BHARTI AIRTEL LIMITED
ANNUAL REPORT 2009-2010
DIRECTOR'S REPORT
Dear Shareholders,
The directors have pleasure in presenting the fifteenth annual report on
the business and operations of the Company together with audited financial
statements and accounts for the year ended March 31, 2010.
OVERVIEW:
Bharti Airtel is one of Asia's leading telecommunication service providers
with presence in all the 22 licensed jurisdictions (known as Telecom
Circles) in India and also in Sri Lanka and Bangladesh. The Company served
an aggregate of 130.69 mn customers as on March 31, 2010 in India;
including 127.62 mn customers using GSM services and 3.07 mn customers
using fixed line and/or broadband (DSL) services. The Company offers an
integrated suite of telecommunication services to enterprise customers, in
addition to providing national and international long distance
connectivity. The Company also deploys, owns and manages passive
infrastructure for telecommunication services through its subsidiary
company, Bharti Infratel Limited, which also owns 42% stake in Indus Towers
Limited. Bharti Infratel and Indus Towers are the top two providers of
passive infrastructure services in the country.
FINANCIAL RESULTS AND RESULTS OF OPERATIONS
Financial Highlights of Consolidated Statement of Operations of the Company
(Amount in Rs mn)
Particulars Financial Year Y-o-Y
2009-10 2008-09 Growth
Gross revenue 418,295 373,521 12%
EBITDA 168,473 152,858 10%
Cash profit from operations 174,728 135,769 29%
Earnings before taxation 108,954 85,910 27%
Net profit/(loss) 91,631 78,590 17%
Particulars Financial Year Y-o-Y
Financial Highlights of Standalone Statement of Operations of the Company
(Legal entity)
(Amount in Rs mn)
2009-10 2008-09 Growth
Gross revenue 356,095 340,143 5%
EBITDA 138,698 131,918 5%
Cash profit from operations 148,151 115,686 28%
Earnings before taxation 106,992 81,615 31%
Net profit/(loss) 94,262 77,438 22%
LIQUIDITY:
The Company meets its working capital requirement by having suitable
commercial agreement with its creditors and sufficient standby credit lines
with banks and financial institutions. It deploys a robust cash management
system to ensure timely availability of funds and its deployment. The
Company has been able to optimise finance cost and generate funds for
expansion by minimising the amount of funds tied-up in the current assets.
As on March 31, 2010, the Company has cash and bank balance of Rs 25,786 mn
and marketable securities of Rs 51,512 mn. The Company actively manages the
short-term liquidity to generate optimum returns by investments made in
debt and money market instruments including liquid and income debt fund
schemes, fixed maturity plans and other similar instruments.
The Company foresees liquidity requirements for funding the 3G spectrum and
BWA spectrum auction fees. The strength of the Company's balance sheet has
enabled the Company to adequately tie up funding for expected 3G and BWA
liquidity requirements on favorable terms.
On March 30, 2010, the Company has also announced acquisition of Zain
Africa B.V. in a USD 10.7 bn deal. The Company has tied up adequate funding
to cover the deal. The Company expects to maintain a comfortable liquidity
position post payment of spectrum fees and closure of the acquisition.
GENERAL RESERVE:
Out of total profit of Rs 94,262 mn for the financial year 2009-10, an
amount of Rs 7,100 mn has been transferred to the General Reserve.
DIVIDEND:
The Board has recommended a final dividend of Re 1 per equity share of Rs 5
each (20% of face value) for the financial year 2009-10. The total dividend
payout will amount to Rs 4,443 mn, including Rs 645 mn as tax on dividend.
The payment of dividend is subject to the approval of the shareholders in
the ensuing annual general meeting of the Company.
SUBSIDIARY COMPANIES:
As on the date of this report, the Company has twenty subsidiary companies
namely (i) Bharti Airtel Services Limited (ii) Bharti Hexacom Limited (iii)
Bharti Infratel Limited (iv) Bharti Infratel Ventures Limited (v) Bharti M
Commerce Services Limited (vi) Bharti Telemedia Limited (vii) Bharti Airtel
(Canada) Limited (viii) Bharti Airtel International (Mauritius) Limited
(ix) Bharti Airtel International (Netherlands) B.V. (x) Bharti Airtel
Holdings (Singapore) Pte. Limited (xi) Bharti Airtel (Hongkong) Limited
(xii) Bharti Airtel (Japan) Kabushiki Kaisha (xiii) Bharti Airtel Lanka
(Private) Limited (xiv) Bharti Airtel (Singapore) Private Limited (xv)
Bharti Airtel (UK) Limited (xvi) Bharti Airtel (USA) Limited (xvii) Bharti
Infratel Lanka (Private) Limited (xviii) Bharti International (Singapore)
Pte. Limited (xix) Network i2i Limited and (xx) Warid Telecom International
Limited.
Pursuant to the provisions of Section 212(8) of the Companies Act, 1956,
the Central Government has vide letter No. 47/305/2010-CL-III dated April
27, 2010, granted an exemption to the Company from attachment of the
balance sheet, profit & loss account and other documents as set out in
section 212(1) of the Companies Act, 1956 in respect of the aforementioned
subsidiary companies for the year ended on March 31, 2010.
Annual accounts of these subsidiary companies, along with related
information are available for inspection at the Company's registered office
and are also being uploaded on the website of the Company, www.airtel.in.
Copies of the annual accounts of subsidiary companies will be made
available to Bharti Airtel's investors and subsidiary companies' investors
upon request.
Since, Bharti International (Singapore) Pte. Limited and Bharti Airtel
International (Netherlands) B.V. (both subsidiaries of Bharti Airtel
Holdings (Singapore) Pte. Limited) were incorporated in March 2010 and
their first financial year will conclude on March 31, 2011, no financial
statements have been prepared till March 31, 2010. The Company has also
incorporated Bharti M Commerce Services Limited, Bharti Airtel
International (Mauritius) Limited and Bharti Airtel (Japan) Kabushiki
Kaisha in April 2010 whose first financial year will conclude on March 31,
2011.
The statement pursuant to the approval under section 212(8) of the
Companies Act, 1956, is annexed as part of the Notes to Consolidated
Accounts of the Company on page no. 158.
QUALITY:
Quality is an integral element of Bharti Airtel's DNA. Lean Six Sigma,
Process Standardisation, Performance Variance Reduction (PVR) and Knowledge
Management are some of the quality initiatives which are deeply ingrained
in Bharti Airtel's processes. The Company continuously invests in training
and development of its employees to champion these initiatives. It
continually raises the benchmark by getting assessed by external quality
agencies. In this regard, its ISO27001 implementation is among the largest
in the world. Bharti Airtel is TL9000 and PCI DSS compliant and its IT
infrastructure and processes are compliant with COBIT and ITIL best
practices.
BRANDING:
Bharti Airtel has been rated as the Strongest Brand' by the Economic Times
- Brand Finance Brand Power Rating'. Brand Airtel was the only corporate
brand to be awarded the AAA rating which means extremely strong' and it
improved its rating from the previous AA+. Airtel was also rated as the 7th
Most Valuable Brand in India with a brand value of USD 2.5 bn and was the
only telecom player to feature in the top 10 most valuable brands. Airtel
also crossed the 100 mn customer base and extended its brand in DTH and
IPTV services.
In mobile services, the overarching brand philosophy focused on celebrating
the idea of people and relationships. It continued the segmented approach,
which strengthened the brand's relevance across various socio-economic
segments of close to 600 mn mobile users in the country.
Airtel marked its milestone of crossing 100 mn customers with a thematic
campaign on Together Good Things Happen'. The concept acknowledged each
individual as an accumulation of people, relationships and experiences. The
refreshed logo used in the campaign comprised of faces of people -
customers, employees and partners, who have made the brand what it is. The
brand campaign was endorsed by the movie icon, Shahrukh Khan, who resonated
with Airtel's belief that his people and relationships define him. For
urban centers, the brand's belief in togetherness was extended to an on-
ground manifestation through the ownership of the Airtel Delhi Half
Marathon.
In the midst of hyper competition with new players in the market, Airtel
offered multiple competitive advantages to its customers, most significant
of which was a network with over 110 mn people on it, who could now talk
with each other at 50 paise per minute, local and STD. Affordability' as a
proposition to the customer was further driven through consecutive
campaigns on roaming at 60 paise per minute and 1 paise per second, and the
recent value series featuring Sharman Joshi.
In the DTH segment, Airtel digital TV continued to gain a strong mindshare
and market share in the year 2009-10 through key brand campaigns aimed at
building differentiation based on technology and product superiority. A
high decibel campaign featuring superstars Kareena and Saif along with
former Miss India Sarah Jane Dias brought to the audience the advantage of
'Picture clarity' which triggered faster adoption for DTH. This campaign
was supported by MPEG 4 DVB S2 technology which only Airtel offered at that
point of time. The next campaign announced the launch of digital TV
'Recorder'. Airtel was the second player to launch this product. To create
a strong differentiation and consumer benefit, the campaign talked about
the 'Record from mobile' feature. With the 'record from mobile' feature,
one can record live TV with ease anytime, anywhere.
