Bhavesh Rajani
Bharti Airtel
Bharti Group, founded in 1976 by Sunil Bharti Mittal, has grown from being a manufacturer of bicycle parts to one of the largest business groups in India. With entrepreneurial initiatives and risk taking capabilities, Bharti has entered into diverse fields such as financial services, insurance, retail, wholesale and agro-business.
However, the group is known more for being in telecom with its brand Airtel. Share prices of its flagship company Bharti Airtel forms part of much coveted BSE Sensex and NSE Nifty. Not far back in the history, Bharti started telecom services business by launching mobile services in Delhi in the year 1995. With in no time Bharti Airtel became leading telecommunication service provider in the country with presence in
22 telecom circles. The company had a very strong customer base of 130.69 million customers in India as on March 31, 2010. The company also has big plans in Wi-Fi and 3G services in the country. Last couple of years were difficult for Telecom industry with increased competition and cut-throat tariff wars. Unperturbed by the competition Bharti continues to look for the opportunities within and outside the telecom sector. Bharti Airtel, after firmly establishing itself in India, is spreading its wings beyond geographical boundaries. In the year 2007, its Sri Lankan arm - Bharti
Airtel Lanka was granted license in the island. In January, 2009 the company commenced commercial operations and now has an aggregate of 1 million customers. It is Sri Lanka's fastest growing wireless operator. After the successful foray into Sri Lanka, the company entered the Bangladesh market by acquiring a majority stake in Warid Telecom in January, 2010.
The group was very keen in entering the African markets which the company believed to be one of the few high growth markets. In the first half of the year 2009, the company renewed its efforts for a partnership with MTN Group Limited. The envisaged partnership was expected to create a leading telecommunications service provider group aligning Bharti's market leading Indian business with MTN's market leading African and Middle Eastern operations. In the scheme of arrangement, Bharti was to acquire a 49% shareholding in MTN. MTN and its shareholders, in turn, were to acquire an approximate 36% economic interest in
Bharti. In the scheme of arrangement it was contemplated that Bharti would have substantial participatory and governance rights in MTN. At the same time
MTN will have economic interest in Bharti that would be equity oriented. MTN will also have representation on the Board of Bharti. Singapore Telecommunications, a major existing shareholder of Bharti, will continue to be a strategic partner and significant shareholder after the implementation of the potential transaction.
However, the deal fell apart by the end of September, 2009. Although, the deal was expected to bring significant synergistic benefits for both the companies and was also considered as a step towards cooperation between South Asia and South Africa by many, it could not materialise. This arrangement between the two commercial organisations required approval from the government of South Africa which

Bhavesh Rajani was not granted considering the overall scenario. Bharti Continued to explore international expansion opportunities with the focus on South Africa. Early
2010, Bharti Airtel Limited entered into an exclusive discussions for the acquisition of
Zain's African unit (Zain Africa BV). A lot of groundwork was required for the deal.
The process involved due diligence, regulatory approvals and signing of final documents.
External financing was also required and Bharti was able to easily tie-up the entire financing requirement. Moving on war footing, the company entered into a legally binding agreement with Zain Group ("Zain") to acquire Zain Africa BV in the month of
March 2010 at valuation of USD 10.7 billion. With the deal the Indian company acquired Zain's African mobile services operations in 15 countries with a total customer base of over 42 million. At the time of agreement Zain was market leader in ten of these countries. It enjoyed number two position in four other countries. It was largest ever cross-border deal in emerging markets. The company also become a major Indian MNC with operations in 18 countries across Asia and Africa with a customer base of over 180 million. However, Bharti has an insatiable desire to expand. In the month of August, 2010, the Board of Bharti Airtel approved the acquisition of 100 % of Telecom Seychelles Limited, the leading telecom operator of
Seychelles, for an enterprise value of USD 62 million. Telecom Seychelles had begun operations in 1998 by launching mobile services. With the acquisition Bharti will expand to have presence in sixteen African countries with overall presence to 19 countries. It is felt that the acquisition of Telecom Seychelles will benefit by leveraging the efficiencies of scale in the African operations. Telecom Seychelles has state of art facilities with the presence in 3G services.
1. Do you approve with the pace of expansion plans of Bharti?
Ans. Growth or expansion strategy is the most commonly accepted strategy by business houses. The organization tries to redefine business, enter new business etc. when growth becomes passion and organization seeks sizeable growth, it takes shape of an expansion strategy. Thus expansion if pursued or executed properly can turn an organization into a business power house.
Bharti went around expanding into unrelated fields such as financial services, insurance, retail, wholesale and agro-business, but the engine of B harti’s effort lay in its flagship company Airtel which generated the major chunk of revenues.
Airtel is a telecommunications giant holding a sizeable market share in the high growth Indian industry. Airtel went about aggressively expanding its business and gaining footprint across 19 countries.
The flagship company, Airtel went about in an inorganic manner to gain larger ground and a parabolic rise in its revenues in a relatively shorter span of time.
Airtel has gone for M&A, which is one of the fastest ways to grow. Airtel was able to best utilize the reserves on its book in order to traverse geographies through the inorganic mode of expansion.

