Bharti Tele-Ventures Limited

Qutab Ambience (at Qutab Minar)
Mehrauli Road
New Delhi—110 030
India
Telephone: +91 11 5166 6000
Fax: +91 11 5166 6011/12
Web site: http://www.bhartitele.com

Public Company
Incorporated: 1995
Employees: 5,189
Sales: INR 78.76 billion ($1.8 billion) (2005)
Stock Exchanges: National Stock Exchange of India
Ticker Symbol: 532454
NAIC: 517212 Cellular and Other Wireless Telecommunications; 517110 Wired Telecommunications Carriers

Bharti Tele-Ventures Limited, part of the Bharti Enterprises group, is India's leading wireless telecommunications provider, with a 25 percent share of the national market, and market share of as much as 50 percent or more in the group's target market "circles." Bharti Tele-Ventures is also one of the world's fastest-growing mobile telephone companies, in part due to the rapid growth of the Indian cellular market as a whole. The Indian mobile telephone market is expected to top 250 million subscribers before 2010, rising from just more than nine million in the early years of the 2000s. Bharti itself has grown from an initial subscriber base of less than 120,000 in the mid-1990s to more than 11.4 million by 2005. The company owes much of its success to its commitment to offering cutting-edge services, while maintaining low pricing policies, an important component in generally impoverished India. The group's GSM-based mobile telecommunications operations span 23 of India's mobile "circles," typically encompassing both major urban and outlying areas. In 2005, the company completed the national rollout of its network. Bharti groups its mobile telecommunications operations under the Mobility Leaders division. Through its Infotel Leaders business division, Bharti also has entered the fixed-line telephony market, building its own 12,000-kilometer fiber-optic network for selected markets; the company also provides national long distance and broadband services. Most of Bharti's telecommunications services operate under the Airtel brand. Bharti is listed on the Mumbai Stock Exchange and the National Stock Exchange of India, and is led by founder and Chairman Sunil Mitall. In 2005, Bharti's sales topped INR 78.76 billion ($1.8 billion).

From Bicycle Parts to Cellular Phones in the 1990s

Sunil Mittal was an unlikely candidate to become the leader of India's mobile telephone sector. Mittal started his business career in 1976 with the opening of a small factory manufacturing bicycle crankshafts in Ludhiana, in the northwest of Punjab. Mittal, then just 18, started the business with only $400; before long, the factory employed 25 workers. To gain greater scale, and access to bank credit, Mittal added other manufacturing operations, such as hosiery and household utensils.

As his manufacturing capacity grew, Mittal continued exploring other business opportunities. His attention turned to the import-export sector. By the end of the 1970s, Mittal had moved to Delhi and established a new business importing portable generators from Japan, among other items. The generator business flourished, adding operations in Mumbai as well, in large part because of Mittal's ability to navigate the often tortuous windings of Indian regulations governing the sector. Yet in the early 1980s, the government, seeking to develop homegrown industries, placed a ban on the import of a number of items, including portable generators.

The ban, however, encouraged Mittal, joined by his brothers, to explore new business opportunities, setting the stage for his greatest success. Into the early 1980s, India's telephone system still relied on the rotary dial telephone. The development of new types of telephone services, however, demanded the use of push-button telephones. In 1983, Mittal reached an agreement with Germany's Siemens to manufacture the company's push-button telephone models for the Indian market.

Mittal became the first in India to offer push-button telephones, establishing the basis of Bharti Enterprises. This first-mover advantage allowed Mittal to expand his manufacturing capacity elsewhere in the telecommunications market. By the early 1990s, Mittal also had launched the country's first fax machines and its first cordless telephones.

In the early 1980s, Mittal had continued to explore other areas of operations; in 1982, for example, he set up Bharti Healthcare in order to produce capsules for medicines. (The word Bharti came from the Hindi word for "Indian.") By the end of the 1980s, however, Bharti's focus had narrowed to the telecommunications market. As Mittal told Rediff: "From 1986 to 1992, we manufactured telephone instruments, fax machines and cordless telephones. There has been a method to this growth. We didn't stray even then. No steel mills, no paper mills, no mini-cement plants, cinema halls or hotels—all these opportunities did come to us. Every entrepreneur was getting into these things. But we single-mindedly concentrated on telecom."

At the beginning of the 1990s, the Indian government began preparing for the launch of a new generation of wireless telecommunications standards. Bharti quickly recognized the potential for the development of products such as pagers and cellular telephones. Yet the company's interest now reached beyond manufacturing, and instead focused on becoming a telecommunications services provider. As part of its own preparations, Bharti requested the results of a survey from Feedback Ventures determining the market potential for cellular phone services in the Delhi "circle," as the Indian licensing regions were called.