MAJOR AGREEMENTS AND ALLIANCES:
During the year, the Company signed the following major agreements
relating to operations, customer service, innovation and technology:
* With Alcatel Lucent to manage Bharti Airtel's pan-India access network
for broadband and telephone services through a joint venture company
* With Ericsson and Nokia Siemens extending network upgradation contract
for 2 years for providing a superlative customer experience at a lower cost
* With Royal Government of Bhutan to launch a new terrestrial cable network
to Bhutan to further the growth of the IT/ITES and Data Centre market in
Bhutan
* With Cisco to create and launch unique products, including managed data
services, hosted unified communications, connected branch services and
Cisco TelePresence
* With HTMT and Firstsource, expanding the call center contracts to include
two more partners, thereby achieving a capability to handle 1.4 bn minutes
of customer calls
* With Limelight Networks for global content delivery network
* With global telcos in launching unity cable system to boost Trans-Pacific
connectivity
* With global telcos to build and operate the Southeast Asia Japan Cable
System rated among the highest capacity cable systems in the world
* With Twitter, allowing its customers to send and receive SMS tweets on
Twitter
* With Dow Jones to launch The Wall Street Journal India mobile application
providing the latest international and Indian financial and business news
from The Wall Street Journal and Dow Jones Newswires, exclusively for
Airtel customers on the mobile platform
* Investment in Asia America Gateway (AAG), Unity North, South East Asia
Japan Cable system (SJC), India Middle East Western Europe (IMEWE), East
African Submarine System (EASSy) cable systems with consortium partners for
extending global reach to 50 countries across 5 continents
NEW PRODUCTS/INITIATIVES:
During the year, the Company launched various new and innovative products
and services, which enabled it to strengthen its leadership position in an
intensely competitive market. Few of the key launches of the year included:
* World's first Windows-based Online Desktop powered by Microsoft and Nivio
on Airtel broadband
* India's first mobile application store - Airtel App Central which offers
over 1,500 applications for download across 550+ devices categorised under
25 customer categories
* Airtel Hosted Mail' - powered by Microsoft Exchange Server 2007, a
corporate mailing solution for Small and Medium Business (SMB) across the
country to offer a robust enterprise grade mailing solution with an inbox
as big as 4 GB along with a wider range of communication tools enabling
them to share email messages, contacts, calendars, work folders, task list
and documents from either their PC or mobile phone
* HTC Smart, world's first commercial 3G Smartphone based on brew MP
platform in partnership with HTC and Qualcomm
* Ultra fast 50 MBPS broadband offering the fastest wire line broadband in
the country. The service will be initially available in Delhi and Gurgaon,
with phased roll-out in cities of Mumbai, Chennai and Bengaluru
* 'VPN in a box', a bundled product offering - MPLS bundled with last mile
connective and customer premise hardware
* Website Builder for customers with 15,000 built-in templates, domain
names and e-commerce capabilities
* mChek on voice, thereby expanding the range of mobile commerce
application
* Digital Media Exchange (DMX) and Teleport services for integrated content
delivery for Media customers thereby marking Airtel's foray into the '4th
screen' for digital cinema content delivery
* Airtel Digital TV Recorder, an enhanced Set Top Box (STB) with capability
to record live television, anytime, anywhere
* Mobile Comics Portal on Airtel Live, allowing its subscribers to access
more than 300 Indian and International comics via WAP
* Freedom Plan, giving its customers to choose from a variety of plans
based on usage and calling patterns and; Turbo Plan allowing its customers
to enjoy substantial advantage while roaming anywhere
* Far-East Connect Network to serve global wholesale by linking Singapore
and US via Asia America Gateway (AAG) cable landing in Singapore
* Ethernet Services in more than 25 global cities across Asia, Europe,
North America and Australia
* Mobile Application Tool for Enterprises (MATE) that enables mobile
devices to become an integral part of enterprise network, by allowing
seamless, secure and On-Demand access to enterprise business data from
anywhere, anytime
CAPITAL MARKET RATINGS:
As at March 31, 2010, Bharti Airtel Limited has outstanding ratings with
four institutions, two of them domestic, viz. CRISIL and ICRA, and two
international, viz. Fitch Ratings and S&P.
* CRISIL and ICRA have rated Airtel at the top end of their rating scales,
both for short term (P1+ / A1+) as well as long term (AAA / LAAA)
* Both Fitch Ratings and S&P have rated Airtel at the level of the
sovereign rating of India (BBB-) Subsequent to March 31, 2010, and pursuant
to the closure of the Zain transaction and related acquisition debt, while
CRISIL, ICRA and Fitch Ratings have reaffirmed the above ratings, S&P has
moved the rating to BB+.
SHARE CAPITAL:
During the year, the Company issued 919,734 (sub-divided) equity shares of
Rs 5 each upon exercise of stock options under ESOP Scheme 2005 of the
Company.
Further, the Company also allotted 65,385 (pre-split) equity shares of Rs
10 each upon conversion of Foreign Currency Convertible Bonds (FCCB's) by
their holders in May 2009.
In July 2009, the Company has sub-divided its 1 equity share of Rs 10 each
into 2 equity shares of Rs 5 each. Due to these corporate actions, the
issued, subscribed and paid-up equity share capital of the Company
increased from 3,796,479,592 (sub-divided) (March 31, 2009) to
3,797,530,096 equity shares as of March 31, 2010.
MANAGEMENT DISCUSSION & ANALYSIS REPORT:
In accordance with the listing agreement requirements, the Management
Discussion & Analysis report is presented in a separate section forming
part of the Annual Report.
CORPORATE GOVERNANCE:
The Company is committed to maintain the highest standards of Corporate
Governance. The directors adhere to the requirements set out by the
Securities and Exchange Board of India's Corporate Governance Practices and
have implemented all the stipulations prescribed.
A detailed report on Corporate Governance pursuant to the requirements of
clause 49 of the listing agreement forms part of the annual report. A
certificate from the auditors of the Company, S.R. Batliboi & Associates,
Chartered Accountants, Gurgaon confirming compliance of conditions of
Corporate Governance as stipulated under clause 49 is annexed to this
report as Annexure A.
SECRETARIAL AUDIT REPORT:
Keeping with the high standards of corporate governance adopted by the
Company and also to ensure proper compliance with the provisions of various
applicable corporate laws, regulations and guidelines issued by the
Securities and Exchange Board of India and other statutory authorities, the
Company has voluntarily started a practice of secretarial audit from a
practicing company secretary.
The Board had appointed M/s. Chandrasekaran Associates, Company
Secretaries, New Delhi, to conduct secretarial audit of the Company for the
financial year ended March 31, 2010, who has submitted their report
confirming the compliance with all the applicable provisions of various
corporate laws.
The Secretarial Audit Report is provided separately in the annual report.
CORPORATE SOCIAL RESPONSIBILITY:
At Bharti Airtel, Corporate Social Responsibility (CSR) encompasses much
more than social outreach programs and is an integral part of the way the
Company conducts its business. Detailed information on the initiatives of
the Company towards CSR activities is provided in the Corporate Social
Responsibility section of the annual report.
DIRECTORS:
Since last Directors' Report, Paul O'Sullivan, Quah Kung Yang and Mauro
Sentinelli have resigned from the Board due to personal reasons and Bashir
Currimjee has retired from the Board in terms of the policy on independent
directors adopted by the Company. During the year, Tan Yong Choo and Lim
Chuan Poh were appointed as directors. The Board places on record its
sincere appreciation for the services rendered by Paul O'Sullivan, Quah
Kung Yang, Mauro Sentinelli and Bashir Currimjee during their tenure on the
Board.
Chua Sock Koong, Pulak Chandan Prasad, Rajan Bharti Mittal and Rakesh
Bharti Mittal retire by rotation at the forthcoming annual general meeting
and being eligible, offer themselves for re-appointment.
A brief resume containing nature of expertise, details of directorships
held in other public limited companies of the directors proposing re-
appointment along with their shareholding in the Company as stipulated
under clause 49 of the listing agreement with the stock exchanges is
appended as an annexure to the notice of ensuing annual general meeting.
FIXED DEPOSITS:
The Company has not accepted any fixed deposits and, as such, no amount of
principal or interest was outstanding as on the balance sheet date.
AUDITORS:
The Statutory Auditors of the Company, M/s. S. R. Batliboi & Associates,
Chartered Accountants, Gurgaon, retire at the conclusion of the ensuing
annual general meeting of the Company and have confirmed their willingness
and eligibility for re-appointment and have also confirmed that their re-
appointment, if made, will be within the limits under section 224(1B) of
the Companies Act, 1956.
AUDITORS' REPORT:
The Board has duly examined the Statutory Auditors' report to accounts
which is self explanatory and clarifications wherever necessary, have been
included in the notes to accounts section of the annual report.
