Huawei Technologies

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1 Huawei Technologies

2 VOICE FROM OPERATORS Bharti Airtel leading mobile revolution through innovation What is most innovative about Bharti Airtel in my opinion is their business model and how they construct their company. It s quite different from the rest of our industry, recommended by Craig Ehrlich, former Chairman of GSMA. At GSMA Asian Congress in November 2008, Mr. Manoj Kohli, President and CEO of Bharti Airtel delivered a keynote speech themed Leading Mobile Revolution through Innovation, and shared with the industry peers their key to success. By Manoj Kohli, CEO of Bharti Airtel Seizing the huge potential India has the second largest population in the world. In a couple of decades, India will probably surpass China in population. The GDP growth rate, which was around 9% in India has marginally come down to about 7%. This is actually a sustainable growth rate, given the current global financial impact of today. The GDP of India is about USD1 trillion and grows at a rate of about 8% a year. In six years, we can double the GDP to USD2 trillion. The India telecom sector will be a catalyst to the growing economy and continue to show healthy growth both in customers and traffic at a very speedy rate. Inflation has fortunately come down to 6% from a high of over 12%, meaning that there is more and more disposable income coming to the telecom, media, and Internet services from other sectors. Luckily for Bharti Airtel, a zero-debt company, financing is not a problem. We can finance the growth and lead future growth in a very robust way. The mobile penetration is quite low at around 27%, with over 346 million mobile subscribers as of the end of December 2008, among them over 84 million are Airtel (wireless) brand users. Unfortunately, the broadband penetration is as low as 0.42% with over 5.3 million users. The good thing is that now the government is promoting broadband, targeting to reach 20 million broadband subscribers by The broadband revolution is following the mobile revolution and the Indian economy. Clearly, India has deep domestic demand and fantastic potential for growth in the next few years. Key drivers of telecom growth Based on the prediction for the next five years for 1 Win-Win / FEB 2009

3 Bharti Airtel is on a journey of excellence through innovation. This journey definitely has no destination. Other than that Bharti Airtel will continue to be a catalyst to India s economy and an engine for the economic growth. Manoj Kohli, CEO of Bharti Airtel FEB 2009 / Win-Win 2

4 VOICE FROM OPERATORS Under our unique business model, we assume the roles of supervisor, planner, governor and quality control inspector. By partnering with strong global partners, we are able to successfully develop and focus on the core competence. the Indian telecom industry, the wireless subscriber base should grow from around 350 million in 2008 to 500 million in It is safe to say that India is the second largest market after China, but still a very large market with only a 61% projected penetration rate by The wireless revenue could be about USD37 billion in What are the key drivers for growth? The most important thing is an affordable tariff, which is about 1.5 cents/minute. That is why the MOU in India is about 513 minutes a month. Second, incomes are rising, not only in the urban areas, but also in the rural areas. Third, I can remember the handset price at the beginning was USD200. We now have handsets that are USD20. This is definitely a big trigger of growth. Fourth, rural economic prosperity is certainly going up. In India, close to half of the economy is rural, and it is a cash economy. The money doesn t go through banks. We have covered about 400 thousand out of a total of 600 thousand villages. Fifth, the youth segment is going to develop. According to demographic analysis, young people are the highest percentage of the population in India. As many Asian countries are aging, the Indian population is becoming younger. The youth segment is important for all of the telecom operators in India. Finally, new technologies like 3G are going to be launched in India in 2009, providing another very good growth opportunity. The India telecom industry began taking off in During the last few months, we saw over 10 million net added subscribers per month in India. I don t think any other countries in the world have achieved this kind of figure. It clearly shows that operators in India have rolled out the networks very swiftly and rolled out distribution close to customers, including their homes and offices. Innovation-Airtel s key enabler India is the most competitive and a very hard-fought market in the telecom world. There are now about 11 to 12 players in every state. In October 2008, three international brands including NTT DoCoMo, Telenor and Etisalat entered India and heated up the competition. We at Bharti Airtel welcome competition, and believe we can actually become stronger as new competition enters the marketplace. Bharti Airtel continues to lead the market, and our leadership is due to our commitment to affordability for Indian customers. Offering world-class, innovative and world s most affordable tariffs at 1.5 cents/minute, we have achieved more than 33% of the regular GSM market share in India. More than half of our new customers are coming from the villages. Unique business model Innovation was not a choice for us, innovation was a necessity for us. For achieving the lowest costs for the production of minutes in India, we need to have the lowest cost possible. We therefore launched in 2002 a unique business model featuring outsourcing the five big portions of our operations. First, we outsourced our network to leading international vendors. In the network partner selection, we began with a very innovative way of buying networks since we started in At that time, we were buying about 2,000 black boxes. We didn t understand many of those black boxes as we are not technologists. But we understood customers, people, and the market. So we started buying lines and capacity from our partners. We paid the partners by every user capacity in terms of lines. We also had 3 Win-Win / FEB 2009