The results were less than encouraging. As Mittal recalled to Rediff: "It said that there would be a market for 5,000 cellular phones in Delhi. That was one more confirmation that these reports were silly and nonsensical, so we tore it up and threw it away. Even before the project was up, I was sure that on the first day of booking, we would have 5,000 connections, leave alone the market being that size!"

The survey nonetheless succeeded in dissuading a number of larger groups from competing for the Delhi license. At the same time, stipulations from the government required that any bids be made by groups with prior telecom experience, which effectively eliminated another class of competitors. Bharti's background in telephone and fax machine manufacturing, however, provided it with the experience sufficient to meet the requirement. Mittal quickly lined up an equipment and support agreement with France's Vivendi and launched its own bid.

The bid from the relatively minor company raised eyebrows, and few gave the company any hope of succeeding. Indeed, even Vivendi developed cold feet, and at the last minute decided to switch its backing to the larger Modi group. Yet Mittal managed to convince Vivendi to stick to their agreement, and Bharti won the Delhi license.

Building a Mobile Telephone Network in the Late 1990s

Bharti began installing its network, a process completed in 1995. With Vivendi's backing, the group was able to convince Ericsson to supply the equipment to build its network on credit. Time International reported that Mittal told Ericsson that Bharti would pay "when the customers are happy." In that year, the company founded a subsidiary for its cellular telephone business, called Bharti Cellular, which was placed under the holding company, Bharti Tele-Ventures Limited. Bharti Cellular launched its service, branded Airtel, in Delhi that year. The company immediately began bidding for other markets, adding Himachal Pradesh in 1996.

Bharti's growth was rapid and, in an industry requiring high investment, the company was among the fastest, and very few, in the country to enter profitability. A big part of the group's success in this matter was its willingness to break down traditional subscription-based services. Instead, Bharti emphasized a prepaid card-based model as well. The company then began selling its prepaid cards in a large variety of venues, from grocery stores and other shops, and even to street peddlers. Shopkeepers were given free phone calls and other gifts in exchange for promoting Bharti's service over rivals' networks.

The model worked, and Bharti's growth was rapid. By the end of the 1990s, the company had succeeded in attracting more than 100,000 subscribers, a significant number given the slow pace of the cellular phone industry as a whole in the country.

Bharti began branching out in the 1990s as well. In 1997, the company won a license for providing fixed-line telephone services in Madhya Pradesh. The company also joined with British Telecom, which acquired a 21 percent stake in Bharti Cellular, to launch new services, including Internet services, in 1998. In that year, also, Bharti became the first private company in India to launch fixed-line services.

Bharti was one of the rare profitable cellular phone companies in India in the late 1990s. By then, a number of the country's 30 or so cellular phone operators had begun to struggle. Bharti once again rose to the opportunity, and in 1999, the company launched a series of significant acquisitions. The first of these came with the purchase of more than 63 percent of SC Cellular Holdings, which in turn controlled nearly two-thirds of JT Mobiles. Renamed as Bharti Mobile, the acquisition enabled the company to extend its reach into the Karnataka and Andhra Pradesh circles.

In 2000, Bharti moved again, buying up 40.5 percent of Skycell Communications, which operated under a license for the Chennai circle. That company was renamed as Bharti Mobinet. That year, the company also acquired full control of Bharti Mobile.

Company Perspectives:

Mission: To be globally admired for telecom services that delight customers.

Into the 2000s, Bharti increasingly moved toward its goal of national coverage. A major step forward came in 2001 with the purchase of Spice Cell, which provided services to the highly prized Calcutta circle. That service was then rebranded as Bharti Mobitel. At the same time, Bharti increased its control of Bharti Mobinet to more than 95 percent. The company also successfully bid for cellular licenses to enter eight new circles that year. Bharti also was developing its fixed-line business, adding licenses for Haryana, Delhi, Tamil Nadu, and Karnataka in 2001. The company then began rolling out its TouchTel fixed-line service in these markets, starting with Haryana. In addition, Bharti received the right to offer national long distance services, launching IndiaOne.

A large part of Bharti's success had been based on Mittal's ability to raise private investment capital; by the early 2000s, the company had built up a war chest of more than $1.2 billion by bringing in investors such as Singapore Telecommunications and Warburg Pincus. This enabled the company to back its growth through a spending spree; by 2002, the company had spent some $1 billion. That investment had enabled the company to quadruple in size, and to capture the leading share of the Indian mobile telephone market, just as the market was finally beginning to take off in the early 2000s.

