Bharti Airtel: Strategic outsourcing

1. Bharti Airtel
Strategic Outsourcing
Group 3 – Section D
Alka | Amritanshu | Anshul | Ankur | Atika |
Ankit | Deepika | Rohit | Shubham

2. AGENDA
Problem Definition
Bharti History and Background
Indian Telecom Market
Bharti’s Telecom Network
Relationship with Vendors
Technical Problems Faced
Bharti’s Proposed Deal
Questions on the Case

3. PROBLEM DEFINITION
• Bharti Airtel faces multiple issues with various
changes in technology
• Moving over all operations to its vendors
• How would Vendors react ?
• How would Internal Stakeholders react ?
• Is this the right way to go ?

4. BHARTI AIRTEL COMPANY BACKGROUND
Bharti Airtel Limited commonly known as Airtel is an Indian
multinational telecommunication Services company Headquarter
at New Delhi, India.
It operates in 20 countries – India , Sri Lanka , Bangladesh and
17 countries in Africa
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.
The Company Provides Internet Access over 96 cities .
Submarine Landing Station At Chennai

5. Wireless
• 2G
• 3G
Enterprises
• Carriers
• Corporates
Telemedia Services
• Fixed Line
• Broad Band
• IPTV
Passive Infrastructure
Services
• Infratel
• Indus
DTH
Fully integrated telecom player offering end to end solutions
and entering new geographies
The Company...Bharti Airtel – An Integrated Telco Company divisions

6. Bharti Airtel Timeline
1995
Bharti Cellular
launched
cellular
services
'AirTel‘ in Delhi
2001
• Mobile licenses
for 15 circle
•Went public raised
$ 1 bn through
FDI
•First telecom
Provider to launch
national and
international long
distance
2004
•Bharti, in a first in
the telecom
industry, signs a 10
year comprehensive
IT outsourcing deal
with IBM.
•Bharti becomes
India’s first mobile
service provider to
complete a national
footprint in all 23
telecom circles.
2006
• Bharti Airtel
launches its
services in Sri
Lanka (2G/3G
network).
• Bharti Airtel
crosses the
100 million
telecom
customers
mark.
2010
• Acquires 70%
stake in Warid
Telecom,
Bangladesh.
• Acquires
mobile
operations of
Zain in 15
African nations
• Becomes the
world’s fifth
largest mobile
operator.

8. MARKET STRUCTURE
• Divided into 23 circles
4 metros
20 circles
• Further divided into A,B,C category based
on economic parameters and revenue potential
• Each circle has licenses
Four operators per circle are allowed
Licenses are saleable

9. MAJOR PLAYERS OF TELECOM
INDUSTRY
1) Bharti airtel-1985
2) BSNL-2000
3) Vodafone Essar-2007
4) Reliance communications-1999
5) Idea cellular-1995
6) Tata communications-1986
7) Tata teleservices-1996
8) Aircel-1999
9) MTNL-1986

10.  Bharti Airtel is holding the lead position in India by recording a five per
cent growth in the year 2011. The company is dealing with four major
categories namely digital television, enterprise, telemedia and mobile.
 BSNL or Bharat Sanchar Nigam Limited is the oldest player in the telecom
sector in India and they hold the pride of being the first to connect even
remote villages through their telephone service.
 Vodafone Essar began its operations in the year 1994 and the company has
operations all over India with more than 106.34 million customers.
 Reliance is one of the largest private sector company in the information and
telecommunication sector in India.

11.  Idea Cellular is a part of Aditya Birla Group and they are the
leading GSM Mobile service provider in India. They are offering
both pre-paid and post paid mobile service.
 Tata Communications influence its domain expertise and advanced
solutions across India and global network, with connectivity to
more than 400 PoPs & 200 countries.
 Tata Teleservices hold the pride of being the first to introduce
CDMA mobile services in India. The company introduced its
mobile operations in the year 2005 under the brand name of Tata
indicom.

12. INDIAN MARKET SHARE – TELECOM
OPERATORS
COMPANY WIRELESS MARKET WIRE-LINE MARKET
BHARTI 25 1
BSNL 16 86
MTNL 1.5 4.6
HUTCH-ESSAR 12 -
TATA 2 -
IDEA 11 -
RELIANCE 19.5 1
OTHERS 13 -

13. TELECOM COMPANIES MARKET SHARE
IN INDIA AS OF AUGUST 2011

14. RELATIONSHIP WITH VENDORS
NOKIA SIEMENS ERICSSON
IBM
COMVIVA

15. KEY DEFINITIONS NEEDED TO PROCEED
• Mobile Phone
• Base Substation
• Cellular networks
• Network Substation
• Home Location Register
• Visitor Location Register
• Authentication Center
• Equipment Identity Center
• Cellular Network
• Network Congestion
• Network Traffic
• Erlangs – A,B,C
• Network Technology
• GSM
• CDMA
• 3G

16. TYPICAL GSM NETWORK

17. PROBLEMS WITH SWITCHING
• GSM and the GPRS Switch for Bharti
• GSM and 3G Switch
• Competitors with CDMA for 3G Switches
GSM CDMA3G
/

18. QUESTIONS ON THE CASE
1. What must Bharti do to succeed well in the Indian mobile phone
market and what are its core competencies?
2. What do you see as advantages and disadvantages of the
outsourcing agreement outlined by Gupta?
3. How do the different outsourcing agreements work towards
building these core competencies?
4. If you were Bharti, What major concerns would you have about
entering an outsourcing agreement with IBM? With Ericsson, Nokia,
or Siemens?
5. How would you structure the agreements to address your
concerns and capture any advantages you have identified?

