PROJECT SUMMARY

The project aims at understanding the Business strategies of Bharti Airtel vis--vis the Telecom Industry in India. The purpose of the Strategy analysis is to understand what is unique about Bharti Airtel and how it not only helps in maintaining Bharts leadership status but takes its business to new horizons.

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Table of Contents

1. 2. 3. 4. 5. 6. 7. 8. 9. 11. 12. 13.

Introduction Telecommunication Scenario in India About Bharti Airtel Value Chain Analysis Resource and Capabilities Industry Analysis-Five force Model Competitive Advantage PESTEL Analysis SWOT Analysis Business Strategy Conclusion Bibliography 20 21 9 11 12 14 3 5 7

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Introduction In a recent TV interview (CNBC-TV18) Sunil Mittal, the CEO & MD, of Bharti Airtel was asked, What the future holds for Bharti? He replied, We have out-played a good many and a good many will out-play us. How we keep them at bay is the challenge. What he probably meant is - to devise and pursue a strategy that will keep Bharti Airtel ahead of its competitors. Tele-Communication Scenario In India The Indian Telecommunications network is the third largest in the world and the second largest among the emerging economies of Asia. The telecommunication sector has emerged as one of the key sectors responsible for Indias resurgence and economic growth.

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Growth This rapid growth has been possible due to various proactive and positive decisions of the Government and contribution, both by the public and the private sector. The rapid strides in the telecom sector have been facilitated by liberal policies of the Government that provide easy market access for telecom equipment and a fair regulatory framework for offering telecom services to the Indian consumers at an affordable prices. There is a genuine commitment to creating a modern and efficient communications infrastructure that takes account of the convergence of telecom, IT and media. Industry Overview Total Telephone Subscribers The number of telephone subscribers in India increased to 846.32 Million at the end of March 2011 from 826.25 Million at the end of February 2011, thereby registering a growth rate of 2.43%. The share of Urban Subscriber has declined to 66.65% from 66.72% where as share of Rural Subscribers has increased from 33.28% to 33.35%. With this, the overall Tele-density in India reaches 70.89. Subscription in Urban Areas grew from 551.27 million in February 2011 to 564.08 million at the end of March 2011. Rural subscription increased from 274.98 million to 282.23 million. The growth of Rural Subscription (2.64%) is higher than the Urban Subscription (2.32%). The overall Urban tele-density has increased from 154.01 to 157.32 and Rural tele-density increased from 32.95 to 33.35. Wireless Segment (GSM, CDMA & FWP) Total Wireless subscriber base increased from 791.38 Million in February 2011 to 811.59 Million at the end of March 2011, registering a growth of 2.55%. The share of Urban Subscriber has declined to 66.30% from 66.36% where as share of Rural Subscribers has increased from 33.64% to 33.70%. The overall wireless Tele-density in India reaches 67.98. Wireless subscription in Urban Areas increased from 525.17 million in February 2011 to 538.05 million at the end of March 2011. Rural subscription increased from 266.21 million to 273.54 million. This shows higher growth in Rural Subscription (2.75%) than Urban Subscription (2.45%). The Urban wireless tele-density has increased from 146.72 to 150.06 and Rural tele-density increased from 31.90 to 32.75.

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Private operators hold 88.01% of the wireless market share where as BSNL and MTNL, two PSU operators hold only 11.99% market share. The graphical presentations of market shares and shares in net additions of all the service providers during the month of March 2011 are given below

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About Bharti airtel Bharti Airtel was established as Bharti Tele-Ventures Limited in 1985. It is a joint stock holding enterprise headquartered in New Delhi. Bharti Airtel Limited, commonly known as airtel, is an Indian telecommunications company that operates in 19 countries across South Asia, Africa and the Channel Islands. It operates a GSM network in all countries, providing 2G or 3G services depending upon the country of operation. Airtel is the fifth largest telecom operator in the world with over 207.8 million subscribers across 19 countries at the end of 2010. Airtel is the 3rd largest in-country mobile operator by subscriber base, behind China Mobile and China Unicom.