As regards the comment under para xxi of Annexure to the Auditors' Report,
to address the issues of fraud by employees and external parties, the
Company has taken appropriate steps including issuance of warning letters,
termination of service of the errant employees, termination of the contract
/ agreements with the external parties, legal action against the external
parties involved, blacklisting the contractors, etc. The Company is focused
on further strengthening its internal control systems to reduce the
probability of occurrence of such events in future.
ENERGY CONSERVATION, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS
AND OUTGO:
For the Company, being a service provider organisation, most of the
information as required under section 217(1)(e) of the Companies Act,
1956, read with the Companies (Disclosure of Particulars in the Report of
the Board of Directors) Rules, 1988, as amended is not applicable. However,
the information, as applicable, has been given in Annexure B to this
report.
EMPLOYEES STOCK OPTION PLAN:
The Company values its human resource and is committed to adopt the best HR
practices. The employees of the Company are presently benefited from two
ESOP schemes under 2001 and 2005 Employee Stock Option Policy. Besides
attraction of new talent, the policies also helps in retention of
wellperforming employees, who are contributing to the growth of the
Company.
The ESOP Scheme 2001 is administered through a trust, whereby the shares
held in the trust are transferred to the employee as and when the concerned
employee exercise stock options under the Scheme.
Under the ESOP Scheme 2005, the employees were allotted new equity shares
upon exercise of stock options up to March 2010. In the board meeting held
in April 2010, the Board has approved acquisition of the Company's equity
shares up to the limit approved by the shareholders in the existing Trust
and appropriate the same towards the Scheme. Accordingly, henceforth under
the ESOP Scheme 2005, instead of allotment of fresh equity shares, the
Company will transfer the shares so acquired from the trust to the
respective employees. There will be no fresh allotment of equity shares
under the ESOP Scheme.
Disclosure in compliance with clause 12 of the Securities and Exchange
Board of India (Employee Stock Option Scheme and Employee Stock Purchase
Scheme) Guidelines, 1999, as amended, if provided in Annexure C to this
report. A certificate from M/s S. R. Batliboi & Associates, Chartered
Accountants, Statutory Auditors, with respect to the implementation of the
Company Employee's Stock Option schemes would be placed before the
shareholders at the ensuing annual general meeting and a copy of the same
shall be available for inspection at the registered office of the Company.
PARTICULARS OF EMPLOYEES:
The information as are required to be provided in terms of section 217(2A)
of the Companies Act, 1956 read with Companies (Particular of Employees)
Rules, 1975 have been set out in the annexure to this report. However, in
terms of the provisions of section 219(1)(b)(iv) of the Act, the annual
report has been sent to the members of the Company excluding these
information. Members who desire to obtain this information may write to the
Company Secretary at the registered office address and will be provided
with a copy of the same.
DIRECTORS' RESPONSIBILITY STATEMENT:
Pursuant to section 217(2AA) of the Companies Act, 1956, the directors to
the best of their knowledge and belief confirm that:
(i) the applicable accounting standards have been followed along with
proper explanation relating to material departures, in the preparation of
the annual accounts for the year ended March 31, 2010;
(ii) they have selected and applied consistently and made judgments and
estimates that are reasonable and prudent to give a true and fair view of
the state of affairs of the Company as at the end of the financial year and
of the profit of the Company for that period;
(iii)they have taken proper and sufficient care for the maintenance of
adequate accounting records in accordance with the provisions of the
Companies Act, 1956 and for safeguarding the assets of the Company and for
preventing and detecting fraud and other irregularities;
(iv)they have prepared the annual accounts on a going concern basis.
ACKNOWLEDGEMENTS:
The directors wish to place on record their appreciation to the Department
of Telecommunications (DOT), the Central Government, the State Governments,
Government of Bangladesh, Sri Lanka and Africa, Company's Bankers and
business associates; for the assistance, co-operation and encouragement
they extended to the Company and also to the employees for their continuing
support and unstinting efforts in ensuring an excellent all-round
operational performance. The directors would also like to thank various
partners viz. Bharti Telecom, Singapore Telecommunications Limited and
other shareholders for their support and contribution. The Board looks
forward to their continued support in future.
For and on behalf of the Board
Sunil Bharti Mittal
Chairman and Managing Director
Auditor's Certificate
regarding compliance of conditions of corporate governance
Annexure - A
To
The Members of
Bharti Airtel Limited
We have examined the compliance of conditions of corporate governance by
Bharti Airtel Limited ('the Company'), for the year ended March 31, 2010,
as stipulated in clause 49 of the listing agreement(s) of the said Company
with stock exchange(s) in India.
The compliance of conditions of corporate governance is the responsibility
of the Company's management. Our examination was limited to procedures and
implementation thereof, adopted by the Company for ensuring the compliance
of the conditions of Corporate Governance. It is neither an audit nor an
expression of opinion on the financial statements of the Company.
In our opinion and to the best of our information and according to the
explanations given to us, we certify that the Company has complied with the
conditions of corporate governance as stipulated in the above mentioned
listing agreement.
We state that such compliance is neither an assurance as to the future
viability of the Company nor the efficiency or effectiveness with which the
management has conducted the affairs of the Company.
For S.R. BATLIBOI & ASSOCIATES
Firm Registration No: 101049W
Chartered Accountants
per Prashant Singhal
Partner
Membership No. :93283
Place: Gurgaon
Date : April 28, 2010
Annexure - B
Information relating to conservation of energy, technology absorption,
research and development and foreign exchange earnings and outgo forming
part of Directors' Report in terms of section 217(1)(e) of the Companies
Act, 1956 read with the Companies (Disclosure of Particulars in the Report
of the Board of Directors) Rules, 1988.
CONSERVATION OF ENERGY AND TECHNOLOGY ABSORPTION:
The information in Part A and B pertaining to conservation of energy and
technology absorption are not applicable to Bharti Airtel, being a
telecommunication services provider. However, the Company requires energy
for its operations and every endeavor has been made to ensure the optimum
use of energy, avoid wastage and conserve energy as far as possible.
The Company continuously evaluates global innovation and technology as a
benchmark and whenever required, enters into arrangements to avail of the
latest technology trends and practices.
FOREIGN EXCHANGE EARNING AND OUTGO:
Activities relating to export initiatives taken to increase exports;
development of new export markets for products and services; and export
plans; International Long Distance Business The Company's long distance
business has seen significant growth and with India's increasing
integration into the global macro economy, further growth is anticipated.
The Company has strong relationships for under-sea networks and continues
to look for opportunity to invest in major cable systems to increase its
presence and share of global traffic.
International Calling Card Services:
The Company offers cost effective and reliable international calling
services (Airtel CallHome) and Value Added Services, through its wholly
owned subsidiary companies and connects the widespread NRI population in
USA, UK, Canada and Singapore to their families in India and several other
locations worldwide. The Company also plans to extend its wide range of
services to other countries of the world through its global network.
Telecom Services in other countries:
The Company continuously explores and evaluates various opportunities for
growth and expansion inside and outside the country organically and through
alliances, mergers/acquisitions in identified markets, subject to
availability of licenses, growth potential and cost as well as other
relevant factors.
Bharti Airtel entered its second year of operations in Sri Lanka through
its wholly owned subsidiary Bharti Airtel Lanka (Pvt) Ltd. Marketing voice
and data solutions through a state of the art 3.5G network, the operations
crossed one million revenue earning customers' mark in less than 6 months
of launch.
Having gained leadership on both incremental customer market share and
revenue market share indices, Bharti Airtel's first international foray has
been recognised as Sri Lanka's fastest growing wireless service provider.
The Company has commenced its expansion into the newly liberated North and
East geographies of the country, which were inaccessible until now.
In January 2010, the Company acquired 70% stake in Warid Telecom,
Bangladesh (Warid) through infusion of fresh equity of approx USD 300 mn.
Warid offers mobile services across all 64 districts of Bangladesh with a
distribution network of 124 distributors and 34,000 retailers across the
country. On March 30, 2010, Company entered into a legally binding
definitive agreement with Zain Group to acquire Zain Africa B.V. based on
an enterprise value of USD 10.7 bn. Zain's African mobile services
operations cover 15 countries with a total customer base of over 42 mn.
With telecom penetration of approximately 32%, Zain covers a total
population of over 450 mn in the region. The countries in which Zain Africa
operates are - Burkina Faso, Chad, Congo Brazzaville, Democratic Republic
of Congo, Gabon, Ghana, Kenya, Madagascar, Malawi, Niger, Nigeria, Sierra
Leone, Tanzania, Uganda and Zambia. Zain is the market leader in 10 of the
15 countries and second in 4 countries. Along with Zain Africa B.V., the
Company is the first Indian brand to go truly global with a footprint that
covers over 1.8 bn people, with operations in 18 countries across Asia and
Africa having a customer base of over 180 mn. This cross-border transaction
is expected to further strengthen the historic Indo-Africa economic &
social ties and provide a big boost to South- South cooperation.
