Company

Company Analysis of Bharti Airtel

Boggarapu Nikhil 10/10/14 Executive Communication

1



Abstract

Company analysis is done to evaluate capability, stability, Market Share, Growth rate,

Sustainability and profitability of a company. It is done through collection of secondary data

from various resources available in the Internet. Company Analysis helps the people to know

more about the company. The main objective of this study is to analyze the company position of

Bharti Airtel from the public point of view. It is done through various information collected from

Internet. There are various tools and techniques of financial analysis out of these techniques

Investigator has used ratio analysis for the analysis of financial statements of Bharti Airtel based

on the secondary data including balance sheet and profit and loss account . Investigator has

calculated various types of liquidity ratio, activity ratio and profitability ratio which helped to

analyze and interpret real profit and liquidity position of the company. Investigator has collected

information regarding market growth and market share of Bharti Airtel in the market and the

company has largest market share from subscriber and revenue based in the telecom sector and it

is 4th Largest Telecom Company in the world

Keywords: financial Analysis, Evaluate Capability, Stability, Market Share, Growth rate,

Sustainability and profitability

Mr. Boggarapu Nikhil – Student, Master of Business Administration, KCT BS, Coimbatore.

2


Introduction

Bharti Airtel Limited, commonly known as Airtel, is an

Indian telecommunications Services Company headquartered at New Delhi, India. It operates in

20 countries across South Asia, Africa and the Channel Islands. Airtel has GSM network in all

countries, providing 2G, 3G and 4G services depending upon the country of operation. Airtel is

the world's fourth largest mobile telecommunications company with over 261 million subscribers

across 20 countries as of August 2012. It is the largest cellular service provider in India, with

186.41 million subscribers as of October 2012. Airtel is the third largest in-country mobile

operator by subscriber base, behind China Mobile and China Unicom.

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 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.

Sunil Bharti Mittal founded the Bharti Group. In 1983, Mittal was in an agreement with

Germany's Siemens to manufacture push-button telephone models for the Indian market. In

1986, Mittal incorporated Bharti Telecom Limited (BTL), and his company became the first in

India to offer push-button telephones, establishing the basis of Bharti Enterprises. By the early

1990s, Sunil Mittal had also launched the country's first fax machines and its first cordless

telephones. In 1992, Mittal won a bid to build a cellular phone network in Delhi. In 1995, Mittal

incorporated the cellular operations as Bharti Tele-Ventures and launched service in Delhi. In

1996, cellular service was extended to Himachal Pradesh. In 1999, Bharti Enterprises acquired

control of JT Holdings, and extended cellular operations to Karnataka and Andhra Pradesh. In

2000, Bharti acquired control of Sky cell Communications, in Chennai. In 2001, the company

acquired control of Spice Cell in Calcutta. Bharti Enterprises went public in 2002, and the

company was listed on Bombay Stock Exchange and National Stock Exchange of India. In 2003,

the cellular phone operations were rebranded under the single Airtel brand. In 2004, Bharti

acquired control of Hexa com and entered Rajasthan. In 2005, Bharti extended its network to

3


Andaman and Nicobar. This expansion allowed it to offer voice services all across India. In

2009, Airtel launched its first international mobile network in Sri Lanka. In 2010, Airtel acquired

the African operations of the Kuwait based Zain Telecom. In March 2012, Airtel launched a

mobile operation in Rwanda. Today, Airtel is the largest cellular service provider in India and

the third largest in the world.

Airtel operates in all telecom circles of India. Its network is present in 5,121 census

towns and 457,053 non-census towns and villages, covering approximately 86.6% of the

country’s population as of September 2012. Airtel is the 6th most valued brand according to an

annual survey conducted by Brand Finance and The Economic Times in 2010.