19. • Increase base stations from 5000 in 2004 to 40000 in
2007
• Deploy EDGE technology to upgrade to 3G and scale it
Network Infrastructure
• Hire 2000 to 3000 people to build & maintain the base
stationsHR
• Reduce conflicts between vendors and itself.Generate Profit
• Capitalize on top vendor connectionsDistribution Network
• Transitioning from 2G to higher technologies
• Expanding the IT network to meet the scalability
requirements
Technologies and
Network coverage
• Bharti must focus on providing excellent customer
service through “error free” service (low drop-out
rates etc)
Customer service
1. What must Bharti do to succeed well in the Indian mobile
phone market and what are its core competencies?

20. Strategies
Focus on
Core
competency
Competitive
pricing
structure
Focus in
Rural
markets
Innovate
to offer
value
added
service
Better
technology
Information
tools and
applications

21. Bharti's core competencies
Core Competencies (Present)
Operational excellence
Work culture: Strong values which comes
from a family business culture
Established Network
•First mover advantage – its presence in 15
circles
Formidable presence across diverse
portfolio of mobile, wireless, broadband and
business services
Large user base
- Able to tap into economies of scale
Marketing
- High brand recall by being the earliest
and longest in the market.
Technologies
- Latest technologies- EDGE
- Presence in GSM ecosystem- plug & play
- Occupancy on international fibre optic
n/w- long- distance services
Outcomes
• 25% market share-highest
• Reputation among suppliers-
they see Bharti as a profitable
client
• Obtained license for mobile
operation in 15 out of 23
circles.
• 6 million mobile subscribers

22. 2. What do you see as advantages and disadvantages of
the outsourcing agreement outlined by Gupta?
• Risk of excessive dependence on vendor
• Lack of flexibility
• Possibility of reneging
Telecom
infrastructure
Outsourcing
• Information misuse
• Specialised software for each department by
different firms may be needed
• Access to new innovation is restricted
• Possibility of reneging
IT infrastructure
Outsourcing
• Will non IBM software and hardware applications be
ever used again by IBM?
• Will Bharti loose the opportunity to use high end
latest non IBM products ?
• Will IBM be swift enough to timely launch the new IT
products and services for enhanced customer
experience?
IT and
Marketing
Department

23. • Transfer of 1000 employees will be difficult and
may not be accepted well by the employees
• Cultural difference between an Indian company
and an MNC
HR
department
• Difficulty in accepting the unheard deal which is
not an accepted practice in the industry
• The risk of running into excessive dependence
upon the vendors
• Will vendors be as enthusiastic about the
expansion and keep up in pace with the rapid
telecom expansion
Board
members
2. What do you see as advantages and disadvantages
of the outsourcing agreement outlined by Gupta?
( Contd )

24. Agreements with
Vendors
• Reduced risk of network
equipment
• Resolves conflict between
operator and network
equipment provider by
• For Bharti, pay as much as
you use would resolve the
issue of frequent ordering
process and related costs
Agreement with IBM
• Future IT operation
capacity is going to grow
exponentially
• IBM’s revenues are will be
shared by Bharti
• Consolidation of IT
equipment under IBM
Strategy in Indian Market
•low cost services to its
customers
•Reducing risk associated with
n/w equipment and paying as
per the use
•Consolidation of IT systems
•can build its expertise in
understand Indian market and
accordingly plan where to
expand
•Core competency would be
according to marketing need
Advantages of Outsourcing

25. 3. How do the different outsourcing agreements work
towards building these core competencies?
• Lesser capital expenditure and also more efficient
utilization of equipment as the interests of vendors aligned
with Bharti Airtel
• Cost structure being being more reliable and predictable
implies the lowest cost of production of minutes in the
world
• More efficient use of management bandwidth and time
currently being used in budgeting and tendering of
network expansion
• Capital freed from the requirement of maintaining excess
capacity can be used to improve the customer touch points
• Opportunity for vendors to be part of long term growth
story by linking revenues with Bharti’s revenues

26. 4. If you were Bharti, what major concerns would you
have about entering an outsourcing agreement with IBM,
Ericsson, Nokia, or Siemens?
• Coordinating with vendors on daily basis, also
adding the risk of outsourcing company ie company
going bankrupt
• Overdependence upon the vendors
• Difference about the strategic goal
• Vendor’s Lack of expertise
• Organizational culture difference
• Employees may not accept the transfers
• Due to outsourcing, Bharti may loose out better
opportunities available with other vendors

27. 5. How would you structure the agreements to address
your concerns and capture any advantages you have
identified?
Outsourcing dependency to be reduced by increasing by creating a in house technological
capabilities. Engaging other technological partners to reduce dependency on one .
Airtel to maintain a service level agreement with the technology partner to maintain the quality of
the service provided.
Data Security check to be in place. All the transactions going through the system should not
result in revenue loss. Audit flow of transactions to take place
Servers outside India would cause compromising sensitive data. Strict onsite server access policy
Price flexibility which would depend on fixed contract payment and variable payment with
resolution of every service case in the system
Quality of the solutions to be ensured by creating uniformity across the technological partners
over all the process and procedures
Up to date with new technology and interface and servers for better service and less down time

28. Thank You 