Airtel zain acquisition rishika
- 1. Presented By : Prathamesh Pande Priyanshi Srivastav Rishika Ghosh Rohit Tiwari Rohit Thakur Roinak Sarkar Satyam Singh
- 2. Vision :- Hunger to win customers for life. To be the most loved brand in the daily lives of Africans by 2015 by providing life enriching products and services. Mission :- To enrich the lives of our customers. obsession is to win customers for life through an exceptional experience. To make every life we touch better through the transformative power of communication.
- 3. WHY AFRICA? Attractive growing market after Asia. Mobile user increase at 20% every year. Low penetration. ARPU was better than India. Tariff was around 10 cent a minute. Less competition compared to India. To Compete with larger, global Telcos: UK-based Plc, Norway-based Telenor ASA. WHY ZAIN? 2nd largest in Africa after MTN Group. Operations in 15 countries in Africa 42 million subscribers in Africa Less per subscriber cost compared to MTN Full control over assets in Africa over the ‘Only board control’ in MTN
- 4. How vision aligned to acquisition? Airtel’s vision of building a world-class multinational. With this acquisition, Bharti Airtel will be transformed into a truly global telecom company with operations across 18 countries fulfilling our vision Zain has operations in 17 African countries and Bharti has acquired all, but those in Sudan and Morocco. The African business would widen Bharti's reach, which was hitherto restricted to Asia and Indian Ocean region with businesses in Sri Lanka, Bangladesh and Seychelles.
- 5. SWOT Analysis Strength- Free cash flow It had SPV’s around the world which helped for LBO in Africa The capex in the Indian operations had started to decline and hence the free cash flow was likely to increase even further in future High Brand Equity Zain had presence in 15 countries in Africa. Weakness- Zain had not invested sufficiently in key things like brand and billing Cultural misfit Poor infrastructure
- 6. Opportunity- Penetration level in Africa- 33% ARPU- $3-$25 (Africa) ; India- $1.5 Tariff was high in Africa(10 cent/ min) as compared to India(1 cent/min) Growth of mobile phone user base= 20% Some countries started using 3G Threat- Volatile currency Economy weakness with crude fall Tough competitive and regulatory environment Africa EBITDA is near all time low Corruption and political instability
- 7. Financial Position BEFORE ACQUISI TION TARGET ( by end of March 2013 Q4) ACTUALL Y ACHIEVE D SUBSCR IBER 42 mn 100 mn 63.4 mn REVENU E $3.6bn $5 bn $3.76 bn Failed target because- • Lack in understanding markets • High Cost • Experiment with tariff cuts • Failed strategy of minute factory model • Human Resource • Poor infrastructure • Integration difficult
- 9. STRATEGIC GOALS Marketing Target- • To leverage the now-famous minute factory model which will bring down the cost. • To tap into the 3G technology services which was still a very new concept in India around 2008 by providing 3G smartphones called “Airtel Red”. • Dynamic Sim Allocation (DSA) was launched in Nigeria and provides Airtel the ability to supply market with blank sim cards. • Airtel started digital drive in the form of App store, micro insurance, internet discovery portal, video entertainment store, etc. to promote their network in Africa. Financial Target- • To acquire a target subscriber of 100 Mn by March 2013. • To acquire $5 Bn in revenue in less than 3 years of its acquisition.
- 10. Technology Target- • To get into the 3G technology business to offer faster data services. • To enter into mobile broadband technology in Africa. • To extend Airtel Money schemes in Africa. HR Target- • To recruit and retain a diverse workforce to meet the needs of the organization. • To outsource work force to retain the same quality of work. • To align the performance with the goal of the organisation.
- 11. Strategies Devised Operational Strategy-Minute Factory Model Financing Strategically Managed Potentially apply Matchbox Strategy
- 15. 17.39 22.05 24.05 21.04 21.91 10.17 5.96 2.83 3.23 5.63 0.68 0.78 0.72 0.68 0.63 0.55 0.47 0.5 0.49 0.49 11.75 17.22 17.3 14.31 13.85 5.89 2.81 1.4 1.58 2.74 2.69 2.43 2.18 2.26 1.94 3 3.1 3.33 3.07 3.16 33.17 43.57 39.21 31.88 28.78 14.25 8.57 4.51 5.04 8.52 20.22 28.3 26.66 21.7 20.95 9.35 5.87 1.87 2.14 5.8 0 20 40 60 80 100 120 140 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Bharti Airtel Ltd Net Margin Asset Turnover ROA Financial Leverge ROE ROIC Financial Analysis
- 16. Interpretation of Financial Ratios
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- 18. Was Strategy Successful? Successful in Long Term Penetration is just 33% so the customer base can be expanded. Higher ARPU (3$ as compared to 1.25$ in India) which can lead to profitability 5th largest service provider in terms of customer base then today ranks 3rd . African telecom are improving in network infrastructure. Once achieved can yield fruitful results.
- 19. Other factors than Zain acquisition The following other factors lead to dip in profitability for Airtel 3G Spectrum Auction Investment in Network Infrastructure to launch 3G services and initial plans for 4G as less Highly Competitive Market Introduction of new competitor in India like NTT Docomo and Tata Teleservices’s Tata Docomo Introduced pay per second - lowest pulse to measure Price war Revenue dip
- 20. Major Strategies in 2014 Introduction of four Strategic Business Unit Selling towers to generate revenue Marketing strategies 1. Elevating Customer Experience 2. Digital Drive 3. Product Innovation
- 21. Market Strategies Elevating Customer Experience Self care Customer engagement Airtel Specialized customer care service Airtel Zone Dynamic SIM allocation Digital Drive App store Micro Insurance Internet Discovery Portal Wynk Video Entertainment Store Airtel Red Product Innovation UnlimiNET Yatosha Wiceceka Smart Share Talk ChawAnkasa
Editor's Notes
- #13: The beauty of the Minutes Factory is that it can add small capacities fairly rapidly and economically. The key to this is an array of partnerships that “manufacture” the minutes. The speed comes because each partner is a specialist and can do its bit better than anyone. Financially this works because Bharti doesn’t have to invest in equipment and towers in advance. Read more: http://forbesindia.com/article/cross-border/bhartis-minutes-factory-moves-to-africa/12502/1#ixzz3uPZyZAt4
- #14: Bharti Airtel‟s decision to opt for the SPV route makes a lot of sense since it will not impact the parent‟s balance sheet in the near term At the end of the quarter to December 2009, Bharti Airtel‟s debt-equity ratio was 0.4 and this would have shot up to 1.2, had Bharti Airtel taken the loan on its books.38 That would have limited Bharti Airtel‟s ability to raise funds in the future for expansion into new third generation technologies through participation in the 3G spectrum allocation. Hence, Bharti Airtel has structured the acquisition strategically and routed it through the SPVs keeping Bharti Airtel‟s standalone financials intact. However, that does not absolve Bharti Airtel from overall responsibility of a borrower since it has provided a guarantee to bankers for the loan that will be in the SPV‟s books.
- #15: Indian mobile service providers including Bharti Airtel have adopted a „matchbox strategy‟ of distribution, which essentially means any shop that sells matches should also sell mobile SIM cards and top-up vouchers, helping build a vast dealer network.