Airtel’s Unique Business Model

Bharti Airtel Limited (the holding company for the Airtel brand and service) is one of India’s 5 largest companies by market value (the actual rank goes up and down a bit everyday depending on the stock price). Airtel is also a relatively new company (started in the mid-nineties in its current avatar). It was also not always the huge success it has turned out to be. Sunil Mittal, founder and Chairman of the company, has stated in many an interview that for a number of critical years, the company was paradoxically on the cusp of both bankruptcy and great success. Through a combination of business sense, sheer hours and of course, luck, it fell on the right side of the net.

Airtel today, however, is probably one of the best run companies in the world (most definitely in India). It is the largest telecom player in the country and has the advantage of both massive size and a very high-growth industry. It’s worth about $25 billion and growing fast.

The secret of its success (at least in my view) has been its model. Airtel focuses only and solely on two things - customer acqusition & servicing (retention) and business development/expansion. ALL other functions - hardware, network management, backend applications (billing etc), value added services and even telecom infrastructure - are outsourced. Airtel pioneered this in the Telecom game. It was the first to give up network management to companies like NokiaSiemens and Ericsson, IT and backend applications to IBM, billing to someone else etc. It was also the first to divest it’s hard assets, i.e. - its telecom towers - to a separate company and lease them back themselves as well as monetize surplus bandwitdh by selling to other operators. This was the ultimate act in putting the faith in the brand rather than in iron and steel.

Of course, having seen Airtel succeed with this, a number of the other operators are now trying to follow in some way or the other.

Because of this focus on the customer experience and on business development, Airtel has been not only the fastest growing but the most innovative of operators. It has realized the importance of having access to the consumer at all levels, and therefore is going from core mobile to landline internet, Digital TV (DTH) and even digital cinema (theaters). Its taking AT&T’s triple play and making it quintuple (5x)-play and more.

It is also one of the few companies that has realized the importance of value added services (VAS) early on in the game and is gearing up to provide compelling applications and content for when the explosive subscriber growth in India eventually slows (as it surely will).

Airtel is a company I greatly admire. As a disclaimer, I don’t currently hold this stock but have in the past (profitably) and plan to do so in the future. I’m pretty sure this is a great bet going forward.

Tagged as: airtel, bharti, india, mobile, sunil mittal, telecom