Business Case Studies,Corporate Governance & Business Ethics Case Study, Indian Telecom War: Startup Reliance Takes on Leader Airtel in 4G Services

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Indian Telecom War: Startup Reliance Takes on Leader Airtel in 4G Services



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Code : COM0265

Year :
2013

Industry : Telecommunications

Region : India

Teaching Note: Available

Structured Assignment : Not Available

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Introduction: Bharti Airtel Limited started its mobile service under the brand name ĎAirtelí in 1995 after it won the license to become the first telecom operator in Delhi. By being in the forefront in offering 2G and 3G telecom services in India and by enhancing its market share across the country, Airtel became the largest mobile phone operator in India by 2009-10 and also ranked among the six best performing technology companies in the world. However, with intensifying competition in all circles pan-India and the resulting decline in average revenue per user (ARPU), the company was looking for opportunities to further consolidate its position as leader as well as strengthen its financial situation. In 2010, Airtel won spectrum for broadband wireless access (BWA) through an auction for four telecom circles Ė Kolkata, Maharashtra, Punjab, and Karnataka, for INR 33.1 billion. In 2012, it bought a 49% stake in Wireless Business Services Pvt. Ltd. for INR 9.24 billion ($165 million), which won the auction for wireless broadband spectrum in the four crucial circles of Delhi, Mumbai, Haryana, and Kerala. In 2013, Airtel increased its stake in Qualcommís BWA venture to 51%.

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Reliance Industries Limited (RIL , Reliance) headed by Mukesh Ambani (Mukesh) had forayed into the Indian telecom industry in 2010. In the division of family businesses in 2005, Mukesh signed a non-compete agreement with ADAG headed by his younger brother Anil Ambani. As per the pact, RIL could not enter telecommunications. The two parties scraped the agreement in 2010, paving way for RIL to enter into the telecommunications industry. The Broadband Wireless Spectrum auction held in May 2010 provided a platform for RIL to enter the segment. RIL bought a 95% stake in Infotel Broadband Services (Infotel) for INR 48 billion in June 2010, a few days after Infotel had successfully bid for a pan-India BWA license...

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