Total foreign exchange used and earned for the year:
(a) Total Foreign Exchange Earning Rs 17,943 mn
(b) Total Foreign Exchange Outgo Rs 34,583 mn
Annexure - C
Information regarding the Employees Stock Option Scheme (as on March 31,
2010)
Sl. Particulars ESOP Scheme 2005 ESOP Scheme 2001
No.
1) Number of stock 21,337,264* 39,361,579**
options granted
2) Pricing formula Exercise Price not less 29,015,686 @ 11.25
than the par value of 1,760,000 @ 0.45
equity share and not 4,380,000 @ 35.00
more than the price 142,529 @ 0.00
prescribed under 3,998,364 @ 5.00
Chapter VII of the SEBI 40,000 @ 60.00
(Issue of Capital and 25,000 @ 110.50
Disclosure Requirements)
Regulation 2009 on
Grant Date
3) Option vested 9,708,730 36,857,036
4) Number of options 2,226,368 28,549,505
exercised
5) Number of shares 2,226,368 Nil
arising as a result
of exercise of option
6) Number of option 6,281,934 8,516,872
lapsed
7) Money realized Rs 283,712,555 Rs 375,268,085
upon exercise of
options
8) Total number of 12,828,962 2,295,202
options in force
9) Options granted to
senior managerial
personnel
* Ms. Abhilasha Hans 26,600 Nil
* Mr. Ajai Puri 42,000 Nil
* Mr. Atul Bindal 61,400 Nil
* Mr. Deven Khanna 10,600 Nil
* Dr. Jai Menon 59,000 Nil
* Mr. Joachim Horn Nil 90,000
* Ms. Jyoti Pawar 20,000 Nil
* Mr. K. Shankar 39,000 Nil
* Mr. Manik Jhangiani Nil 150,000
* Mr. Manoj Kohli 91,400 Nil
* Mr. N. Arjun 34,600 Nil
* Mr. Narender Gupta 10,600 Nil
* Mr. S. Asokan 31,400 Nil
* Mr. Sanjay Kapoor 89,000 Nil
* Mr. Sarvjit Singh 10,600 Nil
Dhillon
* Ms. Shamini 11,400 Nil
Ramalingam
* Mr. Srinivas K 59,000 Nil
* Ms. Vijaya Sampath 3,534 Nil
10) Diluted earning per 0.0017 NA
share (EPS) as per
AS 20
11) Difference between NA 38,04,341
the employees (0.001)
compensation cost based
on intrinsic value of
the stock and the fair
value for the year and
its impact on profits
and on EPS of the
Company
12)a) Weighted average Rs 270.13 a) Rs 11.25; Re 0.45;
exercise price Rs 35; Rs 0; Rs 5; Rs 60;
Rs 110.5
b) Weighted average Rs 155.11 b) NA; NA; NA; Rs 69.70;
fair price Rs 251.46; Rs 84.43;
Rs 357.63
13) Method and Black Scholes/Lattice Valuation Model
significant
assumptions used to
estimate the fair
values of options
(i) risk free i) 6.44% p.a. to 7.86% p.a. (The Government
interest rate Securities curve yields considered as on
valuation date)
(ii) expected life ii) 48 to 66 months
(iii) expected iii) 36.13% to 37.47% (assuming 250 trading days
volatility to annualize)
(iv) expected dividends iv) 20% (Dividend yield of 0.31%)
(v) market price of the v) Rs 307.42 to Rs 412.13 per equity share
underlying share on
grant date
* Granted 2,602,712 options out of the options lapsed over a period of time
** Granted 7,681,579 options out of the options lapsed over a period of
time
- The options granted to the senior managerial personnel under both the
schemes are subject to the adjustments as per the terms of respective
performance share plan
- There is no variation in the terms of options during the year
- The quantum and the price of the options have been adjusted due to sub-
division in the face value of shares
- Other than the employees stated in point no. 9, no other employee was
granted stock options exceeding 5% of the total grants or exceeding 1% of
the issued capital during the year
MANAGEMENT DISCUSSION AND ANALYSIS
ECONOMIC OVERVIEW:
The global economy is recovering better than expected. With the recovery
gaining traction, risks to global financial stability appears to be easing
out. Better growth prospects in many emerging economies and low interest
rates in major economies shall influence capital flows in emerging
economies. International Monetary Fund (IMF) estimates global GDP to grow
at 4.25% in 2010, following a 0.5% contraction in 2009.
Amongst economies of size, India continued to be second fastest growing in
the financial year 2009-10. Following a slowdown in the previous year,
Indian economy rebounded with a GDP growth of 7.4% as per the revised
estimate of Central Statistical Office, Ministry of Statistics and
Programme Implementation, Government of India. Sectors of manufacturing,
construction, trade, hotel, transport and communication contributed over
50% towards GDP.
Importantly, all these sectors maintained a sustained growth trend quarter-
over-quarter during the year. This trend together with the prediction of a
favourable south-west monsoon and accelerated spending on infrastructure
development shall help Indian economy return back to the GDP growth range
of 8.5-9.0% in the financial year 2010-11.
INDIAN TELECOM SECTOR:
India is the second largest telecom market in the world and is amongst the
fastest growing markets. The country offers robust growth opportunities
driven by strong growth fundamentals, increasing urbanisation, rising
income levels and favorable demographics. The majority of new customers are
likely to come from the rural areas with inadequate basic infrastructure
and limited or no connectivity, demanding lower tariffs for voice calls and
value added services like information about market and commodity prices,
weather updates, health updates coupled with vernacular support at the user
interfaces. The urban consumer demands high speed internet connectivity,
audio video streaming, navigation and location maps, music downloads,
gaming, m-commerce, IPTV and mobile TV. Innovations like shared
infrastructure, new low cost technology and energy saving devices are
critical for roll-out in rural areas. M-Commerce will emerge as the future
growth engine as the industry shifts from voice to data services. The
convenience of the mobile phone as an instrument for conduct of financial
transactions and its potential in the process of financial inclusion and
growth has been well recognised. There is a large untapped potential for
these services in the Indian market. Given the huge growth potential
offered by the telecom industry through the increased coverage and newer
products and services, the competition will remain intense with both
existing and new players attempting to maximise their share of the growing
telecom pie.
Indian telecom sector continued to register a robust growth in the
financial year 2009-10 and added 191.55 mn new connections between April
2009 and March 2010. The number of telecom subscribers in India reached
621.28 mn and the overall teledensity reached 52.74% at the end of March
2010. Subscription in urban areas grew to 420.51 mn, recording an annual
growth of over 37% and taking the urban teledensity to 119.45%. Rural
subscriptions grew by over 62% to cross the 200 mn mark and improved the
rural teledensity to 24.31% during the year.
While wireline connections de-grew by 2.61% during the financial year 2009-
10, the growth of the telecom sector was driven by wireless segment. The
wireless segment grew by 49% during the year reaching 584.32 mn as on March
31, 2010.
Broadband subscriptions reached about 8.75 mn at the end of March 2010.
Broadband connectivity has reached 4,044 cities; 5,431 block headquarters
and 613 district headquarters covering about 106,559 villages.
RECENT DEVELOPMENT IN REGULATIONS:
Telecom sector is one of the highly regulated sectors in India. Beside
Department of Telecom, the Telecom Regulatory Authority of India set up by
the Government of India is the nodal authority, which regulates the telecom
services including fixation/revision of tariffs for telecom services in
India. During the previous year the key regulatory changes were as follows:
Regulatory Changes
* Auction of 3G and BWA:
On February 25, 2010, DoT issued a notice inviting application (NIA) for 3G
auction to invite potential bidders to apply for 3G (2.1 GHz) and BWA (2.3
GHz) spectrum auction. The 3G mobile services will allow high-speed content
download and broadband services. BWA (Broadband Wireless Access), also
known as WiMAX in international jargon is wireless (not mobile) broadband
access technology.
The successful bidders will be allowed to offer 3G services on commercial
basis from September 1, 2010 while fulfilling roll-out obligations within
five years from the time of the grant of spectrum.
* Mobile Number Portability:
On September 23, 2009, TRAI issued 'Telecommunication Mobile Number
Portability Regulations, 2009'. Subject to fulfillment of certain
conditions, the Regulation will allow a mobile subscriber to switch to
another service provider with in the same licensed area at a nominal
charge. The date of enforcement of the Regulations is yet to be notified.
* Launch of Calling Card by Long Distance Operators On August 21, 2009, DoT
has allowed the national and international long distance operators to offer
voice service excluding IN based services i.e. tele voting, toll free
service, value added services, ringtones and local voice service, through
calling cards.
* Restriction on Sale of Equity :
On July 23, 2009, DoT, vide a circular, introduced a lock-in period for
sale of equity by a person who hold 10% or more share capital in UAS
licensee company on the effective date of UAS license and whose net-worth
is taken into consideration for determining the eligibility for grant of
UAS license, till completion of 3 years from the effective date of the UAS
licence or till fulfillment of all the rollout obligations, whichever is
earlier. The circular permits issue of additional equity share capital by
the UAS licensee company by way of private placement/ public issues and
bars declaration of dividend in such cases. However, the provision of lock-
in period will not apply, for transfer of shares in favour of lending
financial institutions/banks in pursuance of enforcement of pledge of
equity shares with them, in the event of defaults committed by the UAS
licensee company.