Coverage map of Bharti Airtel across 19 countries Airtel is the 5th largest mobile operator in the world in terms of subscriber base and has a commercial presence in 19 countries and the Channel Islands. Its area of operations include: The Indian Subcontinent : Airtel Bangla, in Bangladesh Airtel, in India Airtel Sri Lanka, in Sri Lanka Airtel Africa, which operates in 16 African countries: Burkina Faso, Chad, Democratic Republic of the Congo, Republic of the Congo, Gabon, Ghana, Kenya, Madagascar, Malawi, Niger, Nigeria, Seychelles, Sierra Leone, Tanzania, Uganda and Zambia. The British Crown Dependency islands of Jersey and Guernsey, under the brand name Airtel-Vodafone, through an agreement with Vodafone

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It is the largest cellular service provider in India, with over 164.61 million subscribers at the end of 2011 April and a presence in all the 23 telecom circles. The company offers mobile voice and data services, fixed line, high speed broadband Internet access(DSL)in 96 cities in India, IPtv, dth and turnkey telecom solutions for enterprises. It also acts as a carrier for national and international long distance communication services. The company has a submarine cable landing station at Chennai, the submarine cable connecting Chennai and Singapore. Vision of Bharti Airtel - By 2015, Airtel will be the most loved brand, enriching the lives of million. Mission of Bharti Airtel - Committed to creating and supporting programs that bring about sustainable changes through education and use of technology. Bharti airtels businesses can be categorised broadly under three strategic business units (SBUs)

Mobile telephony

Telemedia

Enterprises

The mobile business is the major revenue earner(star) where as the other two SBUs are in different stages of their business cycles.

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Value Chain Analysis Of Airtel Airtel is the first telecom company in the world to outsource everything except marketing, sales and finance. Its network (base stations, microwave links, etc.) are maintained by Ericsson, Nokia Siemens and Huawei business support by IBM and transmission towers by another company (Bharti Infratel Ltd. in India). Ericsson agreed for the first time, to be paid by the minute for installation and maintenance of their equipment rather than being paid up front. This enabled the company to provide pan-India phone call rates of Rs. 1/minute (U$0.02/minute). Call rates have come down much further. In the year 2009-10, Bharti has roped in a strategic partner Alcatel-Lucent to manage the network infrastructure for the Telemedia Business. Value chain of Bharti Airtel Value Chain

Information Technology (IBM)

Network Outsourcing & Maintenance(Erics son, NokiaSiemens)

Strategic investor (Temasek, Voda fone, Warburg pincus, Singtel)

Passive Infrastructure(B harti Infratel, INDUS Power)

Call Centre Outsourcing(IB M DAKSH, Mphasis, Nortel)

- Pricing and Payment as a % of revenues, thus reducing fixed cost. - Service level agreement for quality deployment - Deliver service delivery, platform enabling delivery of content to end user, device like mobile, PCs, etc.

- Pricing linked to capacity + -Payments linked to uses & network quality (Assured network quality) -Service level agreement

- WP was instrumental for Providing support at the Early stage -SingTel had 50:50 JV in Chennai landing station

- Increased sharing of passive infrastructure -reduced Capex spend

-Enhanced & consistent customer experience -Common platform across the group -Scalable business model to met business needs

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Resources & Capabilities- Bharti Airtel 1. Financial : Bharti has strong balance sheet with a good cash and reserves. The Equity:Debt structure is also sound. Its successful fund raising through debt in 2009 and through equity in 2010 is the testimony of these facts. Though valuable, its not a rare resource that gives Bharti a competitive edge. 2. Physical : Airtel has the state-of-the art towers and networking infrastructure that use the latest software to provide best services at lower cost. It is valuable as well as rare. Hence the physical resources is a source competitive advantage. 3. Technological : It has a major network outsourcing and maintenance deal with NOKIA-Siemens and Ericsson. It has a stake in INDUS towers and long term customer support outsourcing deal with IBM. Thus it has innovative processes that rare, valuable and costly to imitate, giving it a competitive advantage. 4. Innovation & Creativity: Airtel combines telecom services, istribution of products as well as after sales services. It has a proven track record of high profit generation. 5. Reputation: Airtel enjoys a good Brand equity in India. It has the Largest market share in GSM segments. Bharti had been the front runner in product innovation and always enjoyed the first mover advantage. This places Bharti a notch above the rest.

