Ringing in the gains

Manoj Kohli, CEO & Joint MD, Bharti Airtel, is upbeat when we catch up with him on a late Friday evening in February. “We are like Sachin Tendulkar in batting. Quarter after quarter, we improve on efficiency and productivity,” he asserts. Indeed, despite intense competition and the economic slowdown, his company has been able to post strong growth results.

In the October-December period, Bharti Airtel’s top line surged by 38 per cent year on year. The Mobile Services unit remained the key growth driver, clocking an impressive 41.5 per cent surge. What’s more, as has been the case for the past several quarters, Bharti Airtel’s mobile subscriber base continued to soar. Bharti recorded net subscriber additions of over 8 million for the second consecutive quarter and increased its market share by one percentage point to 24.7 per cent. Gaining market share—that too without eroding profit margins— in a downturn is a classic winning strategy.

 “We have a fundamental work ethos that doesn’t change,” says Kohli. “We reward hard work and innovation. This has ensured a consistent and well thought-out network expansion plan, which has been chiefly responsible for Bharti improving market share.” Bharti has expanded its network across the country methodically. After tapping the high-potential metros first, the company has moved further down the pyramid into other circles. Its network now covers approximately 79 per cent of the country’s population (it was 68 per cent at the end of the previous year’s third quarter). Sunil Bharti Mittal, Chairman & Managing Director, Bharti Airtel, put things in perspective after declaring the third quarter results. “Bharti’s strategy of extensive roll-out ahead of competition, especially in new villages, has yielded rich dividends,” Mittal pointed out.

Compounded growth of Bharti’s subscriber base has averaged nearly 13 per cent over the past four quarters; the figure for compounded revenue growth over the same period is a little over 10 per cent. Says Harit Shah, an Equity Analyst at Angel Broking: “These numbers reflect an impressive scaling up of the business and network expansion across the country.” Bharti feels its extensive network will help ward off the impact of a slowing economy. What helps is that almost half of the incremental users being added to its network now are rural. Says Kohli: The rural maket has not been hit by the downturn.

Why Bharti is a winner Expanding beyond mobility—long distance connectivity, besides DTH and IPTV Growing presence in rural India driving subscriber growth Well thought-out network expansion plan Low debt-equity ratio

Agricultural output has been good recently and rural income is growing. This will mean an increasing spend on telecom services.” A challenge, however, is how the company will manage the competitive intensity in the sector, which is among the highest in the world and is leading to a consistent fall in realisations. Reliance Communication’s recent aggressive pricing strategy in GSM services—it offered lifetime pre-paid for only Rs 25 and free talk-time worth Rs 900 spread over three months—is a case in point. Says Sanjay Gupta, Chief Marketing Officer, Bharti Airtel: “We are not looking to get into a price war. We believe our superior products and services give us an edge over competition.” Bharti has committed $3.5 billion as capital expenditure for mobile services and infrastructure for the next financial year. It’s in pursuit of a larger ambition of becoming a global one-stop shop for all communication requirements.

“Unmatched” broadband (8 Mbps speed which is being upgraded to 16) in 100 cities, will be a key part of its future initiatives. On that will ride its IPTV plans—the company recently became the first private player to offer the service in the country. It has already made a foray into DTH with an all-India offering. Says Kohli: “We are pursuing a three-screen strategy. Airtel should be on mobile, PC and TV.” Then, it is expanding as a long-distance carrier. Also, over the next two years, Airtel will be laying five more submarine cables for international access. “The next big growth after mobility will come from these businesses,” says Kohli.