5 managed services managed by vendors. Today, I can say that those vendors have given us the power to rollout up to 3,000 towers per month. I think this innovative business model has been very successful. IT outsourcing is more innovative than network. IT is the backbone for any telecom company in the world, whether it is the billing system, IN system, or CRM system. So we went to IBM in 2003 and let them run our IT systems end to end. Now, all hardware, software, and services are handled by the IBM employees who work for Bharti Airtel. IBM tailored 65 platforms for us and we pay IBM a percentage of our top line and revenue. There is no linkage with how many new services, new software, or new hardware has come online in a month. It is just simply linked to the top line and we pay this amount to IBM. There is a short case project for IBM globally. Based on the project, IBM is getting many new contracts in the telecom sector across the globe. For customer service and call centers, we have five to six partners who are high quality global partners. We know that if every customer calls us each month, we will have 80 million calls a month. So we need very large capacity call centers. 70% of our present call centers are outsourced to our partners who are very high-quality global partners. 30% of the present call centers are being outsourced now and will be completed within the next six months or so. These partners focus on the output factor of the customers. If the customer satisfaction goes up, these partners get more fees from us. If it goes down, these partners have to suffer. By completely outsourcing the entire distribution of the company, we have built up the strongest distribution force in India. We have thousands of distributors and more than one million retail points in India. Our target is that by 2010, the number of retail points will reach close to 2 million. There is a match box distribution strategy in India wherever a match is sold, Bharti Airtel s services will also be sold. This will make our distribution the deepest in the world. We see that local retailer and local outlets are the best way to promote Bharti Airtel. Hence, we do not own the distribution of the company, including large showrooms with our exclusive Airtel Relationship Centres and other small showrooms that are not exclusively Airtel. Last but not least, the passive infrastructure is all open for sharing with other operators. I think it is very important that we collaborate when the competitive intensity is at a cut-throat level in India. With more operators sharing the infrastructure, the cost of our network operation actually is coming down steadily. A clear example is Indus Towers, where Bharti Airtel, Vodafone and Idea Cellular are the joint venture partners. I think in the coming few years, the average tendency will be that one tower is shared by 2-3 operators. In conclusion, under this unique business model, Bharti Airtel has assumed the roles of supervisor, planner, About Bharti Airtel Limited Bharti Airtel Limited, a group company of Bharti Enterprises, is Asia s leading integrated telecom services provider with operations in India and Sri Lanka and has an aggregate of over 88 million customers as at the end of December Bharti Airtel Limited has been voted as India s most innovative company, in a survey conducted by The Wall Street Journal. FEB 2009 / Win-Win 4