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Industry Analysis (Porters Five force model)

Threat From Competition:

HIGH

Companies like BSNL, MTNL, Vodafone, TATA, Idea & Reliance continuously engage themselves in aggressive marketing and expansion and thus trying to capture Bhartis market share.

As compared to its nearest competitor, Reliance & Vodafone the market share of three companies in wireless telecom as on 31.03.2009 to 31.03.2011 is given below: FY ending on 31.03.2009 31.03.2010 31.03.2011 Bharti Airtel 23.97% 21.84% 19.99% Reliance 18.55% 17.53% 16.72% Vodafone 17.55% 17.26% 16.58%

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Threat From Customers:

HIGH

Since Similar type of services are providing by all the major Telecom Market players, Customers can easily switch to another firm. With a number of portability in a reality it further gives theme power to dictate. Lower prices are enjoyed by the customers due to the severe service competition in the Telecom Market. Declining ARPU & MoUs in India

Threat From Suppliers:

LOW

Long term contracts ensuring future supply of Handsets and SIM cards. Suppliers are dependent on few telecom operators for revenue because of their high investment, therefore bargaining power is low for them and these networks cannot be put into other profitable investments. There are many companies to provide the customer services at lowest prices. No. of major telecom software companies compete for software develop thereby pushing the prices low for these software.

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Threat From New Entrance:

LOW

Initial Investments are very high and also high gestation period. Telecom Industry is highly regulated and very dynamic in nature. Introduction of new strategies by the existing firms and availability of low spectrum. Threat From Substitutes: HIGH

Fixed line services are in the declining stage. However internet telephone is increasing, giving operators run for money. Video conferencing, Social networking web sites and Skype are reducing the necessity for mobile services. Analysis of competitive Advantage Cost leadership Advantage A firm gains cost leadership in an industry when its cost of production is lower than that of its competitors. Airtel has gain cost leadership by managing its processes and resources efficiently and effectively. By bringing down its operational costs, Airtel offers its products and services at lower prices compared to its competitors. It also earns higher profits because either the profit margins are greater or the sales volume has increased.
40 30 20 10 0 Bha rti Airtel Voda fone O Profit-2011 P N Profit-2011 et

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OP Profit Margin Company Bharti Rcom Vodafone Mar-10 25.04% 33.30% 21.32% Mar-11 16.41% 37.05% 12.20%

Net Profit Margin Mar-10 21.45% 21.03% 19.38% Mar-11 10.17% 5.82% 17.15%

Differentiation Advantage The differentiation strategy adopted by the firms needs to possess sufficient skills and abilities to differentiate the product from that of the competitors based on some attributes that allow the consumers to perceive the product as different from that of the competition. Firms that adopt the differentiation strategy successfully have access to advanced scientific research, a highly skilled labour force, effective customer communication strategies, etc. Airtel is providing free digital EPABX with free leased lines (no connectivity charges).So the firm is providing latest EPABX to the customer which is costing approx Rs 50,000. Best service provider, good call center service esp. in local languages, good service even in the remote areas, emphasis on barriers break when people speak, new initiatives like google search on airtel live, downloads etc Focus strategy A firm pursuing a focus strategy tends to serve a specific segment instead of catering to the entire market. This segment may be a special group of customers, a specific geographic area, or a particular product or service line. The customers will also be loyal to the company and therefore, the entry of a new competitor into that area becomes difficult. Airtel is focusing on the customers who is having more than Rs10000 monthly landline billing. Airtel is offering landline services which consist of PRI (Primary Rated Interface). Airtel can provide its service to a specific geographic area i.e. from Dahisar to Churchgate in western region & Thane to Panvel in eastern region. Of late, Airtel has extended its focus to the rural customers having much less ARPU. 15 | P a g e