Organizational Structure

Airtel's initial organizational structure concentrated on the hierarchy of the operations

inside the company as a whole. The structure depicted the corresponding operation/region of

different in-charges and it didn't hold anyone responsible for each of its services. So, the

company found it better to restructure its organizational chart. The transformed organizational

4


structure has two distinct Customer Business Units (CBU) with clear focus on B2C (Business to

Customer) and B2B (Business to Business) segments. Bharti Airtel's B2C business unit will

comprehensively service the retail consumers, homes and small offices, by combining the

erstwhile business units - Mobile, Tele media, Digital TV, and other emerging businesses (like

M-commerce, M-health, M advertising etc.). The B2C organization will consist of Consumer

Business and Market Operations.

Review of LiteratureRachana Bajaj (2013)1 Financial analysis is done to evaluate capability, stability and

profitability of a company. It is done through various financial ratios calculated from the

financial statements of a company. Financial analysis helps investors to appraise whether they

should invest in a particular company or not. The main objective of this study is to analyze the

financial position of Bharti Airtel from the investors' point of view. It is done through various

ratios calculated through financial statements of company for the period from 2005 to 2012.

There are various tools and techniques of financial analysis out of these techniques Investigator

has used ratio analysis for the analysis of financial statements of Bharti Airtel based on the

secondary data including balance sheet and profit and loss account Investigator has calculated

various types of liquidity ratio, activity ratio and profitability ratio which helped to analyze and

interpret real profit and liquidity position of the company. Bharti Airtel has the largest market

share from subscriber and revenue based in the telecom sector. In nutshell, it is found that

investors can be benefitted in the long run by investing in the telecom industry because telecom

industry is otherwise growing industry. Indian government is also providing various facilities in

the development of telecom industry. Telecom commission has approved 100% FDI in telecom

sector. And among the industry Bharti Airtel has the largest market share from subscriber and

revenue based. Roma Mitra Debnath (2008)2 Technological modernization is increasingly

viewed as a premeditated necessity in today's era of growth and prosperity for any country.

Telecommunications has entered a new age of development with advanced technology and

increased competition with established players.

http://www.emeraldinsight.com/action/doSearch?target=emerald&logicalOpe0=AND&text1=Mitra%20Debnath,%20R&field1=Contrib

5


The prime focus of the service providers is to create a loyal customer base by benchmarking their

performances and retaining existing customers in order to benefit from their loyalty. The paper

aims to address these issues. The results are insightful to the telecom policy planner as

benchmark them in terms of their efficiency. It also identifies the inefficient service providers

who can improve their efficiency by making the efficient providers as their role model. The

paper also identifies some generic insights. Sharma, Alka Singh, Mandeep (2012)3 In Indian

context, telecommunication has emerged as one of the fastest growing services, as it has

witnessed phenomenal growth from 22.8 million subscribers in 1999 to 746.77 million by the

end of November 2010 (Ministry of Finance, Govt. of India, 2011). However, despite this

unparalleled growth, few critical issues have emerged which affect the growth in a negative

manner. These are decreasing ARPU, undifferentiated services, increased competition, rapid

evolution of technology and highly dynamic customers. The present study has been undertaken

to analyse the customers' perception about the following aspects of key telecom providers the

value added services (VAS), service quality, customer satisfaction and loyalty. The results

suggest that value added services are perceived to be a strategic tool to differentiate service of

one provider from the other. Further a comparative analysis of the leading service providers has

been undertaken from customer’s perspective to understand the variations in satisfaction and

loyalty levels of their customers. Subhasish Majumdar, Partha Pratim Bhattacharya

(2014)4 in this paper, we have discussed Porter Five Forces model and presented mobile

communication market scenario in India. Then we have analyzed the intensity of competitions

among different mobile phone service providers. Different forces which may throw a challenge

to the existing leader are thus found out. So far very little analysis is done on telecom sector

using Porter five forces model. Analysis indicates that although to meet competition the top

service provider is struggling hard but the presence of strong rivals has put a challenge. From

above discussion, we may conclude that the presence of rivals is the main area that needs

company’s management serious attention. Company may follow the strategy of horizontal

