken stews to sell Maggi
stock cubes in Angola,
 – they have to produce advertising that’s more relevant, that resonates – it’s costing more but it’s
the only way to do it.” “Plus, if you come with a brand that’s not known in this market – unless it’s
Prada or Mercedes – it could be famous in London but it won’t necessarily appeal to consumers
out here.
 The most successful brands go so local they become part of society – running marathons and
musical festivals, raising money following natural disasters or regularly responding directly to
customers. Bob Collymore, boss of Safaricom, Kenya’s leading mobile phone company in which
the UK’s Vodafone has a 40 per cent share, regularly tweets to his 209,000 followers.
 Companies must learn to adapt to local tastes While big companies are beginning to tailor their
marketing messages – increasingly choosing local models, languages, music and food to reach
target audiences – some are also beginning to adapt their products to the tastes of local African
markets.
 Manufacturers of soft drinks and confectionery typically sweeten products aimed at African
markets, while South Korea’s Samsung recently brought out extra-loud stereos to appeal to
Nigerian consumers, and fridges that can withstand power loss and fluctuations, to cope in
African markets where electricity regularly cuts and surges.
 “There was a habit in Africa of pumping out universal products,” says one European corporate
executive, adding that companies had not bothered to do market research. But that is changing
now with the arrival of competition – particularly from homegrown African companies.
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Some corrections for Bharti
 Airtel learnt this lesson and, shortly after its disappointing
campaign, put out a series of more tailor-made television
adverts:
 one about a pidgin-speaking hustler in Nigeria to reflect the
country’s “bigger-than-life” appreciation for all things
slapstick;
 another about a Congolese mechanic whose poignant
francophone tale was set to captivating local rhythms;
 and others showcasing graduation ceremonies to capture east
Africa’s “more conservative” culture.
 Exiting tower business
 Reworking Opers. Model

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Today
 Bharti / Airtel is re-strategizing Africa business and
approach
 They are more learned !

 They need to stay and be profitable

Are they ready

Or
 Where is the new battle in Africa or India

 Who is the new threat – devaluation, localization,

regulatory, Safaricom or MTN or Jio

 Picture Abhi Baaki Hain Mere Dost

End of presentation
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Jio Effect
 Industry bankruptcy
 Market consolidation
 Strange bed fellows Vodafone and Idea
◦ Different business interests, culture
◦ Mayawati and Akhilesh
 Bottoming of prices
◦ Fight for revenue or fight for customers
 Value addition
◦ From we charge for data to data as much as you want
 Losing DTH market
◦ Who is taking away the market

36
Finally some Sense
 STP
 Separate the chaff from the rice
 Know your customer
 Airtel Thanks
 Airtel Xstream

Battle of Caller tune timing and IUC charges

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 25 april 2018 Economic Times
Airtel’s India Ops Post First Loss in 15 Years
African revival helps co log ₹83cr consolidated profit in Q4 despite ₹652cr loss at
local arm
Bharti Airtel’s India operations reported their first net loss in almost 15 years in
the fourth quarter of 2017-18 and joined Idea Cellular and Vodafone India in the
red, as Reliance Jio-led low tariffs and a cut in international termination rates (ITR)
took toll on the country’s largest telco.
Net loss, before exceptional items, for the India business in the three months
ended March 31, 2018, stood at ₹652.30 crore, compared with a net profit of
₹770.80 crore a year earlier, the Sunil Mittal-led telco said in a statement on
Tuesday.
The company eked out a net profit of ₹83 crore on a consolidated basis — also its
lowest in nearly one-and-a-half decades — in the just-ended quarter, a 78% year-
on-year drop, thanks largely to its Africa operations which clocked a profit of
₹698.70 crore.
Consolidated revenue dropped 10.5% on year to ₹19,634 crore primarily as data
and voice tariffs in India fell further. Revenue from India operations — which make
up almost 77% of the total — declined 13% year on year to ₹14,795.50 crore,
dragged by lower revenue from mobile services which fell 20% on year.
For the full financial year, 2017-18, Airtel’s consolidated net profit declined 71%
on year to ₹1,099 crore and consolidated revenue fell over 12% to ₹83,688 crore.
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 More news
Relief Still Some Time Away for Co: Analysts“The telecom industry continues to witness below cost, artificially
suppressed pricing. Industry revenues were further adversely impacted this quarter due to the reduction in
international termination rates,” Gopal Vittal, managing director, India & South Asia at Airtel, said in the
statement.Bharti Airtel’s India ARPU (average revenue per user) for voice and data — a key operational indicator —
fell 5.9% in the January-March quarter to ₹116.