* Withdrawal of Benefit of Exemption of Licence Fee for Fixed Wireline
Services in Rural Areas On May 15, 2009, TRAI withdrew its order /benefit
of licence fee exemption for fixed wire line services in rural areas which
they had provided to all operators vide their earlier order dated August
29, 2008.
* Value Added Services:
On April 27, 2009, TRAI issued a direction requiring the service providers
to procure written consent of the subscriber before activation of
chargeable VAS such as Hello Tunes etc. by dialing certain special keys
like *'. The direction also requires service providers to seek explicit
consent of the customer for activation of the value added services in case
the provision of VAS is through mechanism of pressing of special keys.
Regulatory Work in Progress
* Subscriber re-verification:
On September 30, 2009, DoT issued a direction mandating the re-verification
of existing subscriber base within a time period of maximum 1 year w.e.f.
November 1, 2009.
* DTH Tariff Related:
On December 24, 2009, TRAI issued a consultation paper on tariff related
issues for DTH services. The paper takes up the following important issues
for deliberations:
- Need to differentiate various packages for the purpose of wholesale
tariff determination and related terms and conditions
- Need for a DTH operator to extend a-la-carte mode of service provisioning
of a TV channel to the subscriber and related terms and conditions
* Passive Infrastructure Related:
On January 12, 2010, TRAI issued a pre-consultation paper seeking views of
the industry players to bring the telecom tower infrastructure business
under the ambit of regulations. TRAI also wanted to review the impact of
radiations from telecom towers and right of way in erecting these towers.
* Revised Spectrum Charges:
On February 25, 2010, DoT announced revised 2G spectrum charges for both
the GSM and CDMA operators, which if implemented, would be effective from
April 01, 2010. Based on the TDSAT order, as on date the order has not been
enforced by the Government.
* Security Clearance for procuring Telecom Equipments/Software:
On February 25, 2010, DoT made it compulsory for all telecom operators to
get security clearance on all network equipments before it is imported into
India. The direction also required the equipment vendors to transfer
technology to Indian manufacturers within 3 years of selling machines to
any Indian operator.
* Co-location Charges:
On March 17, 2010, TRAI issued Consultation Paper on co-location charges
containing detailed terms and conditions for co-location, measures to
ensure transparent and non-discriminatory treatment in pricing,
provisioning of co-location facilities and sharing of cost of co-location
by the seeker and provider.
OPPORTUNITIES AND THREATS Opportunities:
Untapped Landscape:-
Indian telecom market holds large untapped potential in rural areas. With
majority of the population yet to get access to telecommunication and
teledensity at ~ 53% with rural teledensity at ~ 24%; there is significant
growth potential for the sector. Urban areas present potential for wireline
and internet services. Rural areas shall provide robust and sustainable
growth in mobile services segment.
New Technologies and Paradigms:
After the exponential growth in recent years, Indian telecom sector is
poised to transit towards better technology and service delivery. Coming
years look even more exciting. One ofthe key drivers in this direction is
roll out of 3G and BWA technology. New technologies such as HSPA, Wimax and
Wifi will extend the reach of telecommunication services and offer new
platforms for development of new businesses.
Triple Play services will gather momentum with operators getting into media
space with IPTV and DTH platforms. The growing demand for digital content
will be the driver for accelerating growth of these services. Teleport
Services and Digital Media Exchange (DMX) will get content aggregation
capabilities and will open avenues for the 4th screen - Cinema for the
telecom domain.
Value Added Services (VAS) is the sum of non-voice consumer utilities. This
includes SMS, MMS, music downloads, various updates and alerts, mobile TV,
video streaming, sophisticated m-commerce applications etc. Prior to 2008,
majority of VAS revenues were attributable to short messaging services.
However, recent trends indicate that this trend is evolving. With greater
penetration of new services, availability of relatively inexpensive
feature-rich handsets and consumer education, VAS other than SMS is gaining
importance. It is further expected that over the next few years, non-SMS
VAS would become a dominant contributor to VAS revenue.
Growing Overseas Footprints:
Sri Lanka and Bangladesh offer exciting potential for the Company and it is
using its experience of Indian telecom market to build a low cost business
model for these markets as well.
Strong Strategic Partnerships:
Forming enduring partnerships of strategic importance successfully is an
intrinsic part of Bharti Airtel's DNA. Company's strategic alliance with
Singtel has enabled it to continuously enhance and expand its
telecommunication network in India. Singtel's investment in Bharti Airtel
is one of their largest investments in the world outside Singapore. IBM is
Bharti Airtel's partner for all business and enterprise IT systems.
Company's contract with IBM caters to technology evolution, scale, tariff
changes and subscriber growth. More than 90 hardware, software and service
providers serve Bharti Airtel through IBM. Ericsson, Nokia Siemens and
Huawei are network equipment partners of Bharti Airtel. During the year,
the Company had awarded a network expansion contract each to Ericsson
(worth USD 1.3 bn) and Nokia Siemens (worth USD 0.7 bn). The Company has
formed a Joint Venture with Alcatel Lucent to manage its pan-India
broadband and telephone services. This partnership will help in Company's
transition to next generation networks in order to offer advanced services
like high-speed internet, triple play, mediarich VAS, MPLS and VPN.
During the year, the Company formed a strategic alliance with Cisco for
jointly producing products and services for the Small and Medium Businesses
(SMB). Partners like Juniper, ECI, Tellabs, Wipro provide various
equipments for Telemedia and Long Distance Services of the Company. IBM
Daksh, Mphasis, Firstsource, Teleperformance, Aegis, and Hinduja TMT are
associated as call centre partners and provide superlative experience to
Company's customers.
In addition, the Company works with several globally renowned organisations
like On Mobile, Yahoo, Google, Cellebrum and Comviva to improve its
customers' VAS experience via services like CRBT, music on demand, e-mail
services etc. During the year, the Company formed a strategic partnership
with Limelight Networks for Content Delivery Network (CDN) services.
These strategic partners have been an integral part of Bharti Airtel's
achievements over the years. They have supported its ambitious growth
plans, helped it launch new and innovative products in the market and
maintain its leadership position in the telecom industry. Besides these
strategic partners, Bharti Airtel is also associated with a large number of
partners, spread across the globe, who support its product and service
requirements. The Company seeks regular feedback from its partners through
Annual Partner Meets, Satisfaction Surveys and Regular Management
Interactions. These initiatives play an important role in developing an
enduring relationship.
Threats
Global Economic Environment:
The global economy is recovering at varied pace with the developed
economies progressing at a very moderate pace. Large MNC's operating from
India are still cautious with their expansion plans, which might possibly
impact Bharti Airtel's Enterprise Services Business. However, with
increased focus on Small and Medium businesses and enhanced portfolio of
telecommunications solutions, this threat can be mitigated.
Increased Competition:
Financial year 2009-10 witnessed entry of several new operators and roll-
out of their services in various circles. The market also saw entry of many
international and long distance operators. The resultant increase in
competition can lead to further lowering of tariff and put pressure on
marketing expenses. Bharti Airtel, with significantly large and diverse
customer base; integrated suite of products and services; pan India
operations; and a very strong Airtel brand is best positioned to emerge
stronger from the market environment and will retain its leadership
position in the market.
REVIEW OF OPERATIONS:
Bharti Airtel put up a strong performance in the financial year 2009-10.
With the highest-ever net addition of 34 mn customers in a single year, it
grew its customer base by 35% and closed the year with 131 mn customers on
its network in India. Mobile services clocked over 127 mn subscribers,
recording a growth of 36%. The Company maintained its leadership position
as the largest mobile service provider by customer base and its market
share stood at 21.8%. 95.8% of Bharti Airtel's 127.62 mn mobile customers
were using pre-paid services as at March 31, 2010. The Company's Telemedia
Services customer base grew by 12% to reach 3 mn.
The Company closed the financial year 2009-10, carrying over 2 bn minutes a
day on its network. It added 31 census towns and 24,027 non-census towns
and villages under its coverage and grew the population coverage to 84%
(from 81% as at March 31, 2009). The Company's optic fibre network grew to
126,357 route kms with addition of 25,020 route kms during the year.
SEGMENT- WISE PERFORMANCE
Mobile Services:
Mobile services segment is the dominant contributor to the Company's
revenues and customer base. The Company expanded its operations to 5,091
census towns and 438,933 non census towns and villages in India during the
year, covering 84.2% of the total population. In India, the customer base
increased to 127.62 mn customers as on March 31, 2010 from 93.92 mn
customers a year ago.
In Sri Lanka, Company's subscriber base crossed one million customers
during the year. Operating across 16 administrative districts of Sri Lanka,
the Company launched 3.5G services in major towns. Company's distribution
strength has gone up with a widened network of 23 distributors and over
15,000 retailers across the country.
