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Bharti Tele Ventures Case Study

 

was still around 20.5% as compared to the world average of 50%, which was amongst the lowest inthe world and was a clear indicator of the huge potential for further growth

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.The two technologies used for mobile services in India are Global System for Mobiles (GSM) andCode Division Multiple Access (CDMA)

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. GSM and CDMA technologies were not currentlycompatible or interchangeable with each other and required separate types of wireless phones andnetwork infrastructure. In 2008, all the major players in the industry were aggressively investing ininfrastructure, primarily in network upgradation and rollout.

Competitors

The Indian mobile telephony market was highly competitive and the top five players Bharti, RelianceCommunications, Vodafone, BSNL-MTNL and Tata Tele controlled 83% market share. The other  players such as Idea cellular (11 circles), Aircel (9 circles) Spice telecom (2 circles) had lined up plansto expand their presence and become a pan India operator to get a sizeable share of the growingmarket. The growth in both the GSM and the CDMA segments was phenomenal and the total number of GSM subscribers had reached 121.43 million by March 2007. Bharti Airtel was holding a 30.6%share of this market with 37.1 million customers at the end of March 2007, followed by BharatSanchar Nigam Ltd (BSNL) with 27.4 million (22.6% market share). Vodafone’s Hutch-Essar had26.4 million subscribers (21.8%), while Idea had 14 million customers (11.5%). Exhibits 1a, 1a & 1dgives industry statistics.

 Reliance Communications

, the flagship company of the Anil Dhirubhai Ambani Group (ADAG) of companies, was the second largest wireless telecom operator in the Indian telecom industry with presence in both CDMA and GSM segments and also the largest provider of long distance carrier services. It was the leading player in the CDMA market and had a subscriber base of 34.8mn and amarket share of 17.7% with a pan India CDMA and 8 circles GSM presence. The company ownedand operated FLAG telecom, which owned 76,500 km of submarine cable system, the largestsubmarine cable system in the world. There was a stiff competition between RelianceCommunications and Bharti Airtel for market leadership and in March 2006, Bharti Airtel waslagging behind Reliance Communications in terms of market share. But post FY06, Bharti had notonly gained a leadership position in the Indian mobile industry, but also consistently increased itsmarket share, consequently widening the gap between itself and Reliance Communications.

 Bharat Sanchar Nigam Ltd.

was the second largest GSM operator in the country. It was formed outof the former DoT in October 2000 as a public sector unit. It was the World's 7th largestTelecommunications Company providing comprehensive range of telecom services in Indiacomprising Wireline, CDMA mobile, GSM Mobile, Internet, Broadband, Carrier service, MPLS-VPN, VSAT, VoIP services, IN Services etc. MTNL holds the license to provide cellular services inDelhi and Mumbai, and commenced its cellular services during February 2001.

Vodafone Group Plc

was the world's leading mobile telecommunications company, with a significant presence in Europe, the Middle East, Africa, Asia Pacific and the United States through theCompany's subsidiary undertakings, joint ventures, associated undertakings and investments. It waskeen on entering the Indian mobile telephony market and ventured into it through its acquisition of interest in Bharti Airtel. Later, it acquired Hutch, one of the top players in the Indian GSM segment to

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http://www.cellular-news.com/story/28809.php; and http://investing.reuters.co.uk/news/articleinvesting.aspx?type=media&storyID=nL29172095&pageNumber=1&imageid=&cap=&sz=13&WTModLoc=InvArt-C1-ArticlePage1 accessed on 7 Feb, 2008.

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GSM works by dividing a single radio frequency into multiple time slots so it can support multiple calls.CDMA technology works by encoding individual conversations into a series of digits and then spreading thetransmission of the sequence over available spectrum.

NEW DELHI, India - 26 Mar 2004: Bharti Tele-Ventures Ltd., India's leading telecommunications conglomerate, and IBM India today announced a long term on demand business transformation agreement. This agreement will enable Bharti Tele-Ventures to deliver world-class telecommunication services to the Indian market and support its business growth.