PESTEL Analysis Political / Legal Factors: In Telecom Sector of India, Foreign Direct Investment (FDI) in Manufacturing is 100%(through automatic route). FDI ceiling in the telecom sector has been raised from 49% to 74% which would help the Indian telecom sector immensely. Mobile number portability (MNP) implementation would enable subscribers to move to different service provider retaining the original number. This implementation may affect Bharti Airtel as customers would keep switching to any possible networks available. In India legal obligations are defined regarding 3G auction and bidding, which proves to be in favour of Bharti Airtel as this auction is not available to the new entrants. This political factor forbids the entry of new companies in to 3G services. Due to rising terrorist activities and hacking of confidential data on air, Indias Department of Telecommunication (DoT) has made amendments related to security features which states that telecom companies should have good policies for security and they should be responsible for the security of the network. Economical factor: Indian telecom was growing approximately in a range of 20 to 30 % in year 2002 2003, this figure has moved considerably during the last couple of years. Also this sector accounts for 1 percent of Indias GDP. Approximately 30% of the service tax revenue is contributed by telecom sector. It is also considered to be one of the major sectors which provide direct employment which indirectly helps in economic growth of India. Social factor: Now a day, customers have a notion regarding brand and status symbol. Customers have become cautious regarding choosing of telecom network. Cost factor is also major concern to customers for example calling rates, roaming facility, etc. Most of the customers are influenced by the latest fashion trend. A company needs to be updated with the latest technology and fashion trend. Demographic factor play an important role in selecting a product. Likes and dislikes of a teenager and adult might not be same, so the company will have to try its best to meet both the requirements. Advertisements plays very important role in selecting network. Technological factor: Bharti Airtel is first wireless service provider which supplies roaming services, International and long distance communication services and Value Added Services. Bharti Airtel has high-speed optic fibre network. This network presently spans 16 | P a g e

126,357 kms all over India. Bharti Airtel's international network infrastructure includes ownership of the i2i submarine cable system and consortium ownership in five global undersea cable system. Environmental factors: Radio frequency waves emitted from the mobile phones harms body cells and damages the DNA. This is not yet proved that such changes were risk to human health. However, disclosing the quantum of radiation has been made mandatory.

SWOT ANALYSIS

Strengths Largest Telecom Player (With 22.6% market share and around 80 Mn Customer base) Pan-India (Present in all the 23 Telecom circles). Partnership with Leading Telecom Players across the Globe. Strong Financial Technological Leadership Strategic Investors

Weakness Outsourcing of Core Systems. Lack of emerging market investment opportunity.

Opportunities Bharti Infratel Cutting down cost in rural area. Match box strategy Scale of Penetration Comparatively low Tele density, especially in rural areas. Low Broad band Penetration. 17 | P a g e

Rural Telephony.

Weakness India Centric (Major Revenue from India) Falling ARPU & Revenue

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Business Strategy of Airtel Rural strategy of airtel As the urban Tele density about to reach its point of saturation, Bharti Airtel, a pioneer its own field, looked to rural India as its next growth engine. Serving rural India was a challenge in itself. Rural users low income, widely dispersed population, less than ideal public infrastructure were some of the deterentes. With an ARPU of less than $2 per month, profitability of Rural operations was always under a Question mark. On the other hand, with 70% of the Indian populace in rural India (1.1 Bn) and a tele density of only 18.5% as of September 2009, it had a huge potential for growth. To counter this challenges, Bharti Airtel adopted a slew of strategiesAlliance / Partnership To extend its reach to rural India, Bharti Airtel is focusing on innovative initiatives, including efficient infrastructure deployments, expanding its distribution network via partnerships and customized content and tarrifs. Bharti entered into an aggrement with Nokia and SKS Microfinance. Under these partnerships, Bharti provides subsidised tariffs and SIM cards to rural users, Nokia provides subsidised Hand Sets and SKS offers Micro financing. To expand coverage in to rural areas, Bharti Airtel is sharing passive infrastructure services with vodafone and Idea through its joint venture INDUS towers. INDUS towers will control more than 60% of Indias network towers. By sharing infrastructure cost and usage between multiple operators, Bharti Airtel was able to reduce its operating and capital expenses. Bharti also formed a joint venture with IFFCO (named IFFCO Kishan sanchar) and thus benefiting from IFFCO,s rural presence (80% of Indian villages) and appeal among the rural agricultural community to market and distribute Bhartis products. IFFCO Kisan Sanchar provides subsidized handsets and connections at competitive rates in rural areas. It also helps Bharti Airtel to identify and acquire suitable locations for deploying its cell sites. In addition, it offers tailored services including voice-based updates on crop prices, farming techniques, rural health initiatives, and help line services. New market Existing Market

