Bharti Airtel: Business Model
About Bharti Airtel:
Bharti Airtel is the largest wireless service provider in the country, based on the number of customers as of March 31, 2010. After Zain acquisition, it has become one of the five largest mobile operators in the world. The combined entity has 180 million customers, $12.4 billion in combined revenues, and $4.7 billion in EBIDTA. Along with India, It has presence in Sri Lanka, Bangladesh and 15 African countries now.
Bharti Airtel offers an integrated suite of telecom solutions to enterprise customers, in addition to providing long distance connectivity both nationally and internationally. It also offers DTH, IPTV Services and broadband services. All these services are rendered under a unified brand “Airtel”.
Innovative Business Model:
Bharti Airtel is globally well known as the telecom operator who radically changed the business model in Telecom sector. In 2003, it implemented the unique business model by outsourcing not only Information Technology services but also entire network operations to more capable players and made them strategic partners in own business.
Scenario and drivers for innovation:
Telecom is capital intensive, competitive and highly regulated industry. Players with deep pockets only can exist in this sector. On the other hand, the Indian market is very large in size but with very limited ability to spend. Indian consumers need to be serviced with very affordable prices which are considerably lower than global prices. It was very difficult for Bharti Airtel to realize viable business in such scenario with existing business models.
In the year 2002, the stormy entry of big player like Reliance Infocomm with newer technology CDMA (as against GSM used by Airtel) was threatening Bharti Airtel, who was yet to register quarterly profits.
In order to confront bigger players, and as a matter of survival, Bharti Airtel decided to go for the market share. It was very important to offer low price services to penetrate the Indian market. In the words of Manoj Kohli, currently CEO (International) and Joint MD – “On December 6, 2002, we had a meeting in Jaipur during which we decided that if we had to offer the lowest prices in the world, then we needed to have the lowest cost in the world. So we said, okay, let’s now modify the business model according to the needs of the customer”.
To lower operational costs and still provide high quality services, Bharti Airtel designed and executed its innovative five-part outsourcing strategy and a new low cost business model was introduced to telecom sector.
1. Outsource entire network to Ericsson and Nokia.
Bharti Airtel bought capacity from service providers in terms of capacity (Erlang is the measurement of traffic) and made the payments as per utilization. This was ‘pay per use’ model as against conventional fee-based services. This was completely innovative- it was the first time in the world- and it took about six to eight months to convince the Ericsson and Nokia senior management, especially their CFOs.
2. Outsourcing IT operations.
Bharti Airtel outsourced IT operations to IBM. Today, IBM deploys hardware, software, services, and people, and they take some percentage of Bharti Airtel’s top line, which is the across revenues, every quarter.
3. Outsourcing the call centers.
The volume of customer calls was huge so Bharti Airtel decided to go to the world’s best call centers - BPO companies in India- and outsourced call center operations to these BPO companies.
4. Outsourcing tower infrastructure as separate companies.
Telecom companies need huge capital and operational cost to develop infrastructure, also called as passive infrastructure. Bharti Airtel had about 80,000 to 85,000 towers in the country, and was building many more for future. Bharti Airtel decided to use shared tower infrastructure and created separate tower companies. Now it has two of...
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