Bhavesh Rajani
Organizations need to follow certain guidelines before embarking on its journey of expansion.
After ascertaining the growth path to be pursued, the pace of expansion is the most important issue an organization should contemplate upon.
The pace of expansion is a function of many factors-

The available reserves with the company

The opportunity of growth available

The age of the organization

The pace of growth of the sector organization is in

Overall economic growth

The internal mechanism & managerial pool available

The objectives and aspirations of the organization
Such many factors form the basis for ascertaining the amount/pace of growth the organization is willing to pursue.
The pace, extent and timing of growth cannot be same for all the organizations and is mutually exclusive to each organizations context.
A quick and responsive growth mechanism helps the Airtel in many ways-

Helps utilize its knowledge in tele-communications

Helps to gain larger market share

Pole vaults Airtel into an international player

Gaining access to developing economies

Getting ahead of competition
Rapid expansion though helps the organization stay ahead of competition and provides many benefits is not free from its share of pitfalls.
Pitfalls of rapid expansion-

Entering into wrong unrelated businesses

Unable to create synergies with its current businesses

Overleveraging the books of accounts and creating a unacceptable debt equity ratio

Diversifying into too many businesses making the organization unmanageable

Entering into countries with less scope for growth

Acquiring a company where Airtel is unable to create synergies

Bhavesh Rajani
According to Peter F Drucker, a business that grows at an exponential rate would soon gobble up the world and all its resources. Growth at a high rate for extended period of time makes a business exceedingly vulnerable
Such type of growth leads the organization into an unmanageable territory.
So taking into account the above factors Bharti Airtel’s growth in particular calls for a watchful eye. The growth is a parabolic one and can be justified for a shot span but is not digestible for a longer period of time.
Organization best understands that growth is not an overnight journey but is a sustained effort to improve and evolve, sometimes a bit radically and at times a bit cynically.
Though it is understandable for the organization to trust its capabilities, expansion should be pursued with some amount of skepticism and level headed judgment.
2. What precautions Bharti Airtel must take while entering global markets?
Ans. Globalization is a phenomenon whereby world becomes one market where geographical limitations become irrelevant. Going global has become one of the most acceptable growth options for the organizations whereby organizations look at manufacturing and selling across countries.
Depending on resource capabilities and aspirations Bharti Airtel should determine whether to market in few or more countries and decide as to how fast to cover the defined territory.
The following issues may be important for Bharti Airtel while choosing a country in which the company wants to do business.
Hodgetts suggested -(the following questions need to be answered)

Is the country a cost effective place ?

Is the market large enough for the goods and service offered by the company ?

What is the extent of governmental control ? What about the political climate there ?

What about the cultural environment ? is it very difficult to get along with cultural values an beliefs of people in the host country ?

What about restrictions on foreign investment ? Is it necessary to pass on control of operations to local partners invariably ?

Are there any specific benefits offered by the host country in the form of subsidies, tax rebates etc ?

Disincentives need to be also evaluated such as job creation quotas, wage and price controls, restrictions on profit repatriation, controls on the transfer of technology, labour regulations and other such factors.

