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Bharti Airtel – Corruption made into an Art Form,Why Investors Should Avoid the Stock

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Bharti Airtel is India’s largest telecom company and is one of the world’s biggest as well.Despite hypercompetition in the Indian Telecom Industry,Airtel has managed to run quite well and avoided the deep problems of its rival like Reliance Infocomm.While others companies and newcomers like Uninor are bleeding from low ARPUs,low margins,high losses ,high debt,Airtel has managed to expand through a multi billion dollar acquisition in Africa.This has made the Airtel stock an outperformer in recent times as analysts have gone ga ga over the stock citing its competitive strengths,outsourcing model and diversification into broadband and Direct to Home (DTH) services.

However analysts as they are wont are creatures of habit and don’t go out of their comfort zone.They try to stay in the territory of the obvious and don’t look at deeper problems.India has been rocked by a number of corruption scandals and telecom has been one of the biggest hit.Unitech Wireless one of the new operators is one the verge of having its properties attached by the Indian state while top executives on Reliance (ADAG) are in jail for colluding to defraud the Indian government of billions along with the former telecom minister Raja.While Airtel is not facing this problems,its insidious business practises are equally problematic if the come to light.In broadband companies in India,I wrote how service providers fleece and loot consumer through systematically fraudulent tactics.This is so widespread that I have no doubt that top management is aware if not actively promoting such activities.A refresher,telecom providers in India routinely activate value added services like ringtones (costing Rs 30/month) and other such services without the consumer’s consent.As the amount is small and most of the consumers are illiterate without having the knowledge of what’s happening ,these companies make a killing.Airtel is also doing  this and making the biggest killing of the India consumer.Only a serious investigation on the lines of 2G telecom scam can uncover this corruption scam which goes on bringing hundreds of millions of illegal for these telecom companies.

It is a common practice amongst these companies to add value added services like caller tunes without the customer’s permission which is totally illegal.Since most of the customers do not know how the billing is happening and do not know how to turn it off,these companies make millions of dollars in illegal profits from such customers.Airtel,Reliance and other major telecom companies in India follow this practice widely and openly.Nobody is going to complain about 50c/month being charged wrongly by the telecom provider.However 50c multiplied by a 100 million customers is neat $50 million in profits for these companies.This overbilling of customers even extends to broadband customers as I recently found out .After a nightmarish experience with Tata Indicom whose pathetic customer service forced me to change to Airtel,I found a blatant case of overcharging of money in my very first bill.

Analysts will keep ignoring this until it blows up in their faces just like it has did for a number of other Indian companies like Satyam.Note even India’s biggest company like Reliance is in the dock by Indian government auditor for gold plating its gas production.With the Indian public mood strongly against every type of corruption as was seen during the Jan Lokpal agitation,its time to stay away from companies with even a tinge of corruption.


Abhishek Shah

3 Responses so far | Have Your Say!

  1. PB

    Well Abhishek, here in the US I cannot understand what is in my phone bill. There are always these extra charges that keep fluctuating every month. I am sure I can get deeper into it but then people rarely have the time or the patience. On top of it, here we have 2-year contracts that lock us in.

    Another example is whenever I download and install the Yahoo messenger, I always make sure to uncheck any extra software that they want to install but they still install their toolbar in my browser and I have to remove it every time. It’s probably there somewhere in the user agreement but without the user agreement I cannot install the messenger at all. I wonder how many people end up with the toolbar not knowing it is there or not knowing how to remove it.

    I am not making excuses for Airtel but this kind of practice is more widespread than we think. As an investor, would you worry about it if it brings in more revenue without much added risk? Not an ethical question but I think that’s the reason why these practices continue.

  2. Abhishek Shah

    Hi Prasul,
    I agree with you about the fact that all service providers almost everywhere indulge in such unethical practices.The only difference is that in the USA sometimes these companies get hit with class action lawsuits and sometimes have to pay heavy fines .But in India nothing of that sort happens and results in widespread prevalence.I am not saying only Airtel does it because some others like Reliance are even more notorious for such stuff.A Year or two ago this stuff would not have raised any investor concern.However these days corrupt practices are under increasing scrutiny.

  3. Prateek

    Worthless article…