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SHUBHI(51), YOGINDAR(61

INTRODUCTION

OVERVIEW OF TELECOM INDUSTRY IN INDIA

Competitive Landscape:
By 2003, there were 7 major
operators in telecom market
Bharti Airtel was the leader in
wireless segment with 25% market
share
There were a few strong regional
players like BPL and spice
Because
of
the
increasing
competition mobile rates were quite
low and Average Revenue per
customer
per month (ARPU) had
fallen by 50% in the last 3 years
Industry was growing and there
was increasing focus on providing
Value added services though 2.5 G
and 3G technologies

It
required
huge
capital
investments and to compensate
company had to have pan India foot
print

SWOT ANALYSIS
Capacity objectives:
To provide GSM services in all the 5161 census towns
by 2007 by adding 100 towns per month
To build 40,000 base stations from the current
capacity of 5000
Human resource objectives:
Hire 2000-3000 people for building and maintenance
of the base stations
Technological objectives:
Make transition towards 2.5G and 3G technologies to
provide high performance services
Have scalable and compatible IT architecture in place
to match growing demand and acquisitions made by
the Airtel. These included telecom network software,
customer information system and business support
software

STRATEGIES TO SUCCEED IN INDIAN MOBILE PHONE MARKET

STRATEGIES TO SUCCEED IN INDIAN MOBILE PHONE MARKET

Airtel Core Competencies

Summary : Strategies

Expand
Expand in
in Geographic
Geographic Regions
Regions esp.
esp. Remote
Remote and
and rural
rural

Increase
Increase ARPU
ARPU through
through Value
Value Added
Added Services
Services

Increase
Increase Capital
Capital through
through Equity
Equity and
and Partnership
Partnership

Advanced
Advanced Information
Information Technology
Technology for
for customer
customer profiling
profiling and
and traffic
traffic estimation
estimation

Effective
Effective Capacity
Capacity utilizations
utilizations through
through partnerships,
partnerships, acquisition
acquisition and
and tower
tower
sharing
sharing

Tie
Tie ups
ups with
with Hand
Hand set
set vendors
vendors to
to attract
attract customers
customers

OUTSOURCING ADVANTAGES
MORE FOCUS ON COMPANY GOALS
WOULD SAVE THEM A TREMENDOUS AMOUNT OF TIME TO FOCUS ON CUSTOMER NEEDS
COMPANY WILL NOT HAVE TO KEEP EXCESS CAPACITY OF 30 -40 %
ACTUAL PAYMENT FOR NETWORK CAPACITY HAS TO BE MADE ONLY WHEN THE CAPACITY IS UP AND RUNNING
WOULD SOLVE THE CAPITAL EXPENDITURES NIGHTMARE
WOULD BE ABLE TO COMPETE IN TERMS OF COST
BETTER NETWORK QUALITY
CONTRACT AGREEMENT OF 3 YEARS
USE OF OUTSIDE EXPERTISE

OUTSOURCING AGREEMENTS AND CORE

COMPETENCIES

IBM

PROVIDE COMPLETE AND COMPREHENSIVE END TO END MANAGEMENT

SERVICES FOR SUPPLYING, INSTALLING AND MANAGING IT ARCHITECTURE
OF AIRTEL
EMPLOYEES WHO LOSES JOB BECAUSE OF THIS AGREEMENT SHOULD BE
ABSORBED BY IBM AT THE RESPECTIVE ROLES
IBMS SERVICE WILL BE SUBJECTED TO SEVERAL QUALITY CONTROL
CHECKS TO ENSURE GOOD QUALITY OF THE AIRTELS SERVICE AT ANY
POINT OF TIME
A SHARE OF THE REVENUES WILL BE PROVIDED TO IBM BY AIRTEL AND THE
PERCENTAGE WILL DECREASE AS THE REVENUE OF AIRTEL INCREASES
OVER TIME

OUTSOURCING AGREEMENTS AND CORE

COMPETENCIES

ERICSSON, NOKIA, SIEMENS

VENDOR WILL PROVIDE AIRTEL WITH NETWORK CAPACITY- ERLANGSACCORDING TO THE AIRTELS REQUIREMENTS
FEE WILL BE PAID TO VENDOR AS AND WHEN AIRTEL STARTS USING THE
CAPACITY
OWNERSHIP BELONGS TO AIRTEL, YET RESPONSIBILITY FOR MAINTAINING
THE NETWORK LIES WITH THE VENDORS
SLA WILL CONTAIN SEVERAL QUALITY CONTROL MEASURES, SO THAT
QUALITY CAN BE ENSURED AT ANY POINT OF TIME
EMPLOYEES WHO LOSES JOB AT AIRTEL DUE TO THIS AGREEMENT WILL BE
TRANSFERRED TO THE CORRESPONDING VENDOR AT THE SAME ROLE