The Company viewed Bangladesh, with a population of over 160 mn and
teledensity of 32%, as a promising market. It started mobile services
operations in Bangladesh during the year with the acquisition of 70% stake
in Warid Telecom of Bangladesh. With a sizeable customer base, Warid
Telecom offers mobile services across 64 districts and deploys a
distribution network of 124 distributors and 34,000 retailers. Revenues
from mobile services for the financial year were Rs 325,717 mn,
representing a growth of 7% over the revenues in the previous financial
year. Mobile services contributed 78% to the consolidated revenues. The
growth in revenues was despite of the growing competition with the entry of
new players, coupled with significant reduction in tariffs during financial
year 2008-09.
Key financial results for the year ended March 31, 2010
Particulars Financial Year Y-o-Y
2009-10 2008-09 Growth
Total revenues 418,295 373,521 12%
EBITDA 168,473 152,858 10%
PBT 108,954 85,910 27%
PAT 91,631 78,590 17%
Gross assets 721,163 586,616 23%
Capital expenditure 136,071 166,945 -18%
Capital productivity 58.00% 63.67% -
(Amount in Rs mn, except ratios)
FINANCIAL PERFORMANCE:
Particulars Financial Year Y-o-Y
2009-10 2008-09 Growth
Customers (mn) 127.62 93.92 36
Gross revenue (Rs mn) 325,717 304,188 7
EBIT (Rs mn) 69,379 68,746 1
Telemedia Services:
Under telemedia services, Bharti Airtel provides broadband, data and fixed
line telephone services across 89 cities of India. The focus in recent
years has been on customised telecom/IT solutions for small and medium
sized businesses. The Company strategically continues to focus on cities
with high revenue potential. Total customer base for telemedia services
reached 3.07 mn, recording an increase of 12% over 2.72 mn customers at the
end of financial year 2008-09. Of this, 1.30 mn customers were subscribing
to broadband services.
Percentage of customers subscribing to broadband services has increased
from 39.3% as at end of financial year 2008-09 to 42.3% as at end of
financial year 2009-10. The Company is committed to provide superior
internet browsing experience to all its customers through high speed plans.
The Company has introduced 4 mbps speed plans and has upgraded all its
existing customers to a minimum of 512 Kbps speed at no extra cost.
The revenues from telemedia services for the financial year were Rs 34,194
mn, representing a growth of 2% over the revenues in the previous financial
year.
Key financial results for the year ended March 31, 2010
Particulars Financial Year Y-o-Y
2009-10 2008-09 Growth
Customers (mn) 3.07 2.72 13
Gross revenue (Rs mn) 34,194 33,426 2
EBIT (Rs mn) 7,518 8,188 -8
Enterprise Services:
Bharti Airtel's enterprise services is fast emerging as India's leading
integrated communications solutions provider for large enterprise and
carrier customers, in and beyond India. Offering a full suite of
telecommunication services across voice, data, network integration and
managed services; Bharti Airtel is a trusted partner to India's leading
organisations.
Enterprise services owns a state of the art national and international
network consisting of cable infrastructure and global Points of Presence
(PoP) and everything else that is required to provide unmatched
communication solutions to its partners and clients. Its national long
distance infrastructure comprises of 126,357 route km of optical fibre,
over 4,488 MPLS and SDH POPs and over 1,700 POIs with the local exchanges,
providing a pan India reach in 304 LDCA's and 1,741 SDCA's.
The international infrastructure includes ownership of the i2i submarine
cable system connecting Chennai to Singapore; consortium ownership of the
SMW4 submarine cable system connecting Chennai and Mumbai to Singapore and
Europe; and its investments in new cable systems such as Asia America
Gateway (AAG), India Middle East and Western Europe (IMEWE), Unity North,
EIG (Europe India Gateway) and East Africa Submarine System (EASSy),
extending our reach all across the globe with over 225,000 route kms,
covering 50 countries spread over 5 continents. Enterprise services serves
as the single point of contact for all telecommunication needs for
corporate customers in India. It specialises in providing customised
solutions to address unique requirements of different industry verticals:
BFSI, IT, ITeS, Manufacturing and Distribution, Media, Education, Telecom,
Government, PSUs and Retail among others.
The revenues from the enterprise services for the financial year were Rs
84,386 mn, representing a growth of 1% over the revenues in the previous
financial year.
Key financial results for the year ended March 31, 2010
Particulars Financial Year Y-o-Y
2009-10 2008-09 Growth
Gross revenue (Rs mn) 84,386 83,417 1
EBIT (Rs mn) 34,248 31,637 8
Digital TV Services:
Bharti Airtel's Digital TV Services is amongst the frontrunners in DTH
domain. In addition to a superior viewer's experience, the Company offers
innovative packages like pay per view content and interactive services. It
launched digital TV recorder, enabling customers to record live TV content
through their mobile phone.
With a customer base of 2.5 mn; and services spreading across 5,000 towns
and 15,000 villages; Digital TV services is well placed to increase its
customer and market share, and eventually emerge as the market leader.
Passive Infrastructure Services:
Bharti Infratel Limited, a subsidiary of Bharti Airtel, provides passive
infrastructure services on non-discriminatory basis to all telecom
operators in India. Bharti Infratel deploys, owns and manages passive
infrastructure in 11 circles of India and also holds 42% share in Indus
Towers (a joint venture between Bharti Infratel, Vodafone and Idea
Cellular). Indus operates in 16 circles (4 circles common with Infratel, 12
circles on exclusive basis). Bharti Infratel has 30,568 towers in 11
circles, excluding the 35,066 towers in 12 circles for which the right of
use has been assigned to Indus with effect from January 01, 2009. Indus
Towers has a portfolio of 102,938 towers including the towers under right
of use.
Key financial results for the year ended March 31, 2010
Particulars Financial Year Y-o-Y
2009-10 2008-09 Growth
Gross revenue (Rs mn) 70,082 50,913 38
EBIT (Rs mn) 6,327 3,204 97
RISKS AND CONCERNS:
Bharti Airtel has a robust process to identify key risks and prioritise
relevant action plans that can mitigate these risks. Key risks that may
impact the Company's business include
* Changes in regulatory environment:
Despite being a regulated and competitive sector, Indian telecom sector is
maturing fast and continues to offer level playing field. Larger players
control majority of market share and regulatory authorities keep consumers'
interest at the forefront. All this makes India a promising telecom market.
Private players have instrumented the telecom growth in the country and
Bharti Airtel has led from the front. In the process, it has created a
large pool of loyal customers and talented human resource capital, in
addition with a vibrant Airtel brand.
* Technical failures or natural disaster damaging telecom networks:
The Company maintains insurance for its assets, equal to the replacement
value of its existing telecommunications network, which provides cover for
damage caused by fire, special perils and terrorist attacks. Technical
failures and natural disasters even when covered by insurance may cause
disruption, however temporary in its operations. The Company has been
investing significantly in business continuity plans and disaster recovery
initiatives which will enable it to continue with normal operations under
most circumstances.
* Change in existing technology increasing capital cost:
In order to remain competitive, the Company consistently introduces
sophisticated new technologies. If the new technologies it has adopted, or
which it intends to adopt, fails to be cost effective and accepted by its
customers, the Company's ability to remain competitive could be affected.
The Company has prudently deployed new technologies after assessing the
experience, its international partners have had in deployment processes
before choosing to do itself.
* Increased competition bringing tariff down temporarily:
Telecom industry in the year gone by has witnessed entry of various new
players in the telecom space which has resulted into stiffening of
competition and drop in tariffs. The Company foresees this to be a short
term to a medium term phenomenon.
* Talent acquisition and retention:
The growth of the Indian economy, coupled with entry of new players in the
telecom space has led to an increased requirement for talented managerial
personnel. The Company believes that talented manpower is a key strength.
Given the track record and success of itsemployees, other companies often
look to Bharti Airtel as a hunting ground for talent.
As a retention strategy, the Company has issued many schemes including
ESOPs. Further, in order to mitigate the risk it places considerable
emphasis on development of leadership skills and on building employee
motivation. Acquiring right talent which aligns with current resource pool
and needs arising from emerging technologies is equally important as
retaining existing talent. The Company has a stringent process in place for
acquiring new talent with right competency and leadership traits. There is
concerted focus on building right capabilities in current and new
businesses through intensive training and development of employees at all
levels.
INTERNAL CONTROL SYSTEMS:
The Company's philosophy towards control systems is mindful of leveraging
resources towards optimisation while ensuring the protection of its assets.
The Company deploys a robust system of internal controls that facilitates
the accurate and timely compilation of financial statements and management
reports; ensures the regulatory and statutory compliance; and safeguards
investors' interest by ensuring highest level of governance and periodical
communication with investors. M/s. PricewaterhouseCoopers Private Limited
is the internal auditors of the Company, who conducts the audit and submits
quarterly reports to the Audit Committee. The Audit Committee reviews the
effectiveness of the internal control system in the Company and also
invites the senior management / functional directors to provide an update
on their functions from time to time. A CEO and CFO Certificate forming
part of the Corporate Governance Report confirms the existence of effective
internal control systems and procedures in the Company. Company's Internal
Assurance Group also conducts periodic assurance review in order to judge
the adequacy of internal control systems. It simultaneously reports to the
Audit Committee of the Board, Chairman and Managing Director of the
Company.
