Strategic Outsourcing at Bharti Airtel Limited

Strategic Outsourcing at Bharti Airtel Limited

Background

Sunil Mittal founded Bharti Airtel Limited in 1995 with $900 in start-up capital. His goal in the creation Bharti was to take advantage of the liberalization of the Indian telecom market. This included bidding for government licenses to operate as the first private mobile telecom service in the Delhi area. Bharti won the government contract and immediately launched its service, known as “Airtel,” using the Global System for Mobile communications technology or GSM.

Bharti like many of the large Indian organizations was run similar to family business. Sunil Mittal was chairperson and group-managing director, his brother Rakesh Mittal was a board director; Rajan Mittal, another one of Sunil’s brother, was the joint managing director, overseeing the functional directors of marketing, business development, corporate affairs, and corporate development. Akhil Gupta, joint managing director, had known the Mittals for many years and was with Bharti Airtel from the beginning.

Indian Market for Telecommunications

“””Before the 1990s, India’s telecommunications environment had changed very little from the 1950s. It took anywhere between months and years, to get the installation of a telephone in a home or business, and mobile phone services were a far-off luxury. In 1989 before the easing of telecommunication, regulations there were 4.2 million telephone subscribers.”””

In 1991, Indian officials had started to ease law and rules in the telephony industry. This allowed for private sector competition and foreign investment. Something that Bharti would take full advantage of. In the early years Bharti grew by having what Mittal called “a single-minded devotion to the project and the industry”. Bharti was the first private phone service on the market in Delhi and, in 1998, and was India’s first private provider to turn a profit. The telecom service in India was divided into geographical areas, called circles, for the purpose of awarding mobile and landline telephone licenses.

As part of its a single-minded devotion for continuous expansion, Bharti aggressively pursued the acquisition of licenses for mobile operations in other geographic regions. Which by 2001 had netted them 15 of India’s 23 circles. This strategy required ever greater capital funding, and in 1999, Bharti sold a 20% equity interest to Warburg Pincus, they also sold to New York Life Insurance Fund, the Asian Infrastructure Group, the International Finance Corporation (IFC), and SingTel6. By 2002, Bharti had gone public on the Indian National Stock Exchange, the Mumbai (Bombay) Exchange, and the Delhi Stock exchange raising over $1 billion dollars