CONCERNS THAT MAY LEAD TO FAILURE NETWORKING SYSTEMS

Loss of core competence
Operations expertise which was Bhartis core competence would be given away to vendors

Managing different vendors

Vendors would be responsible out installation and operation of equipment
Risk of lack of synergy between the vendors

Management of employee transfer between the companies

Cultural difference between the companies ( MNCs vs Indian company)leading to difficulty in
inducting staff from Bharti to IBM or Nokia, Siemens
Employees were attached to the company and had concerns about working in the new organization
Some employees might not want to be transferred or perhaps vendors might not want to take them

CONCERNS THAT MAY LEAD TO FAILURE - IT

INFRASTRUCTURE
Misalignment between objectives of IBM and Bharti Airtel
Airtels IT department, with its start up culture expects quick response in the development of
IT systems , whereas IBM has a long term orientation

Non availability of software and hardware applications not supported by IBM

IT systems use applications developed by other vendors as well, but might not be supported

Protecting IP, copyright

Risk of exposing business processes to outsiders

MAJOR CONCERNS OF VENDORS

Excess Investment in equipment
They might be stuck with important investments in network equipment that they made on
behalf of Bharti in the event that Bharti did not use the equipment
No price increase to mitigate the risk

Absorbing Airtels employees

Some vendors had very light organizations that would be overwhelmed with a sudden
increase in the number of employees
Managing the corporate culture mix

IBM revenue sharing agreement

IBM needed to project future cash flows of Bharti for evaluating revenue share agreement
Difficult to forecast accurately in high growth markets

STRUCTURE OF OUTSOURCING AGREEMENTS

BEFORE ENTERING INTO AN AGREEMENT IDENTIFICATION OF VENDORS FOR

OUTSOURCING IS NECESSARY

CRITERIA THAT NEEDS TO BE CONSIDERED ARE

PRICE
QUALITY OF SERVICE
WHETHER A NEW ENTRANT OR AN OLD PLAYER IN THE FIELD
FLEXIBILITY
COMPLIANCE WITH RULES AND REGULATIONS
CULTURAL DIFFERENCES

STRUCTURE OF OUTSOURCING AGREEMENTS

AFTER IDENTIFYING THE POOL OF VENDORS, THE OUTSOURCING AGREEMENTS

SHOULD BE IN A WAY SO THAT IT BENEFITS BOTH PARTIES

AIRTEL HANDING OVER A MAJOR PART OF THE OPERATIONS AND IT FRAMEWORK

MAINTENANCE TO VENDORS

AIRTEL SHOULD MAINTAIN ITS CONTROL

THERE CAN BE ADDITIONAL STIPULATION TO PREVENT FROM VENDORS

ENTERING INTO THE SAME MARKET IMMEDIATELY AFTER THE LEASE TERM IS
OVER

REVENUE SHARING MODEL BETWEEN AIRTEL AND BHARTI APPROPRIATE

IN CASE OF EITHER PARTY BREAKING THE AGREEMENT EFFECTIVE
COMPENSATION SHOULD BE PAID

RECOMMENDATIONS
WE CAN REDUCE OUTSOURCING DEPENDENCY OF AIRTEL BY FOLLOWING A PART OUTSOURCING AND

PART IN-HOUSE DEVELOPMENT STRATEGY. WE CAN ALSO LOOK FOR OTHER TECHNOLOGICAL
PARTNERS TO REDUCE DEPENDENCY ON ONE .
TO ENSURE THAT REQUIRED STANDARDS OF THE QUALITY OF SERVICE ARE MAINTAINED, AIRTEL
SHOULD KEEP ON HAVING A SERVICE LEVEL AGREEMENT WITH ITS TECHNOLOGY PARTNERS.
TALENT ACQUISITION AND RETENTION- AIRTEL SHOULD FIND NEW WAYS TO HIRE TALENTED
INDIVIDUALS AS WELL AS MAKE SURE THAT POACHING DO NOT HAPPEN
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

THANK YOU