MATERIAL DEVELOPMENTS IN HUMAN RESOURCES:
Bharti Airtel considers its employees to be the most valuable asset. Its
empowering work culture helps it recruit, nurture and retain some of the
best available talent in the markets it operates in.
Development is the core element of its approach to human capital. It
recruits people with an objective to create a pool of future leaders.
Throughout their tenure, employees collaborate with the Company in their
potential assessment and career and development planning. It fosters a
culture of rewards and recognition for right results and behaviors.
Deploying best practices in HR including mentoring, coaching and continous
training; it continues developing future leadership from within the
Company.
The Company undertakes several strategic initiatives in order to retain
best talent. Some of them include differentiated compensation, job
enrichment and rewarding with special training interventions. During the
year, 72% of B3 positions and 84.6% of EC positions were filled internally
and the Company retained 96.9% of the top talent.
With new revenue streams like m-commerce and m-entertainment becoming
important, the Company stayed focused to hire domain specific specialists
and inducted a total of 254 employees from non-telecom sector during the
year.
The Company won 2010 Gallup Great Workplace Award' once again and also
featured amongst the top 10 companies in BT Best Company to Work for'
survey conducted by Business Today magazine. One of the key pillars of
Bharti Airtel's vision 2010 is to be targeted by top talent' and it is
well on course to realise it.
As on March 31, 2010, Bharti Airtel's employee count stood at 18,354 as
against 24,538 employees on March 31, 2009. Bharti Airtel transitioned some
of its employees in Network and BPO outsourcing initiatives. Over 4,000
employees moved to newly formed joint venture with Alcatel Lucent from its
access network group.
During the financial year gone by, the Company made strategic
organisational changes to enhance its focus on expanding operations to
international markets beyond India and South Asia and further consolidate
leadership position in India. Manoj Kohli now heads the International
Business Group leading Airtel's global foray as CEO (International) & Joint
Managing Director. Sanjay Kapoor has been promoted to the position of CEO
(India & South Asia).
OUTLOOK:
Being the frontrunner in Indian telecom space, Bharti Airtel's outlook is
promising in line with the future growth potential of the sector. Company's
successful forays in Sri Lanka and Bangladesh add two emerging markets to
its growth potential. Its business offerings across the complete telecom
services to retail and institutional customers and geographic spread
spanning most of the urban and rural India enables it to benefit from all
kind of growth opportunities in the Indian market. Its pursuit of
international telecom operations shall further bolster its growth prospects
in coming years. Bharti Airtel lays stronger emphasis of data business
across domestic and international markets, going forward. It believes data
products and solutions drive a significant share of the overall growth. It
will continue to focus on DTH business and build scale in newer verticals
of commerce and entertainment.
Bharti Airtel's unwavering focus on cost and synergies across the
organisation will keep it in good stead and this very business model augurs
well for its expansion and success in new geographies.
The Company has entered into definitive agreements with the Zain Group to
acquire Zain Africa B.V., for an enterprise value of USD 10.7 bn. The
Company, through its overseas wholly owned subsidiary companies, will
acquire Zain Africa's mobile operations in 15 countries with a total
subscriber base of over 42 mn, resulting in a footprint covering 1.8 bn
people across Asia and Africa.
Corporate Social Responsibility:
Driven by the desire to create a meaningful difference in society; at
Bharti Airtel we make conscious efforts to achieve higher socio-economic
goals. Over the years, we have aligned our business processes and goals to
make a more deep rooted impact on the society directly. There is an
absolute belief that the transformational projects undertaken by us are
contributing towards strengthening trust of all our stakeholders.
India being a youthful and growing country, education is considered to be
the most important tool for social and economic development of the nation.
Most of Bharti Airtel's welfare activities are routed through Bharti
Foundation, the philanthropic arm of the Bharti Group. Set up in 2000, the
Foundation aims to bridge the existing education divide and make quality
education accessible to underprivileged children in rural India.
Bharti Airtel's passionate participation in various programs of the
Foundation got recognised when Bharti Airtel received the Corporate Social
Responsibility Awards 2009-2010' of Business World-FICCI-SEDF (FICCI Socio
Economic Development Foundation).
Temples of Learning:
Under the aegis of its flagship program, the Satya Bharti School Program,
Bharti Foundation imparts primary and higher education to help in both
holistic and academic development of underprivileged children and youth
across the rural pockets of India. Girl child gets special focus in these
temples of learning, radiating knowledge and excellence. This helps them
connect with their own community and stay rooted to their local culture.
The senior school program trains students in vocational skills to help them
emerge as employable citizens and contribute towards community development.
Currently 236 Satya Bharti Primary Schools are operational across 5 states
of Punjab, Rajasthan, Haryana, Uttar Pradesh and Tamil Nadu; reaching out
to approximately 30,000 children and recruiting over 1,000 teachers from
local communities. Bharti Foundation launched the Satya Bharti School
Program in Murshidabad district of the state of West Bengal this year. The
foundation stone for this new initiative is a first as a part of the
expansion plan to set up 10 such primary schools in the district in due
course of time.
Of these 236 operational schools, 49 schools are adopted government
schools, under public private partnership reaching out to about 6,000
children, across Neemrana and Amer blocks of Rajasthan. The adopted schools
continue to follow the state-prescribed curriculum, supplemented by
interesting teaching-learning material and processes developed by the
curriculum design team of Bharti Foundation. The most striking achievement
of the program has been the participation of girls which gets reflected in
a healthy girl:boy ratio of 47:53.
Taking everybody along:
Community participation and involvement continues to be an integral part of
the Satya Bharti School Program. Our efforts at making community an
essential part of our operations have not only earned us respect, support
and buy-in from opinion leaders, but have also started contributing to
future growth of the community. Surely there is a positive behavioural
change among the community members.
Design for Giving:
Social issues in the community are getting addressed through Community
Development Programs. 2,100 children across 91 Satya Bharti Schools
participated in the Design for Giving contest. They undertook various
campaigns in their own communities like girl child awareness rallies,
combating global warming, literacy drives, health and hygiene drives, drug
abuse, environment, campaigns against child marriage etc.
The most effective amongst these campaigns the 'Campaign against Child
Marriage' was undertaken by 32 students of the Satya Bharti School in Lordi
Dejgara, Jodhpur, Rajasthan. Seeing rapid increase in the number of their
friends getting married or engaged at an early age, the students identified
Direct involvement of community in school activities is undertaken in the
programs. 1,400 community volunteers signed up to take classes during the
summer camp held in June 2009. They took sessions in local arts and crafts,
storytelling and music. Community members also volunteer their services for
other school related activities.
The program aims to provide academic support to children, healthy
nutritious mid day meals and also contribute to their holistic development.
Launched in 2006, just three years into operation the schools have, slowly
but surely, started to make an impact on the children, parents and the
village community.
Design for Giving:
Social issues in the community are getting addressed through Community
Development Programs. 2,100 children across 91 Satya Bharti Schools
participated in the Design for Giving contest. They undertook various
campaigns in their own communities like girl child awareness rallies,
combating global warming, literacy drives, health and hygiene drives, drug
abuse, environment, campaigns against child marriage etc.
The most effective amongst these campaigns the 'Campaign against Child
Marriage' was undertaken by 32 students of the Satya Bharti School in Lordi
Dejgara, Jodhpur, Rajasthan. Seeing rapid increase in the number of their
friends getting married or engaged at an early age, the students identified
this as a serious peril affecting their community. As a part of this
campaign, the students undertook rallies, performed role-plays against
child marriage and also organised meetings with senior community members to
discuss the issue. The initiative was supported by all community members
and was well accepted. It helped them to prevent marriages of 16 children
in the village and neighbouring villages. Inspired, many parents pledged
not to marry their children before an appropriate age.
Ushering in a bright future:
Bharti Foundation has partnered with premier institutes like the Indian
Institute of Technology, Delhi in 2000 to set up the Bharti School of
Telecommunication Technology and Management, IIT Delhi. 200 students are
supported every year to pursue courses in the field of telecommunications.
The School has been set up with the vision 'to develop telecom leaders
through excellence in education and research'. The Foundation has also set
up the Bharti Centre for Communication, Mumbai in partnership with IIT
Mumbai.
The Bharti Scholarship and Mentorship program has also been instituted to
support academically brilliant students from financially weak backgrounds.
Under this program Bharti Foundation has also partnered with Udayan Care to
support the Udayan Shalini Fellowship Program. Currently 232 scholars are
being supported under the Bharti Scholarship and Mentorship Program.
The Bharti Centre for Entrepreneurial Initiatives set up in 2000 as a joint
initiative with the Entrepreneurship Development Institute of India (EDI)
promotes, develops and facilitates entrepreneurship and works towards
encouraging entrepreneurship among young individuals. The Bharti
Entrepreneur Award honours first generation entrepreneurs and emphasises
the importance of structured training in the area of entrepreneurship. Two
Bharti fellowships are also awarded by the Centre to motivate students to
pursue entrepreneurship training despite financial hindrance.