Financial Analysis of Bharti AirtelBenchmarking telecommunication service in India: An application of data envelopment analysisBenchmarking telecommunication service in India: An application of data envelopment analysisPorter Five Forces Analysis of the Leading Mobile Cellular Telephony Service Provider in India

6


integration by taking the decision of merger or acquisition with any of its one or two rivals. The

leader should offer special packages

Problem Identification

For several years running, Sunil Bharti Mittal-promoted Bharti Airtel has been the

undisputed leader in the Indian telecom market. As of March 31, 2013, it had 188.19 million

wireless subscribers and 21.69 per cent market share. The operator’s rapid rise – from the time it

began as a small company offering mobile services in Delhi only, in 1995 – is symbolic of the

strong growth witnessed in the Indian telecom industry. Today, the company offers mobile voice

and data, fixed line, 3G, national and international long distance, IPTV and direct-to-home

(DTH) services. It also manages 82,083 tower sites through Bharti Infratel and Indus Towers. In

2012, Bharti Airtel raced ahead of its rivals to offer 4G services in the country. These services

were launched on long term evolution-time division duplexing networks, making India one of the

first countries to commercially offer 4G services through this platform. As per industry

estimates, Bharti Airtel currently has over 3,200 4G users. Going forward, analysts expect

significant activity in the 4G space, especially with the entry of Reliance Jio Infocomm in this

market. Bharti is currently the only operator to provide high-bandwidth 4G services in four

circles – Bengaluru, Chandigarh, Kolkata and Pune. Globally, the company operates in 20

countries: 17 African countries besides India, Sri Lanka and Bangladesh. It is the world’s fifth

largest telecom operator in terms of subscribers. Business Week has ranked Bharti Airtel among

the six best performing technology companies in the world. Bharti has made large infrastructure

investments over the past decade and a half, and currently owns a 171,610 route km optic fiber

network across India. Its global infrastructure includes over 225,000 route km of networks,

covering 50 countries and five continents.

Industry analysts attribute Bharti Airtel’s swift success to Mittal’s business astuteness

and strong support from his core team. According to the former managing director of a telecom

firm, “In the formative years of the telecom sector, Mittal’s perspective was sharper than that of

others. He was able to grab opportunities that he saw while others dithered.” Also, Mittal’s

7


outsourcing and “minute’s factory” business model, which has driven low-cost mobile telephony

in the country, is well known. However, the past four years have been rough for the operator

with its financial performance witnessing a major slide. During 2012-13, it registered a net profit

of Rs 22.75 billion, the lowest in seven years. This marked a decrease of about 50 per cent from

Rs 42.59 billion in 2011-12. Its earnings before interest, taxes, depreciation and amortization

margin, though still high, declined from 33.2 per cent in 2011-12 to 31 per cent in 2012-13. The

company’s market capitalization declined from Rs. 1,279 billion to Rs 1,108 billion during this

period. The biggest challenge for the company is servicing its debt, which stood at Rs 638.39

billion as of March 31, 2013. This debt was raised largely to fund the $9 billion acquisition of

Zain’s African operations in 2010. The financial pressure is expected to increase in the coming

years as the operator needs funds to pay the one-time spectrum fee and to renew its licenses for

the Delhi and Kolkata circles in November 2014. While the company has obtained a stay order

from the Delhi High Court on the Rs 52 billion one-time payment for spectrum held beyond 4.4

MHz, it will need to participate in an auction for license extension in the two circles as the

government has rejected its application for automatic renewal. Borrowing additional funds is not

prudent for the operator. Besides, its funding options have become limited as it already has a

huge debt on its books. In this scenario, reviewing its existing business strategy and tapping new

revenue streams are the only way forward for the company.

Key concerns

The major challenges faced by Bharti Airtel in the past two years include hyper competition, a

difficult regulatory environment, falling margins and a decline in almost all operational metrics.

