INM - Brazil_v1

8/9/2019 INM - Brazil_v1

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1

AIRTEL IN

BRAZIL

MembersSantonu Chatterjee

Sossamma George

Swastyayan SenguptaUtpalBowmick


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Agenda Introduction

Why Telecom ?

Why Airtel?

Understanding Brazil

Demography Religion

Language

Food

Lifestyle

Cultural Tips

Telecom in Brazil

Environment Assessment

Internal analysis

Competitive analysis

Entry Strategy2


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Introduction

3

Objective is to present an entry strategy for anIndian firm into Brazil

Options

Telecom

Automobile parts

Services..ITES

Decided to go with Telecom

Bharti Airtel has been chosen as the company

An detailed entry strategy is prepared


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Why Telecom?

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The Indian telecom industry has undergone a seachange

Has been growing at a very brisk rate, but..

13 players

H index is less than 0.2!!

Cut throat competition of the industry

Dwindling profitability

Experts expects a imminent shake-out / consolidation

High time for Indian telecom big players to ventureinto other markets to ensure balanced growth andhedge risk.


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Why Airtel?

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The Indian Market has become highly

competitive

The company is financially sound and hasdeep pockets-$1.7 Billion Cash in its books

Intent of Top Management to expand

operations to international markets.

It has been scouting for telecom assets across

the world but not that successful

Emerging Markets are the only opportunities.


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6

Brazil


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Demographics

146 Million people concentrated on its two hundred milesof east coast

Diverse population: Europeans (55%), Africans (6%) ,Amerindians (1%) & Asians

Brazil has many mixed races: Mulattos (mix ofWhite/European & Black/African), Caboclos (mix ofnative/aboriginal & White/European)

Brazilians refer to these multiracial people as Pardo (brown)

Melting pot of cultures, races, education & economy

Brazil has the highest degree of intermarriage in the world Brazil has the largest Japanese population outside of Japan

Nearly 50 percent of the population is under twenty yearsof age


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Some History

16th century Europeans, notablyPortuguese to colonize

1850 Africans brought in as slaves to workin cotton & sugar plantations until the end of

slave trade

19th & 20th century Japanese, Chinese &

Koreans arrived looking for work

19th & 20th century People from Germany,

Italy & Spain arrived looking for work


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Religion Roman Catholics more than 75%

Largest Roman Catholic population in the world Others several Christian/ Protestant

denominations, Islam, African religions, Judaism &Buddhism.

Largest Buddhist population

in LatinAmerica,

due to high

#of Japanese

Immigrants.


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Languages

Official language Portuguese

Virtually the only medium used for schools,newspapers, media, TV, and for alladministrative & business purposes

English is part of school curriculum in mostBrazilian states

Very few Brazilians are fluent in English.

Spanish is understood by many Brazilians, esp.states bordering the hispanic countries (Colombia, Argentina, Paraguay, Uruguay, Peru)


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Lifestyle

Warm, friendly & free-spirited

Spend a lot of time socializing & view time

more as a sequence of events rather thanwhat is run by the clock

At work not lot of stress. Brazilian chat overcoffee & socialize first, business comes

second Apart from their work-life, Brazilians find

time for music & sports (football/soccer beingthe most popular sport)


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Hofstede Dimensions


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Hofstede Dimensions - 2

Uncertainty Avoidance (UAI) high (76) lowlevel of tolerance for uncertainty, does not

readily accept change and is very risk adverse Individualism (IDV) high 38 compared to the

average Latin population score of 21


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Culturaltips - 1

When you call someone on the phone, chat first andtalk business second

Do not bee too aggressive & try to 'get straight to

the point. Socializing, getting acquainted &comfortable with each other are important

Do not stick to rigid schedules & when schedulingmeetings/appointments, always allow for tardiness.

Unless invited to do so, do not go on first name

basis. Usually have to prefix o senhor for men & 'osenhora' for women before their names.

It is very common from male bosses, executives, anyhigher ranking officials or bureaucrats to be called'doutor' (doctor).


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Culturaltips - 2

The colors of the Brazilian flag are yellow andgreen. Avoid wearing this combination in anyfashion

Purple flowers are extensively used at funerals Touching arms and elbows and backs are very

common

Use handshakes in business meetings. May getkissed on your cheeks or in the air as a greetingby the opposite sex

Avoid Bad conversation topics: Argentina,politics, poverty, religion, and Rain Forest

15


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Brazilataglance

The land of. Samba.Soccer.Pele


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Brazilataglance

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The Federative Republic of Brazil

Situated in South America

The largest country in South America

The only Portuguese-speaking country

in the America

The fifth largest country by geographical

area and the fifth most populous country

in the world

Brazil is the world's eighth largest economyby nominal GDP

Very rich wildlife, natural environments

and extensive natural resources


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TelecominBrazil

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Internet Broadband Fixed Line in

Services

Mobile Telephony

Subscribers

2008 2009 2008 2009 2008 2009 2008 2009

Total Subscribers

(Million)

50.2 60 10.01 11.45 41.02 41.5 150.64 173.20

Penetration Rate 28.7% 30.7% 5.2% 5.9% 21.2% 21.2% 78% 88.5%

Annual Change 12% 20% 30% 40% 4.4% 1.2% 25% 15%

Monthly ARPU of operators in Brazil is 28BRL( approx

INR 700)

Broadband operators have problems of systems

overload.Operators offer triple pay solutions that include

broadband, telephony and pay TV.

