May 06, 2011
Governance and Value Creation Rating CRISIL GVC Level 1 (Reaffirmed)

CRISIL has reaffirmed its ‘CRISIL GVC Level 1’ rating on the corporate governance and value creation practices of Bharti Airtel Ltd (Bharti Airtel). The rating indicates that Bharti Airtel’s capability with respect to corporate governance, and value creation for all its stakeholders, is the ‘highest’.

The rating reflects Bharti Airtel’s outstanding corporate governance practices. The company has a well-experienced and very competent board of directors, with expertise across global finance, telecommunication, banking, administrative services and consulting. The board has demonstrated exemplary practices in corporate governance, focusing on strategic oversight and business performance, processes, systems, audits, and disclosures, and effective functioning of its various sub-committees. The Bharti Airtel board provides strong strategic direction and management oversight aided by the meaningful contribution of the independent directors to the board’s functioning, and the strong capabilities of Bharti Airtel’s operating management. The company has demonstrated commitment to continuously improve its processes in line with the increasing complexity of its business.

Another feature of good corporate governance at Bharti Airtel is the fact that independent directors meet separately before the board meetings; these meetings are presided by a lead independent director. This in CRISIL’s opinion gives independent directors a platform to identify areas where they need more clarity or information, and then put this before the board or management. The independent directors also meet with statutory auditors without the presence of executive management.

Bharti Airtel has an effective sub-committee functioning with none of the executive directors being a part of any sub-committee; only independent and non-executive directors are members of these committees. This, in CRISIL’s opinion, ensures high degree of involvement of independent directors in the overall functioning of the board. The audit committee comprises majority of independent directors, and has high focus on internal control process, risk management, and review of related party transactions. Furthermore, Bharti Airtel adopts the highest standards of disclosures for dissemination of corporate, financial and operational information to all its stakeholders. The company has also started publishing its accounts as per International Financial Reporting Standards. CRISIL however believes that constitution of a separate nominations committee and institutionalisation of a formal mechanism for evaluation of board performance will further enhance the governance practices at Bharti Airtel.

In its sixteen years of operations, Bharti Airtel has been optimally creating wealth for its stakeholders. For its equity shareholders, Bharti Airtel has generated value, as reflected in its healthy economic value added (EVA) of about 18 per cent and a healthy estimated return on capital employed of about 18 per cent in 2010-11 (refers to the financial year, April 1 to March 31). Bharti Airtel’s value creation for its debt holders is reflected in CRISIL’s highest safety rating of ‘AAA/Negative/P1+’ on Bharti Airtel’s debt instruments. The company’s active human resources committee, which convenes every quarter to discuss issues on employee attrition, employee productivity, and training, ensures high level of value creation for its employees.

About the Company
Bharti Airtel is one of India’s leading integrated telecommunication service operators, providing global system of mobile communications (GSM) cellular services, telemedia services, passive infrastructure services (through Bharti Infratel Ltd [Bharti Infratel]) and enterprise services (carriers and corporates). Bharti Airtel provides mobile telephone services in all 23 telecommunication service areas in India. The company has recently been awarded spectrum blocks for 3G in 13 circles. The company had a mobile subscriber base of nearly 159 million as on February 28, 2011, representing 19.8 per cent of the total wireless market. It derives about 78 per cent of its revenues from mobile services and the rest from telemedia, passive infrastructure services, and enterprise services.

Bharti Infratel, a subsidiary of Bharti Airtel commenced operations in the fourth quarter of 2007-08 to provide passive infrastructure services in India. Bharti Infratel holds a 42 per cent stake in Indus Towers Ltd (Indus Towers), a company providing passive infrastructure services in 16 telecommunication services areas in India. Indus Towers is a joint venture between Bharti Infratel, Vodafone Essar Ltd (rated ‘AA/Negative/P1+’ by CRISIL), and Aditya Birla Telecom Ltd, a subsidiary of Idea Cellular Ltd (P1+).

Bharti Airtel commenced operations in Sri Lanka in January 2009 as the fifth operator, after having recently secured the licence, and incorporated a wholly owned subsidiary, Bharti Airtel Lanka (Pvt) Ltd, in 2008-09. Bharti Airtel also commenced operations in Bangladesh in March 2010 through acquisition of Warid Telecom International, Bangladesh.

In June 2010, Bharti Airtel wholly acquired Zain Africa B.V. (Zain Africa), which has operations in 16 African countries with a customer base of about 44 million. Zain Africa operates in following countries: Nigeria, Democratic Republic of Congo, Zambia, Tanzania, Gabon, Congo Brazzaville, Kenya, Niger, Malawi, Burkina Faso, Chad, Uganda, Madagascar, Ghana, Sierra Leone, and Seychelles. Zain Africa’s revenues from its operations in these countries were USD2.88 billion with an operating profit of USD691 million for the year ended March 31, 2011.

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Last updated: March 31, 2011

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May 06, 2011

Bharti Airtel Ltd