The entry of new players in the market in 2008 led to a price war and incumbents like Bharti

were forced to offer services at rock-bottom prices. While low-cost mobile services resulted in

subscriber growth, the operating margins slid significantly. “The cut-throat competition in the

last two to three years has impacted incumbent players,” says a senior research analyst at Kotak

Securities. As a corrective measure, all operators hiked 2G tariffs in 2012. This has helped

companies like Bharti improve their margins to some extent.

In addition, acquiring 3G and broadband wireless access (BWA) spectrum in 2010

turned out to be a costly affair for the operator – it spent Rs 122.95 billion on acquiring 3G

8


Strength1.Largest cellular service provider in India, with over 164.61 million subscribers at the end of April 2011 2.Largest Telecom operator in the world with 207.8 million subscribers across 19 countries at the end of 2010 3.Only Indian operator, with VSNL, that has an international submarine cable4.High brand visibility 5.Strong advertising with celebrity brand ambassadors

Weakness1.Price competition from BSNL and MTNL 2.Untapped Rural Market

Oppurtunity1.Fast expanding cellular market 2.Latest and low cost technology 3.Untapped rural market

Threats1.New entrant's low price offering 2.Saturation point in Basic telephony service 3.Mobile Number Portability

SWOT

spectrum in 13 circles and another Rs 33.14 billion for BWA airwaves in four circles. These

investments have not paid off as 3G service uptake has been below expectations, while the 4G

ecosystem is yet to mature.

Methodology

Sources of Data

The study is primarily based on secondary data. The required data have been collected from

carious websites and relevant data available in the Internet.

Sampling Framework

Annual Reports of the company has taken into consideration and has analyzed the companies

over a period of years

Interpretation

SWOT Analysis

9


Challenging Model

Revenue Market Share

10


Source: TRAI

BSNL+MTNL7%

Aircel5%

Bharti Airtel30%

Vodafone23%

Idea15%

Tata Docomo9%

Reliance8%

Others3%

Revenue Market Share

BSNL+MTNLAircelBharti AirtelVodafoneIdeaTata DocomoRelianceOthers

The above chart explains the revenue market share of Telecom Companies in India for

the year 2014. BSNL+MTNL has a market share of 7%, Aircel has a market share of 5%, Bharti

Airtel has a market share of 30%,Vodafone has a market share of 23%,Idea has a market share of

15%, Tata DoCoMo has a market share of 9%. Reliance has a market share of 8% and others has

a market share of 3%.

Subscribers Market Share

11


Source: TRAI

Bharti Airtel Vodafone Idea Reliance BSNL & MTNL

Tata Docomo

Aircel Others

23.00%

18.00%

15.00%

13.00%

11.00%

7.00%8.00%

6.00%

Subscribers Market Share

The above chart explains the subscriber’s market share of Telecom Companies in the

year 2041.Bharti Airtel has a market share of 23%, Vodafone has a market share of 18%, Idea

has a Market share of 15%, Reliance has a market share of 13%, BSNL has a market share of

11%, Tata DoCoMo has a market share of 7%, Aircel has a Market Share of 8% and others has a

market share of 6%.

12


Source: TRAI, Department of Telecom, Company Filings

Spectrum Position

Acquired 115 MHz of 20 year liberalized spectrum positions – Enhanced long term

deployment flexibility

Prime Spectrum to Lead Data Growth Story in Feb 2014 auctions

Secured pan India 4G footprint- widest broadband footprint in India, which

provides ability to build robust network and enhance leadership position in the

fast growing data segment

13


Company plans to roll-out high speed 4G networks in various circles using

FD-LTE technology in the 1800 MHz band besides its existing TD-LTE

rollout in the 2300 MHz band, giving it a pan-India 4G footprint.

Bharti Already holds 3G and 4G spectrum in 21 telecom circles. Bharti has rolled out 3G

and 4G services – with over 8 million 3G customers

Investment Highlights

Conclusion

14


In nutshell, it is found that investors can be benefitted in the long run by investing in the telecom

industry because telecom industry is otherwise growing industry. Indian government is also

providing various facilities in the development of telecom industry. Telecom commission has

approved 100% FDI in telecom sector. And among the industry BHARTI AIRTEL has the

largest market share from subscriber and revenue based.