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New Product

? Rural Telephony, African Venture

Tele media business Enterprise business Mobile & Land Line Telephony

Existing Product

ANOFFs MATRIX Africa Strategy According to IMF the world economy grew by 5% in 2010, led by 7.1% growth of emerging economies and a 3% growth of advanced economies. With the morphing of the emerging economies (India, Africa, China etc.) from the worlds back office to nerve centre of activities. Both Africa and Asia are expected to be the fastest growing regions with 7% and 5.4% per annum growth respectively in real GDP between 2010 and 2050. The economic growth prospects in these geographies prompted Airtel to devise its Look Africa strategy. Acquisitions and Mergers Bharti Airtel aggressively pursued the to expand its base in markets which have less teledensity to maintain its strategic positioning. For this matter, Africa was a lucrative market where the company entered through mergers & acquisitions. MTN In May 2008, it emerged that Bharti Airtel was exploring the possibility of buying the MTN Group, a South Africa-based telecommunications company with coverage in 21 countries in Africa and the Middle East. The Financial Times reported that Bharti was considering offering US$45 billion for a 100% stake in MTN, which would be the largest overseas acquisition ever by an Indian firm. However, both sides emphasize the tentative nature of the talks, while The Economist magazine noted, "If anything, Bharti would be marrying up," as MTN has more subscribers, higher revenues and broader geographic coverage. However, the talks fell apart as MTN group tried to reverse the negotiations by making Bharti almost a subsidiary of the new company. In May 2009, Bharti Airtel again confirmed that it is in Talks with MTN and companies have now agreed discuss the potential transaction exclusively by July 31, 2009. Bharti Airtel said in a statement "Bharti Airtel Ltd is pleased to announce that it has renewed its effort for a significant partnership with MTN Group". Talks eventually ended without agreement, due to the South African government opposition. ZAIN

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In March 2010, Bharti struck a deal to buy the Kuwait firm's mobile operations in 15 African countries, in India's second biggest overseas acquisition after Tata Steel's $13 billion buy of Corus in 2007. Bharti Airtel completed its $9 billion acquisition of African operations from Kuwait's Zain, making the firm the world's No. 5 wireless carrier by subscribers. Airtel has reported that its revenues for the fourth quarter of 2010 grew by 53% to US$3.2 billion compared to the previous year, newly acquired Zain Africa division contributed US$911 million to the total. However, net profits dropped by 41% from US$470 million last year to US$291 million this year due to a US$188 million increase in radio spectrum charges in India and an increase of US$106 million in debt interest. Economies of scale and efficient working capital management helped boost profit margin. Economies of scale help reduce the percentage cost of advertisement. Product innovation remains a key driver of our market penetration strategy in Africa. We have successfully launched attractive propositions such as 2Good in Nigeria, Magic number in all the OpCos, Loba Nayo in DRC, MNP in Kenya to just mention a few. Besides working as smart penetration tools, the initiatives have helped us to keep our existing consumers excited and glued to our networks. As part of our innovative model we have also successfully set up the Tower Co, which will run as a separate business in our countries of operation and will be responsible for managing the end to end process and operations of our sites. This is another great opportunity, which will not only enable us roll out our network with great speed but also provide potential cost efficiencies arising from site sharing. Bharti Airtel, which registered a 32.6 percent decrease in net profit in fiscal 2010-11 at $1,354 million from $1,989 million in the previous fiscal, has made up for it with its 51.3 percent increase in consolidated revenues, providing a total revenue of Rs 59,467 crore for the year ended March 31, 2011. The consolidated total revenues for the full year ended March 31, 2011 of $13,319 million grew by 42.1 percent y-o-y lifted by the African operations. Bharti Airtel which began its Africa operations last year, with the largest-ever Indian operator investment of $10.7 billion in Zain Africa, and later rebranded its logo to signify its international operations in 19 countries, has reaped the rewards of its investments this year. Africa continued its upward trend with revenues of $924 million, contributing to a total net income of $314 million for Q4 FY 11 for Bharti Airtel, which is an improvement of 7.5 percent from its last quarter, which stood at $289 million. Speaking about its success in Africa, Sunil Bharti Mittal, chairman and MD, Bharty Airtel said, "In Africa, we are rapidly expanding our network coverage, improving distribution width and increasing our efficiency and productivity standards".