Indeed, from just more than nine billion subscribers at the beginning of the decade, the Indian market was expected to grow to as much as 250 million or even more by 2010. Already in the early 2000s, the cellular phone market had begun showing growth rates as high as 80 percent per year.

Bharti prepared for its transformation into a truly national telecommunications provider by merging all of its cellular brands under a single unified brand, AirTel, in 2003. AirTel also continued attracting new subscribers by rolling out a wider and wider range of services, such as free multimedia messaging services, free incoming calls, and voice-mail for prepaid subscribers. As a result, the company's new subscriber rate continued to outpace the industry, topping three million by mid-2003 and more than 12 million by 2005.

Into mid-decade, Bharti continued to expand into new circles. At the end of 2003, the company acquired a stake in Hexacom, which allowed the company to enter the cellular services market in Rajasthan in 2004. By 2005, the company had extended its services to Andaman and Nicobar as well. At the same time, Bharti had been developing its fixed-line services, including a rollout of broadband services over its fixed-line network in 2005.

By mid-2005, Bharti had extended its presence to some 23 circles across India. In August of that year, the company announced a vast expansion effort to be completed by the end of the year, with plans to double its number of base stations to 20,000. The expansion was expected to double the number of towns and cities within the company's network, with a corresponding increase in subscribers. In less than a decade, Bharti had claimed the leading position in the Indian market and was expected by many to become one of the world's largest telecommunications markets before decade's end.

Principal Subsidiaries

Bharti Hexacom Ltd.; Bharti Aquanet Limited; Satcom Broadband Equipment Ltd.; Bharti Broadband Ltd.; Bharti Comtel Ltd.

Principal Competitors

Bharat Sanchar Nigam Ltd.; Mahanagar Telephone Nigam Ltd.; Hughes Software Systems Ltd.; BT India Worldwide Ltd.; BTA Cellcom Ltd.; Videsh Sanchar Nigam Ltd.

Key Dates:

1976:

Sunil Mittal establishes his first business manufacturing bicycle parts in Ludhiana, Punjab.

1983:

Mittal begins manufacturing touch-tone telephones, and later adds fax machines and wireless telephones.

1992:

Mittal wins a bid to build a cellular phone network in Delhi.

1995:

Mittal incorporates the cellular operations as Bharti Tele-Ventures and launches service in Delhi.

1996:

Cellular service is extended to Himachal Pradesh.

1999:

The company acquires control of JT Holdings, extending cellular operations to Karnataka and Andhra Pradesh.

2000:

Bharti acquires control of Skycell Communications, in Chennai.

2001:

The company acquires control of Spice Cell in Calcutta.

2002:

The company goes public on the Mumbai Stock Exchange and National Stock Exchange of India.

2003:

The cellular phone operations are rebranded under the single AirTel brand.

2004:

The company acquires control of Hexacom, entering Rajasthan.

2005:

Bharti extends its cellular network to Andaman and Nicobar; rolls out expansion of its network, doubling its number of base stations.

Further Reading

"Bharti Does Branding, Puts All Under Airtel," Times of India, September 17, 2004.

"Bharti Kicks Off National Long-Distance Telephony," India Business Insight, December 18, 2001.

"Bharti Tele-Ventures," Economic Times, December 6, 2004.

Chandramouli, Rajeesh, "Bharti Tele Keen on US Bourses Listing," Times of India, July 25, 2003.

"A Date with India," Global Telecoms Business, February 2003, p. 14.

Hanssen, Benoit, "Evolutionary Thinking: Managed Capacity Network Solution Allows Bharti to Capitalize on Tremendous Market Growth in India," Global Telecoms Business, November-December 2004, p. 35.

Hibberd, Mike, "Indian Philosophy," Mobile Communications International, May 1, 2005.

"Interview: Sunil Bharti Mittal," Rediff, February 9, 2000.

Kripalani, Manjeet, "Asking the Right Questions," Business Week, August 22, 2005, p. 64.

Schuman, Michael, "Speed Dialing," Time International, December 2, 2002, p. 13.

"Sunil Bharti Mittal, Chairman, Bharti Group," Medianet, 2005.

"Take It Easy, Televentures," India Business Insight, February 3, 2002.

"Why Phones Are Ringing for Sunil Mittal," Business Week, December 27, 1999, p. 21.