References

Misra, A., & Anil, K. (2007). ECONOMIC VALUE ADDED (EVA) AS THE MOST SIGNIFICANT

MEASURE OF FINANCIAL PERFORMANCE: A STUDY OF SELECT INDIAN FIRMS. Journal of

International Business & Economics, 7(1).

Nigam, V., Thakur, T., Sethi, V. K., & Singh, R. P. (2012). Benchmarking of Indian mobile telecom

operators using DEA with sensitivity analysis. Benchmarking: An International Journal, 19(2), 219-238.

Majumdar, S., & Bhattacharya, P. P. (2014). Porter Five Forces Analysis of the Leading Mobile Cellular

Telephony Service Provider in India.

Singh, K., & Sukhija, S. (2010). A Study of Profitability Performance of Telecommunication Companies in

India. Available at SSRN 1613084.

Ramadoss, G. (2013). Customer satisfaction of Telecom services in Tamil Nadu, India. International

Journal on Global Business Management and Research, 77.

Upadhyaya, R. C., & Sharma, V. (2001). Customer Satisfaction with Network Performance of BSNL and

AIRTEL Operating In Gwalior Division (MP).

Annexure

15


Balance Sheet of Bharti Airtel ------------------- in Rs. Cr. -------------------

Mar '14 Mar '13 Mar '12 Mar '11 Mar '10

12 Mths 12 mths 12 mths 12 mths 12 mths

Sources Of Funds

Total Share Capital 1,998.70 1,898.80 1,898.80 1,898.80 1,898.77

Equity Share Capital 1,998.70 1,898.80 1,898.80 1,898.80 1,898.77

Share Application Money 0.00 0.00 0.00 0.00 186.09

Preference Share Capital 0.00 0.00 0.00 0.00 0.00

Reserves 64,729.30 52,247.40 47,530.80 42,212.80 34,650.19

Revaluation Reserves 0.00 0.00 0.00 0.00 2.13

Networth 66,728.00 54,146.20 49,429.60 44,111.60 36,737.18

Secured Loans 1.40 -1,236.50 2.90 17.10 39.43

Unsecured Loans 8,521.30 14,216.30 14,126.50 10,216.00 4,999.49

Total Debt 8,522.70 12,979.80 14,129.40 10,233.10 5,038.92

Total Liabilities 75,250.70 67,126.00 63,559.00 54,344.70 41,776.10


12 mths 12 mths 12 mths 12 mths 12 mths

Application Of Funds

Gross Block 73,949.20 71,911.80 63,885.40 59,457.90 44,212.53

16


Less: Accum. Depreciation 34,071.00

28,729.20 23,444.60 18,757.20 16,187.56

Net Block 39,878.20 43,182.60 40,440.80 40,700.70 28,024.97

Capital Work in Progress 1,244.20 1,030.80 4,466.50 6,479.20 1,594.74

Investments 34,523.90 28,199.10 12,337.80 11,813.00 15,773.32

Inventories 1.10 2.10 32.10 34.40 27.24

Sundry Debtors 2,165.50 2,246.80 2,134.50 1,461.90 2,104.98

Cash and Bank Balance 446.00 362.70 481.20 133.20 54.89

Total Current Assets 2,612.60 2,611.60 2,647.80 1,629.50 2,187.11

Loans and Advances 19,945.20 12,859.10 20,430.80 10,960.20 7,072.42

Fixed Deposits 0.00 0.00 0.00 0.00 761.86

Total CA, Loans & Advances 22,557.80 15,470.70 23,078.60 12,589.70 10,021.39

Deffered Credit 0.00 0.00 0.00 0.00 0.00

Current Liabilities 21,798.60 20,061.70 16,067.20 16,610.30 12,979.55

Provisions 1,154.80 695.50 697.50 627.60 658.75