The comprehensive agreement between Bharti Tele-Ventures and IBM India encompasses three components:

1. A first-of-a-kind initiative to consolidate, transform and manage comprehensive Information Technology (IT) infrastructure and applications.

2. The joint development and marketing of IT and telecommunications solutions and services for India.

3. Bharti Tele-Ventures to be a preferred supplier of telecommunications services to IBM India.

Announcing the agreement, Mr. Sunil Bharti Mittal, Chairman and Managing Director, Bharti Enterprises, said, "The partnership with IBM is set to redefine the existing paradigms in the telecommunication industry. It will add unparalleled value to Bharti at multiple levels, be it for our customers, employees and shareholders. The agreement demonstrates our strategic intent to create a globally admired telecommunication company. With predictable IT spend, improved cash flow and optimized use of technology resources, the agreement with IBM will enhance Bharti Tele-Ventures' shareholder value."

Ms. Colleen Arnold, General Manager, IBM Communications Sector, Worldwide, said, "We believe the next big thing in technology isn't technology itself, but a better way to make it work. With this on demand agreement, Bharti Tele-Ventures will be able to take advantage of IBM's innovative technology coupled with our business expertise in working with telecommunication service providers worldwide. We will enable Bharti Tele-Ventures to adapt to changing market conditions and increase speed-to-market of new and innovative offerings for customers."

Telecom solutions powered by a world class IT architecture
Bharti currently has a leading presence in all the areas of telecommunication services and plans to expand its footprint in India, thereby increasing its IT and connectivity needs. Bharti Tele-Ventures' collaboration with IBM will draw an IT roadmap with a state-of-the-art infrastructure to support its existing and new business operations. The result is a strategic, on demand business transformation agreement capable of servicing the needs of millions of customers.

This business transformation will involve outsourcing Bharti Tele-Ventures' hardware, software and IT services requirements to IBM. This includes all customer-facing IT applications, such as billing, customer relationship management (CRM) and data warehousing. In addition, IBM will service Bharti Tele-Ventures' internal-facing applications, for example, intranet, email and online collaboration. On the infrastructure front, IBM will consolidate Bharti Tele-Ventures' data centers, IT help desks, and enhance its disaster recovery capabilities.

IBM will deploy an open standard-based framework, Service Provider Delivery Environment (SPDE), allowing Bharti Tele-Ventures the flexibility to introduce the latest in voice, data and content-based services to its customers. This superior IT architecture will allow Bharti Tele-Ventures to adapt to rapid changes in technology, as well as provide a greater level of freedom and flexibility to enhance customer experience.

The agreement specifies that the payment made to IBM India will be linked to the percentage of revenues generated by Bharti Tele-Ventures and pre-defined service-level agreements. Based on estimates agreed between Bharti and IBM, the total deal for the first five years is estimated to be in the range of US$250-US$275million, the total deal, over a 10-year period, is likely to be in the range of US$700-US$750million. The percentage-linked revenue payment is modelled to decrease with the increase in Bharti Tele-Ventures' revenues.

Under the provisions of the agreement, employees currently involved in the operation and maintenance of the IT infrastructure of Bharti will be transferred to IBM.

Joint go-to-market services
Bharti Tele-Ventures and IBM will pursue joint go-to-market opportunities and avenues for selling value-based services in the areas of communications, IT services and convergence. These will bring together Bharti Tele-Ventures' leading-edge network and integrated communications service-provider capabilities with IBM's unparalleled innovation and technology leadership. The joint go-to-market initiative would thus provide the benefits of seamless communication and computing to corporate and enterprise customers, such as e-business hosting services and business continuity and recovery services. The initiative will also introduce application services to the small business and mass market segments including online content and managed e-mails. The collaboration is backed by resource investments from both parties.

Bharti identified as a preferred supplier of telecommunication services to IBM India
IBM India has identified Bharti Tele-Ventures as a preferred supplier of telecommunications services, such as bandwidth, satellite connectivity, last-mile wireless and wireline access, and national and international long distance communication solutions. This relationship will allow IBM to leverage Bharti's unparalleled telecommunications capabilities across wireless and wireline services.