3G a success, 4G(LTE) to be auctioned in 2010.

Four major operators(Vivo, Claro, TIM Brasil andOi)

control the entire market


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Environmentassessment PoliticalStability

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Extremely important parameter for any

Good laid down system to ensure governance. A President is elected by the people for a four-year term to

lead the Brazilian government The Congress consists of an 81-member senate representing

the 26 states and a 513-member Chamber of Deputies.

Brazil also has a strong judicial system However, arty-hopping was rampant > unstable legislative > ll

banned in 2007 by

Wining of President Luiz Incio Lula da Silva (Lula) hasprovided stability through leadership Criminal activity is on the rise in major cities


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Environmentassessment Economicstability

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Pre-recession, Brazil witnessed solid global demand,

massive capital inflows

Economy has been hit by the global economic slowdown

However, domestic consumption alone has potential to grow theGDP at 5.0% in 2010 and 5.2% in 2011 respectively.

The Central Bank of Brazil has injected money and eased rates

Government expenditure has increased, leading to higher fiscal

deficit though

The government needs to prevent the formation of asset bubbles in

the economy

Major change in exchange rate (1999) > Pegging to USD is

removed > relief on exchange rate pressure.

In the medium term the prospect of the Brazilian economy

is looking positive.


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Environmentassessment Nationalism

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Another important parameter to consider by foreign

companies

Brazilian nationalism is now approaching its 120th birthday

Not very strong feelings of unity Except for carnivals and soccer !!

No process of nation building has occurred. > no solid

nationalist culture > influenced by outsiders.

In the near future, we dont foresee any strong move by theGovernment to panic MNCs.


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Environmentassessment Internationalcompetition

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One of the favorite destinations of foreign players in many sectors.

Brazilian Telecom market will continue to accelerate in

brisk rate in cellular and broadband services ( @ CAGR of

12.8% over the next 5 years) Lot of FDIs are expected in this sector

However, the market has already started to see serious

price war in all segments.


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Environmentassessment Environmentalscanning

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Understanding Brazil against the backdrop of other Latin American countries.

Despite significant progress in the liberalization of the foreign exchange

regime, important residual controls remain with Brazil in many a economic

activity

Brazilian regulatory agencies are weak and the bureaucracy is very

cumbersome. Procedural requirements to start a business in Brazil take 120 days ! (world bank survey)

Increasingly negative view of Brazil in the Latin American countries. Paraguayan peasants have been threatening to drive Brazilians out of the country.

Petrobras , a Brazilian company was forced to sell two refineries at below-market prices in Bolivia

Many a smaller country in the region is losing their trust in Brazil.

Stumbling blocks of Regional integration in Latin America!

No serious threat to Airtel to venture in to the country.


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Internalanalysis 1/2

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Resources

Tangible( Financial, Technological, Organizational)

Intangible(HR, Innovation & Reputation)

Capabilities

Customer Service team focuses on creating

customer delight.

Strong Distribution Network Marketing.


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Internalanalysis 2/2

Core Competencies

Airtel Mantra Focus on Core Competencies and outsource the

rest.

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CoreCompetencies

ProductInnovation

VAS

Marketingand

Branding

Pricing


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Competitiveanalysis

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Telecom Model

Objective

Reduce Costs and increaseO

perating Efficiencies

Operations

Strategy Outsourcing

NetworkOperations

IT / ITES Call Center


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Competitiveanalysis

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NetworkOutsourcing

Managed capacity model Network/Services/Ops

Benefits: Better Network Management

Rapid upgrade to new technologies

Generate Short term cash

Focus on key projects Known Vendors for Managed Services

Ericssons / NSN / Huwaei


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Competitiveanalysis

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ITOutsourcing

IT Enterprise Applications / Infrastructure Mgmt

Benefits: Predictable IT Spending

Optimizes the use of technology resources

Improves Cash Flows

Possible Vendors / Alliances Airtel already has an alliance with IBM


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Competitiveanalysis

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Call CenterOutsourcing

Outsourcing Call center and Business Processes

Benefits: Per call based pricing model

Payments linked to performance

Access to World Class Capabilities

Reduces man power attrition risk Possible Vendors / Alliances

Call centers can be outsourced to Indian vendors


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Entry strategy (1)

Entry through the acquisition of Claro.

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Parameters Vivo Claro TIM Brasil Oi

Customer base/Market

Share (%)29.8 25.7 24.2 19.9

No of services offered 4 4 1( Only Mobile) 4

Present in no of countries 1 6 1 1

ARPU(Currency-BRL) 26.1 24.9 29.79 21.2

Financials(Operating

Revenues)-USD Billion16.46 12.61 6.64 16.01


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Entry strategy(2)

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Advantages

Part of the Mexican Telecom Group-Amrica Mvil ,

4th largest telecom provider in the world.

Only player to have presence in 6 Latin American

countries(Paraguay, Peru, Uruguay, Brazil,

Argentina, Chile)

Unlike JV, all revenues will be realised.

Entry into an established an emerging market

Technology and skill base protected


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OBRIGADO!

THANK YOU!

Documents

INM - Brazil_v1