Analysts say relief is still some time away for the company, and the industry, which has been upended by the
dramatic entry of Jio in September 2016. Idea Cellular, which has been in the red for the past five quarters, is
expected to report wider losses when it announces results on April 28. “Growth is still several quarters away for
Airtel, since that will entirely hinge on when Jio decides to raise prices and grow ARPU,” said a telecom analyst at a
Mumbai-based brokerage.Any price rise, he added, appeared unlikely in the immediate term. “Jio is likely to maintain
its pricing aggression to fight Airtel in the battle for new customers and to target a chunk of the RMS (revenue
market share) likely to be shed by the proposed Idea-Vodafone merged entity,” the analyst said.Some analysts were
more optimistic. “This is the lowest ARPU for Bharti Airtel, but going forward it should grow to ₹140-145, may be
within one year, due to consolidation,”

The reduction in international termination rates also adversely impacted the telco. ITR is paid by international
operators to local networks that receive calls. Bharti Airtel, India’s largest telco with over 304 million users, along
with Vodafone India and Idea Cellular services over 60% of the subscriber base. The three telcos are the biggest
losers owing to the 43% cut in ITR to 30 paise a minute from February 1.The ITR rate cut hurt Airtel’s gross revenue
by ₹123.5 crore and earnings before interest, tax, depreciation and amortisation by ₹86.1 crore in the justended
quarter, the company said.The change in ITR made things worse for incumbents that were already reeling under the
impact of a 57% reduction in local interconnect charges from October 1 last year. IUC is paid by telcos generating
calls to networks that receive them. Vittal said the company made its highest mobile data customer addition of 15
million during the quarter. “Usage parameters remained robust — on a YOY basis, we saw data and voice traffic grow
584% and 55%, respectively.”He added that the telco spent ₹24,000 crore in capital expenditure — its highest ever —
in the fiscal year ended March. “We intend to continue the rollout momentum next year as well.”

31 Jan 2019 - Airtel Africa will raise $200 million, or around ₹1,420 crore, from Qatar Investment Authority (QIA)
through an issue of primary shares, Bharti Airtel said in a statement on Wednesday.
39
Story continues
 Where’s the market heading
 Who is the competition
◦ Jio
◦ Netflix
 Has the sector changed
 Is telco a commodity
 Do we really care who is the provider
 Experiences from Global Star and Iridium

 More stories for the next term….

40
Industry
 What should it do
 When service becomes a commodity how does business
change
◦ India Gate or Kohinoor or Dawat rice who cares
 What are your learnings

41
Bharti Enterprises wins bid for 45% stake in UK’s OneWeb for $500
m

 Two decades after launching mobile telephony Starlink is a constellation of 4000+

services in India, Sunil Mittal is now embarking on a
new trajectory to connect the next billion users satellites development project
through a constellation of satellites. underway by SpaceX, to develop a
 Mittal-owned Bharti Enterprises has won a bid to low-cost, high-performance satellite
pick up a 45 per cent stake in OneWeb, a UK-based
company that has proposed a mega-constellation of bus and requisite customer ground
satellites in low earth orbit to deliver affordable transceivers to implement a new
wireless internet services to anywhere in the world.
 Bharti Enterprises will invest $500 million in
spaceborne Internet communication
OneWeb. system.
 “OneWeb’s platform will help to reduce the digital  SpaceX has said it will offer speeds of
divide by providing high speed, low latency
broadband access to the poor and hard-to-reach up to 1 Gbit/s, with latencies
rural areas. A low-earth orbit constellation is the between 25 ms and 35 ms. Those
only viable mechanism through which the ‘last
billion’ can be connected. As one of the largest
latencies would make SpaceX's
telecoms operators in India and Africa, I know what service comparable to cable and
a powerful social and economic enabler this can be,” fiber, while existing satellite
Mittal said in a statement. The negotiations were led
broadband services have latencies of
.
by his son Shravin Bharti Mittal The airtel600
saga
mscontinues….
or more

42