ACT - A Caring Touch:
ACT- A Caring Touch is the Company's Employee Philanthropy Program which
encourages employees as well as their families to donate their time,
skills, knowledge, materials and money to either Bharti Foundation or other
charities empanelled under the ACT Program. The program provides a common
platform to all employees by providing them total freedom and flexibility
to contribute towards causes of other NGOs like CRY, Helpage India, SOS
Children's Villages of India, Cancer Aid and Research Foundation, National
Association for the Blind, etc. All monetary donations are matched by the
Company. Launched in 2006, the ACT program has grown at a remarkable pace.
80% of total contributions made by employees under the ACT program are
generated towards the Satya Bharti School Program of Bharti Foundation.
In one such initiative 'Freedom 2 Learn' week was organised, which featured
an innovative auction in which top management team offered to host
employees for breakfast, lunch, dinner, sports activities etc. The auction
donation in ACT through these bids was over Rs 2 mn which was equally
matched by the Company. Bharti Foundation takes full responsibility of
reporting to its donors about the utilisation of their funds and impact
reports of the programs, for which the funds have been received. The
Foundation ensures to direct all the funds towards its programs and allows
surprise visits by Bharti employees to the project sites.
Instituted in 2009, the ACT Ambassador awards recognised the unconditional
efforts and commitment of employees. As an initiative under ACT, Joy of
Giving week was celebrated in the Company in which the employees
participated in 5 campaigns namely Give Dignity (clothes), Give Sight (eye
donation), Give Life (plantation), Give Joy (drawing books & crayons etc)
and Give Hope (donation through our ACT program).
Beyond Corporate Life:
Employee volunteering is an important component of the ACT -Employee
Philanthropy Program. Employees across the organisation are encouraged to
visit any charity of their choice and spend a day away from rigorous office
schedules and deadlines. The program has been set up to inspire people to
volunteer for charitable causes and also help create opportunities among
employees to support a cause by donating their time, skills, knowledge and
money. The group has also put together a volunteering policy, where
employees can avail an additional day's paid leave to volunteer with a
charity.
The employees along with members of senior leadership team keep on visiting
the schools and interact with students and their teachers during the day
they spend at the school. Some of the employees even participate in
community awareness programs.
Disaster Relief and Support:
Bharti Airtel has a nation-wide presence that has grown at an exponential
rate in the recent years. Each local office undertakes special programs for
the local community, thereby touching their lives directly. From time to
time various initiatives like material collection, tree plantation,
adoption of old age homes and orphanages, blood donation camps, etc are
undertaken for the welfare of fellow beings in need.
Bharti Airtel has contributed Rs 10 mn each for helping in flood relief for
Chief Ministers Relief Funds for Andhra Pradesh & Karnataka states.
Educational support was provided to children of Guwahati blast victims in
North East states. During Mumbai floods last year, employees climbed up the
towers to restore the networks so that our customers can connect with their
near and dear ones. Company's Rapid Response Team' responded to the
Kashmir earthquake by bringing more than 2,000 food packets and water
bottles to the affected area. Money, clothes, woolens and blankets were
also collected from employees to distribute among earthquake victims.
Think Green:
Bharti Airtel is committed towards taking steps to protect environment
either by direct initiatives or conserving the by-products to reduce fossil
fuel consumption. We have been running power saving programs in our offices
and on network operations for over 5 years now. These programs help in
reducing costs and our carbon footprint. Airtel has pioneered the Green
Shelter concept for BTS. This unique shelter comes with optimal cooling,
power and thermal management systems, minimising the running of backup
systems like diesel generator sets. The solution reduces operational costs
by as much as 40% as compared to conventional shelters and avoids being a
cause of global warming, as the greenhouse gas emissions are minimal. Green
IT has been a focus area at Airtel and has been a key in all IT decisions
and strategies which includes IT infrastructure at our office buildings &
data centers. Airtel and its partners are working to assess our IT energy
efficiency holistically, which will help the Company apply an end-to-end
strategy that integrates the key components of the energy picture. The
Company has taken initiatives to achieve vision of environment conservation
and a team is driving its Green' program through the key focused areas of
paperless initiative, data center optimisation, desk-side initiatives and
employee awareness programs.
Initiatives have been taken to reduce paper in the day to day working
operations both for internal as well as external customers. Processes are
introduced to enable paperless workflow based methodologies and approval
mechanisms within the Company. This automation not only provides higher
efficiency but has proven to be extremely useful in reducing consumption of
paper within the organisation.
Bharti Airtel's initiative of e-bill to reduce paper based transactions for
statements has been quite successful. With post paid customer base of more
than 10 mn, this initiative is a big area to achieve environmental
conservation. The Company promotes usage of e-bills to its customers via
several incentives from time to time. Being a technology oriented industry;
Bharti Airtel has taken various significant initiatives in data center
domain to reduce electricity consumption. As a part of first phase we have
already consolidated 26 data centers to 4 regional data centers and saved
space as well as power. In the second phase of this initiative, we are
working on server/ storage consolidation within the same location and
target to deliver 10% - 15% enhanced productivity.
The Company uses electrical equipments with high energy efficiency and low
anti environment emissions. This is a key factor while procuring any
electrical equipment. Initiatives like use of water based chilling unit at
new data centers for cooling instead of gas based are helping in protecting
the environment and depletion of ozone layer.
As part of desk side initiatives, Bharti Airtel is migrating most of its
users from Desktop PC to Laptops. This movement is expected to give a
saving of close to 3 MW of power which would be sufficient to light close
to 6,000 houses in rural India at an average consumption of 500 W per
house. All desktops / laptops which are refreshed with newer ones are
released to be donated to Bharti Foundation for educating the children
studying at the Satya Bharti Schools.
There has also been an initiative to move towards Green OS (Windows 7),
which is expected to save power to the tune of Rs 2,000 per machine per
year, leading to huge saving of IT power. Various activities to render more
and more applications on mobile are underway; thus reducing the dependency
on desktop resulting in further reducing power consumption. Bharti Airtel
is associated with The Carbon Disclosure Project (CDP); an organisation
based in UK which works with shareholders and corporations to disclose the
greenhouse gas emissions of major corporations. From past three years we
have been constantly measuring our carbon footprint.
Waste Management:
Bharti Airtel has been able to reduce office waste by introducing simple
but effective practices like printing only when necessary, double sided
printing & photocopying and sending documents electronically. Bharti Airtel
undertook a dramatic transformation in work processes which has delivered
powerful dividends in terms of environmental friendliness. These
initiatives have managed to save approx 600,000 sheets of paper every year.
Bharti Airtel has in place a recycling and waste management program to
support the environment which also provides significant cost saving for the
organisation in long term. Bharti Airtel carefully planned a coordinated
approach with full support of the management & employees.
With the recycling program in force, the equipment does not go in the
market for resale; rather it is destroyed at an authorised centre which
follows environmental norms. This ensures that none of these parts fall in
hands of unsocial elements or end up in polluting the environment. The
recycling program covers end of lifecycle solution, asset recovery, brand
protection by destroying parts before recycling and certifications with
respect to waste disposal and elimination of environmental liabilities.
Bharti Airtel is in the process of finalising its Environment/Health &
Safety Policy (EHS) and will apply for ISO 14001 compliance' within the
next three years for each of its facilities.
The Company constantly explores for new and innovative ways of reducing the
consumption of natural resources, with the aim of leaving a better and
greener earth for generations to come.
Farmer Welfare:
Bharti Airtel believes that the real India lives in its villages and our
rapid rural penetration enables us to impact the lives of farmers. The
Company has been working with farmers' co-operative society IFFCO to
provide farmers with vital information around weather, mandi prices,
agronomy, horticulture, forestry, government schemes, etc. This is managed
through our joint venture with IFFCO called IFFCO Kisan Sanchar Limited
(IKSL).
IFFCO IKSL Programme Highlights
No. of states covered 18
Experts on panel 46
Total unique messages prepared 31,537
Questions on pelpline 34,212
Feedbacks from farmers 1,583
Success stories 984
Customer Welfare:
Airtel has also been instrumental in changing 2 lakh lives by infusing
confidence amongst rural India by offering the Speak English service. The
service offers lessons in spoken English using real life scenarios like how
to greet people, how to talk to women, how to interact in an interview etc.
and has specifically benefited many housewives & job seeking youth.
Internet with just 80 mn users in India limits the reach of the classifieds
services. Jobs on mobile, a utilitarian and livelihood enhancement service
from Bharti Airtel is bridging this information divide. It is enabling 5 mn
Indians to access relevant job posting through the largest Classifieds
content repository in the country. This service is being rendered by tying
up with the leading classified job portals. Jobs on mobile' has impacted
the lives of people from all walks of life including carpenters, plumbers,
ironsmiths, village youth, women etc and has so far delivered over 75 mn
matching alerts. |