Total CL & Provisions 22,953.40 20,757.20 16,764.70 17,237.90 13,638.30

Net Current Assets -395.60 -5,286.50 6,313.90 -4,648.20 -3,616.91

Miscellaneous Expenses 0.00 0.00 0.00 0.00 0.00

Total Assets 75,250.70 67,126.00 63,559.00 54,344.70 41,776.12

Contingent Liabilities 87,232.10 123,273.00 8,261.10 6,852.10 3,921.50

Book Value (Rs) 166.93 142.58 130.16 116.16 96.24

17




Sources Of Funds

Total Share Capital 1,964.50 1,898.80 1,898.80 1,898.80 1,898.77

Equity Share Capital 1,964.50 1,898.80 1,898.80 1,898.80 1,898.77

Share Application Money 0.00 0.00 0.00 0.00 0.00

Preference Share Capital 0.00 0.00 0.00 0.00 0.00

Init. Contribution Settler 0.00 0.00 0.00 0.00 0.00

Preference Share Application Money 0.00 0.00 0.00 0.00 0.00

Employee Stock Opiton 0.00 0.00 0.00 0.00 261.96

Reserves 57,791.50 48,422.90 48,712.50 46,868.00 37,716.06

Revaluation Reserves 0.00 0.00 0.00 0.00 2.13

Networth 59,756.00 50,321.70 50,611.30 48,766.80 39,878.92

Secured Loans 11,586.90 13,286.70 12,089.30 7,670.50 4,958.43

Unsecured Loans 64,308.90 59,674.10 56,933.90 48,979.60 5,329.71

Total Debt 75,895.80 72,960.80 69,023.20 56,650.10 10,288.14

Minority Interest 4,210.20 4,088.60 2,769.50 2,856.30 2,855.53

Policy Holders Funds 0.00 0.00 0.00 0.00 0.00

Group Share in Joint Venture 0.00 0.00 0.00 0.00 0.00

Total Liabilities 139,862.00 127,371.10 122,404.00 108,273.20 53,022.59



18


Application Of Funds

Gross Block 198,569.30 186,681.80 133,582.10 128,874.30 72,116.34

Less: Accum. Depreciation 57,954.80 49,758.00 0.00 0.00 21,267.28

Net Block 140,614.50 136,923.80 133,582.10 128,874.30 50,849.06

Capital Work in Progress 0.00 0.00 0.00 0.00 2,435.94

Investments 15,530.80 6,769.30 1,815.60 622.40 5,162.07

Inventories 142.20 110.90 130.80 213.90 48.39

Sundry Debtors 6,244.10 6,643.00 6,373.50 5,492.90 3,182.48

Cash and Bank Balance 4,980.80 1,729.50 2,030.00 883.90 1,010.74

Total Current Assets 11,367.10 8,483.40 8,534.30 6,590.70 4,241.61

Loans and Advances 15,664.80 15,146.70 13,129.60 10,345.40 5,653.23

Fixed Deposits 0.00 0.00 0.00 73.60 1,567.90

Total CA, Loans & Advances 27,031.90 23,630.10 21,663.90 17,009.70 11,462.74

Deffered Credit 0.00 0.00 0.00 0.00 0.00

Current Liabilities 42,138.30 38,713.80 33,804.60 38,115.20 15,573.92

Provisions 1,176.90 1,238.30 853.00 118.00 1,313.29

Total CL & Provisions 43,315.20 39,952.10 34,657.60 38,233.20 16,887.21

Net Current Assets -16,283.30 -16,322.00 -12,993.70 -21,223.50 -5,424.47

Minority Interest 0.00 0.00 0.00 0.00 0.00

Group Share in Joint Venture 0.00 0.00 0.00 0.00 0.00

Miscellaneous Expenses 0.00 0.00 0.00 0.00 0.00

Total Assets 139,862.00 127,371.10 122,404.00 108,273.20 53,022.60

Contingent Liabilities 38,098.20 21,932.10 21,526.60 16,509.40 4,863.86

19


Book Value (Rs) 149.40 132.51 133.27 128.42 104.32

Documents

Company