6 VOICE FROM OPERATORS Bharti Airtel continues to lead the market, and our leadership is due to our commitment to affordability for Indian customers. Offering worldclass, innovative and world s most affordable tariffs at 1.5 cents/minute, we have achieved more than 33% of the regular GSM market share in India. governor and quality control inspector. By partnering with strong global partners, Bharti Airtel is able to successfully develop and focus on the core competence. Product innovation Production innovation is a delightful journey which has allowed Bharti Airtel to win the hearts of millions of Indian customers. Bharti Airtel comes out with new ideas and new products every month. Although some new customers don t use them, customers like to feel that the brand image of Bharti Airtel is innovative and really brings new ideas every day. Examples include the Micro Prepaid. We started it in 2004, and now all our million plus retailers offer this service. Through e-charging, low-educated or even illiterate retailers can use e-charging instead of a paper recharge card. This is a very good innovation that customers are delighted with because they can buy talk-time near their offices or at home. Retailers are happy because they don t have to keep a large inventory on hand. Money is all kept on the phone, which is fantastic. More than USD5 billion in transactions happen on this system every year. Another example is Lifetime Prepaid which we launched about two-and-half years ago. With the Easy Lifetime, a customer can stay mobile for his entire life by paying just about USD2 per month. Easy Lifetime is an unprecedented move in the Indian telecom sector. If you ask an Indian customer today which product he/she will buy, they will invariably say, I will buy Lifetime Prepaid from Bharti Airtel. Lifetime has lots of benefits for the millions of customers who are using it every month. On the content side, Indian people are really passionate about music, Bollywood, games and a lot of other content. We have been very innovative in this field and we believe that if we give more such exciting content to our customers that they use, it will keep them loyal to the brand. With all these products launched, including Hello Tunes, Music on Demand, Easy Music, and Song Catcher where you can get somebody else s ring back tones, Bharti Airtel has become the largest music company in India. We are not a music company, but by being a telecom company, we are the largest music company, because the volume of downloaded music is the highest in India and more than any other music company. Innovation for the future We see the future very differently. We feel that in the future, technology will give us speed. The service providers have to aggregate. Customers do not want to go to many brands, customers want to have one brand which they like, and hence service providers have to aggregate and make it simple. Customers clearly want affordability and the differences between customers will vanish. If you move ahead, some customers want to use more music or data. The rural market is opening up, while the industry is seeing lots of convergence, including media, telecom, and the Internet. Exploiting rural and youth opportunities On the rural side, we are doing a lot of work at 400 thousand villages in India. We are helping the farmers in India to get commodity prices, agricultural information and agricultural help lines for buying fertilizer and pesticide. We also help them to learn English. We are helping the fertilizer co-operative reach the farmers. About 55 million farmers are going digital, including doctors 5 Win-Win / FEB 2009

7 We also focus on new business opportunities to gain higher share. Now we are focusing on the telecom wallet share. We are an integrated company, so we will pick up the entire wallet of our customers, whether it is for the Internet, media, satellite TV or IPTV. on call, health care givers, animal husbandry workers, veterinarians, etc. We really are impacting rural India in a very big way. Moving ahead, we also focus a lot on youth in India. They like chatting, dating, gaming, voice SMS. As an example, voice MSM simplifies the communication. We want to make our products and services a simple service like voice MSM that is close to the heart of our customers. Mobile commerce is also a big potential area. In India, we have domestic money transfers amounting to about USD40 billion and international remittances around USD42 billion, so we have more than USD80 billion in money transfers that we can do in India. Recently, Bill Gates was in India and helped us to get the automation done for money transfers. I think the bank is helping us, and GSMA is helping us as well. Mobile commerce actually will be a big part. Half the economy in India is a cash economy and we would like to help the consumers to transfer their money from one place to another, maybe from cities to villages, in a very secure fashion, so that people will have no worry of losing money at any time. We are helping customers go mobile with their transactions. For paying bills, money transfers, recharging and everything else, the mobile should be the only instrument needed instead of so many cards. Innovation is core Innovation is the core of success of Bharti Airtel. We will leverage the existing core capabilities to exploit rural and youth opportunities. We also focus on new business opportunities to gain higher share. Now we are focusing on the telecom wallet share. We are an integrated company, so we will pick up the entire wallet of our customers, whether it is for the Internet, media, satellite TV or IPTV. We are continuously redefining our business model so that we can become more and more viable, and our cost structure should come down more and more in the years to come. Of course, we are doing mass customization of the backend systems. The backend system is a big strength of our company. Innovation has to be based on the smell of customers. If you do not smell the customers, it is very difficult to innovate, because the innovation has to start from outside, and then into the company. You should know what the customers aspirations are for the next few years. We need to listen to customers and look beyond Airtel customers and even listen to non-airtel customers too. We also have institutionalized the innovation framework within the company as the culture. Innovation can not be a department s job, a function s job, or a CEO s job. It has to be carried out through the company. We have set up customer labs and we have rewards and recognitions for the people who really help us strongly in innovation. Our vision is simple and clear. By 2010 Bharti Airtel will be the most admired brand in India across all product and service lines, loved by the most customers, targeted by top talents, and benchmarked by more businesses. Our passion to innovate actually continues. We are confident that this vision and its excellent execution will be able to achieve sustainable performance for many years to come. Bharti Airtel is on a journey of excellence through innovation and through the employees passion. This journey definitely has no destination. Other than that Bharti Airtel will continue to be a catalyst to India s economy and an engine for the economic growth. Editor: Gao Xianrui sally@huawei.com FEB 2009 / Win-Win 6