Bharti follows bold strategy for growth - Company Business and Marketing

CommunicationsWeek International, May 8, 2000 by Aparna Achar

India's first private operator to make cellular profits has an aggressive strategy in all areas of fixed and wireless telecoms.

Indian telecoms company Bharti Enterprises is undertaking a bold expansion through a series of acquisitions, new network build and forays into the international arena. In so doing the New Delhi-based company is aiming to become a force to compete with the government-run Department of Telecommunications (DoT) and state-owned Mahanagar Telephone Nigam Ltd. (MTNL).

"We would like to become a customer-driven one-stop-shop for a range of telecoms services, including fixed-line networks, mobile, Internet access [and] VSATs [very small aperture terminals]," said group chairman and managing director, Sunil Mittal.

Bharti started out in the Indian telecoms market offering cellular phone services in Delhi in 1992. Its mobile division, Bharti Cellular, is the first private operator to make operational profits in the capital intensive mobile phone business in India, making a net profit of around 165.8 million rupees (US$3.8 million) in the last financial year (1998-99), and its Airtel brand, operating in Delhi and the state of Himachal Pradesh, now has more than 175,000 customers.

"For most of India's private operators, telecoms is one of their many business interests, but for Bharti it is the only one," said Mahesh Uppal, a New Delhi-based independent telecoms consultant.

This focused approach and some aggressive marketing have helped it grow its user base, According to Mittal the company is adding "about 10,000 cellphone subscribers per month in Delhi."

Sanjay Kapur, chief operating officer of Bharti Cellular Ltd., said Airtel is offering Web-based short messaging services--such as e-mail alerts and news--and has linked up with financial institutions ICICI Ltd. and Housing Development Finance Corporation Ltd. to offer banking services over its mobile phones.

Meanwhile parent company Bharti Enterprises has been raising funds for acquisitions by selling equity stakes in its holding companies--including Bharti Televentures, which has stakes in the cellular interests, and Bharti Telespatial, the holding company for Bharti's foray into Internet access and VSAT services-to strategic investors, including Intel Corp., BT, Telecom Italia and Warbur Pincus.

The funds have enabled Bharti Cellular to make a strategic entry into southern India. Last December it acquired an 18% stake in JT Mobile (JTM) for Rs4 billion (US$93 million), and a 51% stake in Skycell for Rs1.2 billion.

Now with a combined subscriber strength of around 245,000, Bharti is closing in on India's largest cellular operator, BPL Mobile, which has some 267,000 subscribers.

According to the Cellular Operators Association of India (COAI), the total number of subscribers in India is currently 1.6 million.

"Bharti's buyout of stakes in JTM and Skycell is a vote of confidence in the [government's] new telecom policy, but it has to turn its purchases into profitable businesses," said T.H. Chowdhry, director, Centre for Telecom Management & Studies, in Hyderabad. "The company is moving in the right direction and will be a real competitor to DOT/MTNL," he added.

With these acquisitions the company's fixed and cellular footprint extends from north and central India to south India and would give the company a major competitive edge for operating national long-distance services.

To this end, Bharti is laying around 18,000 kilometers of optical fiber network and leasing more from infrastructure providers. The first phase to lay some 3,800 kilometers of fiber will begin this month.

The project is scheduled to be completed by June 2001, and the total cost will be around Rs2O billion (US$465 million).

Long-distance building

The domestic fixed-line long-distance market, currently monopolized by the DoT, is scheduled to be opened to competition in the near future. The government has yet to take a decision on the timing, but analysts agree that licenses will be given to operators for basic inter-state services by the end of the year.

Meanwhile, VSNL has the monopoly on international long-distance services until 2001.

Bharti started offering fixed-line network services in the state of Madhya Pradesh in 1998, competing with state-owned DoT, and has already garnered around 70,000 subscribers, It is the first Indian private operator to offer alternative services in the state, and in many other states the DoT remains the sole provider, with the 1999 telecoms policy to establish competition still not fully implemented. Although licenses have been issued in 7 of the 22 states in India, not all the private operators have begun offering fixed-line services.

Bharti was also the first Indian company to offer telecoms services abroad. In October 1999 it was awarded a license to provide a range of domestic and international mobile, fixed and satellite services in the Seychelles, through subsidiary Bharti Global. It aggressively positioned its tariffs 50% lower than those of competitor Cable and Wireless plc, of London, forcing it to reduce its cellphone tariffs.