Bhavesh Rajani
Further Garland and Farmer suggested, the specific location within a chosen foreign country where the Organization wants to kick start its operations is guided by factors such as: access to markets, proximity to competitors, availability of transportation and electric power, desirability of location for the employees coming from outside, availability of skilled labour at economical rates, etc.
A keen study of all these factors provides Bharti Airtel with precautionary guideline before embarking upon a journey to cross geographies and helps it to avoid a costly error of entering the wrong territory.
3. Do you think that organic growth is better for the company?
Ans. Growth strategy is a strategy whereby the organization attempts to expand market, increase sales or expand human resource base.
Organizations can pursue growth through two basic methods---
1) Organic growth-- Under Organic growth organization attempts to develop plant, machinery, geographies and/or customers by itself. The effort of the organization is towards undertaking growth/expansion of business through internal effort and activity.
2) Inorganic growth-- under inorganic growth the organization adopts to acquire a running company which helps it circumvent the cost, effort and gestation period to start a new business or grow an existing business.
Both of the growth strategies have their merits, a study of which will help us to better understanding.
Organic growth strategy-

As the business is developed internally from the very inception it is easy to integrate the same into the current organizational/business setup
 It is based on the theory of “slow but sure, wins the race”

As business is developed in a set methodical manner there is a lesser possibility of the same being a mismatch to organizations current scheme of things

It is generally noticed that organizations pursuing inorganic growth are less inclined towards over leveraging, which is beneficial in the long run.

Organically grown enterprises are generally backed by management as being
“brought up by them”

Organically grown enterprises are known to handle tougher times in a better fashion
Inorganic growth strategy-

Bhavesh Rajani

Helps to circumvent time of initiating a business. Acquisitions take lesser cost, as there is no gestation period to start an organization. It would be cost effective to acquire an already running and functional enterprise

Inorganic growth helps the organization to stay abreast with changing technology

Inorganic growth provides an direct revenue stream and market share to the organization

It can be used an easy tool for investment and helps the organizations to traverse geographies.

Inorganic growth provides organization with an edge over the competitors in current dynamic times as the organization is able to tap possible opportunities more swiftly

Diversification can be easily practiced with the help of M&A
Thus there are merits to both the forms of expansion. It’s generally witnessed that larger organizations are better equipped and willing to undertake inorganic form of expansion. On the other hand smaller organizations generally stick to the organic form of expansion as it is difficult for them to find necessary resources and managerial backup.
A judicious mix of both the forms of expansion is a better choice resorting to one or the other according to requirement and situation.
Thus it cannot be explicitly put as one form of expansion being superior or better than the other. Organization can choose the strategy according to its objectives and available resources and aspirations.
4. How far Governments should influence the decisions of commercial organizations?
Ans. With the passage of time government intervention into the functioning of business organizations have gradually.
There has been a constant increase in competition and lesser governmental control over business houses.
There is constant trend towards privatization and lesser governmental interference in businesses the world over. Such decrease in interference by governmental agencies has helped the organizations to thrive and grow faster. But this trend has also its share of pitfalls.
With the free reign in the hands of business houses there has been a constant rise in financial scandals by large and enterprises. This lack of intervention has allowed the larger organizations to utilize its resources in an unfair manner to their advantage. Many larger organizations have not flinched to resort to unfair means in order to curb competition and drive competitors out of the market.

Bhavesh Rajani
Thus it can be understood that a functional role of government is necessary in ensuring fair operation by the organizations.
Government has to take into account the larger interests of people of the country, the business organizations of their given country, its security and economic condition.
There cannot be a “one size fits all” governmental control for all the countries or industries.
An extreme measure of control or decontrol can never be a fruitful one. Thus a situational decision is the best possible one.
Still a suggestive list of factors to be studied in order to arrive at any decision can surely be provided. Thus the governmental intervention should be a function of-

Economic condition of the given country.

The nations security (whether positively or negatively affected by the deal)

The possible problems or opportunities that the business deal can create

The size of the organization and its CSR record

The size of the deal and its relevant impact on the business functioning in the country

Its impact on the people of that country at large

The sector in which the business transaction is occurring (whether the sector is a luxury or a necessity one)

Whether the business dealing/s is creating a condition of monopoly
For any queries---- rajanibhavesh@yahoo.co.in