X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2018 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Bharti: Can competition catch up easily? - Views on News from Equitymaster
StockSelect
  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Bharti: Can competition catch up easily?
Dec 23, 2009

The telecom market in India is broadly divided into 23 service areas - 19 telecom circles and 4 metros. Apart from the four metros, the Indian states/regions have been divided into three circles (Circle A, B & C). These are based on their economic development, with Circle A being the relatively more developed regions, while Circles B and C are the lesser developed regions.

  • Metros - Chennai, Delhi, Kolkata, Mumbai
  • Circle A - Andhra Pradesh, Gujarat, Karnataka, Maharashtra, Tamil Nadu
  • Circle B - Haryana, Kerala, Madhya Pradesh, Punjab, Rajasthan, Uttar Pradesh (E), Uttar Pradesh (W), West Bengal and A & N Islands
  • Circle C - Assam, Bihar, Himachal Pradesh, Jammu & Kashmir, North East, Orissa
A few days ago, a leading business daily had carried an interview with Vodafone Group's CEO Mr. Vittorio Calao. As you may be aware, Vodafone is the world’s largest mobile operator by revenues. The discussion revolved around Vodafone's prospects and the issues relating to the involvement of the government (regulation) in India's telecom industry. In addition, he also discussed the ongoing tariff war that the country is witnessing.

However, there was one particular discussion that we thought was quite interesting. "Give us another 15 years and we will catch them," said Mr. Calao. In this statement, he used 'them' to refer to India’s largest telecom company, Bharti Airtel.

Agreed that Bharti has an early mover advantage in India and has already built a huge subscriber base. But a 15 year gap for the second biggest company to close the gap with it was something that we found quite interesting. He also added that Bharti is a very well run company and that he admires the firm.

What Mr. Calao said can probably be substantiated by the following few charts.

The chart below displays the market share (by total subscriber base) of the leading telecom players in metros. Over the past three years, we can see that Bharti has been giving tough competition to Vodafone. In terms of market share, other players are still way behind, fighting a battle of their own. However, considering that the penetration levels in metros have reached high levels, the ratio is not likely to change drastically going forward.

Source: COAI

Moving on to the other circles, we can see that Bharti's share has been on the rise over the past few years. In fact, it has reached such a level, where it has left Vodafone quite far away.

Source: COAI

The story in circle B is quite different. Vodafone has done well to narrow its gap with Bharti over the past few years. While Vodafone has been increasing its share at a good pace, Bharti’s share has been relatively stable.

Source: COAI

Moving on to circle C - this is where we believe the main differentiator between the two firms lies. Bharti pretty much has a big chunk of the pie. Vodafone just started focusing on this circle a few months ago. As such, it has a long way to go to cover up with the former. Bharti has done well to emerge from being the third biggest player in this market (in 2004), to being the biggest at present.

Source: COAI

It must be noted that at the end of June 2009, rural subscribers formed about 30% of the total wireless subscriber base in India. Teledensity levels in urban areas stood at about 87%, while the same in rural markets stood at about 15%.

As per data released by the COAI, Bharti had a share of about 27% of the total rural subscriber base. It is followed by Vodafone, with a share of 20%. Idea, BSNL and RCOM follow with shares of 16%, 15% and 13% respectively. It must be noted that circle C is different from rural markets.

Whether or not Bharti will continue to be the dominating player after fifteen years is practically an impossible call to take at present. However, one cannot discount the early mover advantage and the result of which the company has a strong reach as well as a good brand positioning. All this, we believe, will help the company in not just surviving the ongoing price war, but also emerging much stronger when the dust settles.

To Read the Full Story, Subscribe or Sign In


Small Investments
BIG Returns

Zero To Millions Guide 2018
Get our special report, Zero To Millions
(2018 Edition) Now!
We will never sell or rent your email id.
Please read our Terms

BHARTI AIRTEL SHARE PRICE


Feb 23, 2018 (Close)

TRACK BHARTI AIRTEL

  • Track your investment in BHARTI AIRTEL with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
  • Add To MyStocks

BHARTI AIRTEL 8-QTR ANALYSIS

COMPARE BHARTI AIRTEL WITH

MARKET STATS