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Last year, the company had completed the acquisition of Zain's African operations in 16 countries for an enterprise value of $10.7 billion. For FY'12, Airtel Africa will make a capital expenditure in the range of $1-1.2 billion. The Government regulations are stringent but are now going down, the company said. Further, Kohli admitted that the company is having supply constraints in Africa but assures that it will be taken care of. He added that the company expected operating margins of the African arm to increase in the coming quarters. During the quarter ended March 31, 2011, Airtel incurred a capital expenditure of $382 million on its African arm. Tele media strategy Bharti airtel forayed into television space. With the launch of its DTH satellite television service offering 175 channel across the country. The service is available to customers through 21000 retail points including Airtel relationship centre in 62 cities. DTH service is the culmination of airtels three screens strategy, that is, to be present across Mobile phone, computer and TV screen......................................... On march 14th 2011, it launched airtel broadband TV enabling the customers to watch live TV on their computers or Laptops, indicating a shift in strategy from three screen to multi screen convergence. Airtel broad band TV also works on Wi-Fi, giving the customers freedom to watch TV anywhere in their homes. Besides, while watching one can multi task like browsing the Net or working on the laptop/computer. Enterprise business Enterprise services delivers end-to-end telecom solutions to large Indian and global corporates by serving as the single point of contact for all telecommunication needs across data, voice, network-integration and managed services requirement. Enterprise services owns a state-of-the art national and international long distance network infrastructure, enabling it to provide connectivity services both within India and connecting India to the world. The international infrastructure includes ownership of the i2i submarine cable system connecting Chennai to Singapore, consortium ownership of theSMW4 submarine cable system connecting Chennai and Mumbai to Singapore and Europe, andinvestments in new cable systems such as Asia America Gateway (AAG), India Middle East andWestern Europe (IMEWE), Unity North, EIG (Europe India Gateway) and East Africa SubmarineSystem (EASSy) expanding the Companys global network to over 225,000 Rkms, covering50 countries across 5 continents. Revenues from enterprise services for the financial yearended March 31, 2011 were Rs. 41,292 Mn and represented a year on year decline of 8%. Key financial results for the year ended March 31, 2011

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Particulars

Financial Year 2010-11 2009-10 44,798 9,328 Y-o-Y Growth -8% -41%

Gross revenues (Rs Mn) EBIT (Rs Mn )

41,292 5,536

While the Indian economy has been relatively insulated from the global economic slowdown, large corporate did however exercised caution in IT and Telecom spends which had its impact in FY11. Additionally, this segment witnessed the entry of some of the established mobile players in this segment resulting in increased competition and aggressive pricing. All this had attributed to the decline in revenues in FY11. With clear signs of revival world wide and the Companys growing focus of being global network solution provide, the segment is well placed to be back on the growth trajectory. Conclusion With the 3G auction over and the tariff already bottomed-out, there is very limited downside, in financial terms, for Airtel. Consolidation/ M&A of smaller players in the telecom industry is more or less a certainty. This might present a unique opportunity for Airtel. With its networking competency, Cost advantage, customer support and satisfaction; backed by dynamic management and clear vision; Airtel is well poised to retain its leader status in future.

Bibliography www.airtel.in www.wikipedia.org http://www.writework.com/airtel http://www.iloveindia.com/economy-of-india/telecom-industry.html Contemporary Strategy Analysis By Robert M. Grant

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