INDIAN TELECOM SECTOR

AN INDUSTRY ANALYSIS.

Tanmay

Jauhary

TELECOM SECTOR- INTRODUCTION
Most vibrant sector with highest growth rate – more than 60 lakh customers are added every month  Plethora of services  Easier access/ availability  Drastic reduction in tariff  World class service

Internet.Major classes of Services • Fixed • Mobile Copper. Video . Fax • Broad band High speed Internet. Wireless GSM and CDMA based • Narrow band Voice. Optical Fibre.

05 0.05 0.04 0.23 0.1 0.25 0.16 0.22 0.02 0 Argentina Belgium Italy France Philippines Malayasia Thailand Hong Kong Pakistan Taiwan China Brazil India UK .2 0.09 USD 0.17 0.03 0.05 0.15 0.11 0.11 0.19 0.MOBILE TARIFFS IN INDIA ONE OF THE LOWEST 0.11 0.

 Provide world class telecom service at affordable cost . key for development  Inadequacy of public resource to meet demand  Private sector to supplement Govt.KEY POLICY INITIATIVES/MILESTONES  New  Economic Policy (1991) Telecom Policy 1994 Opening up of Telecom service sector (Mobile – metros)  National  Telecom.

Data.TECHNOLOGY TREND    Optical fiber based wireline networks Wireless networks GSM.CDMA based mobile Next Generation Networks: Voice . Video convergence Telecom networks increasingly software intensive  .

Issues to be addressed in the Indian Scenario  Unique Rural Scenario : low teledensity Need for Spectrum re-farming & re-allocation Lack of Content in Local Languages Network Security    .

743 837.987 M Total.257 M Population 6563.997 1090.270 M Fixed.Telephone connections in millions2008 35. 60.195 Africa America Asia Europe 1744. 3929.815 Oceania      Mobile.504 220.02 . 2699.1229.69 M Teledensity.

MARKET STRUCTURE  Divided into 23 circles  4 metros Jammu & Kashmir Himachal Pradesh Punjab Haryana Uttar Pradesh W North Eastern States  19 circles  Further divided into A. B and C category. DELHI Rajasthan Uttar Pradesh E Bihar Gujarat Madhya Pradesh West Bengal  Division based on economic parameters and revenue potential Each circle has a licenses. which are a saleable. Maharashtra MUMBAI Andhra Pradesh Karnataka Orissa KOLKATA  METRO Circles CHENNAI Tamil Nadu Kerala A Circles B Circles C Circles Source :COAI .

Government gets 15% of revenues from Unified Licensing 900 & 1800 .CURRENT INDUSTRY STRUCTURE Ministry of Communication & Information Technology Licensor Dept of Telecom Unified License Operators Fixed Line Operators National Long Distance Operators CDMA International Long Distance Operators 1800Mhz Regulator Telecom Regulatory Authority of India Judiciary Telecom Dispute Settlement Appellate Tribunal Wireless Operators GSM FDI in telecom recently revised to 74%.

etc. Policy guidelines on new services like 3G. Directives on number of network access service providers. VSAT. STD & ISD) and other Inter-operators tariffs. Internet Telephony. Regular monitoring of Quality of Service parameters .TELECOM REGULATORY AUTHORITY OF INDIA •Setup in 1997 •Protection of Consumer Interest •Nurture Conditions for Growth of Telecom in India •Major Activities Reduced levies on Operators. Reduced upper limit in tariff (Local. Radio Paging. WiMAX.

4. HFCL Infotel Ltd. 3. 2. BSNL 5. Bharti Airtel Ltd.MAJOR PLAYERS OF INDIAN TELECOM INDUSTRY  The Top five companies. on the basis of ‘Market Share’ as on 31st January. Idea Cellular + Spice •Bottom five companies. 5. BPL Mobile Communications Ltd. on the basis of ‘Market Share’ as on 31st January. Aircel Cellular Ltd. + Dishnet 2. Mahanagar Telephone Nigam Ltd. . 4. (MTNL) 3. Reliance Communications Ltd. 2009 are: 1. Shyam Telecom Ltd. Vodafone Essar Ltd. 2009 are: 1.

2009 .MARKET SHARE OF TELECOM COMPANIES AS ON JANUARY.

PORTER FIVE FORCES MODEL .

THREAT OF SUBSTITUTES.) Online Chat    Email Satellite phones None of the above a major threat in current scenario. . Messenger etc.LOW  Some Substitutes:   VOIP (Skype. but a potential threat for near future.

Incumbent Advantages: Established brand image.Lotteries. Infrastructure tenancy costs.    Extremely high infrastructure setup costs Spectrum License cost. auctions.LOW    Declining Average Revenue Per User. Brand pull exists to some extent for brands like Airtel / Idea/ Vodafone.THREAT OF NEW ENTRANTS. Reliability of network .

Shared tower infrastructure.LOW    Large number of suppliers.POWER OF SUPPLIER.medium .  Medium cost of switching since changing their hardware would lead to additional cost in modifying the architecture.  Overall influence on the industry . Limited pool of skilled managers and engineers especially those well versed in the latest technologies.

BARGAINING POWER OF CUSTOMER.HIGH  Lack of differentiation among the service provider Cut throat competition Customer is price sensitive Low switching costs     Number portability to have negative impact .

life time card)  Price wars .HIGH    High Exit Barriers High Fixed Cost 6-7 players in each region   3 out of 4 BIG. Caller tunes.RIVALRY AMONG COMPETITORS. present in each region Very less time to gain advantage by an innovation (Eg.

THE MARKET LEADER .BHARTI AIRTEL.

Nokia and Sing Tel  Pan India Presence  Strong Financials   WEAKNESS Outsourcing of Core Systems  Lack of emerging market investment opportunity .~80Mn.6%  Strategic Alliance with other stakeholders in Bharti Airtel include Sony-Ericsson.SWOT STRENGTHS Largest Telecom Player in India . 22.

SWOT OPPORTUNITIES • THREATS India centric – Major revenues from India  Falling ARPU  Intense Competition & Shortage of Bandwidth  • • • Bharti Infratel – Cutting Down cost in Rural area Match Box Strategy – Scale of Penetration Current Tele-Density – 30. Rural Telephony .6 is still low among developing countries Low Broadband Penetration.

AIRTEL – STRATEGY MANTRA : Focus on Core Competencies and Outsource the rest! Product Innovation Pricing Core Competencies VAS Marketing and Branding .

It has managed to work with the best of domain specialists globally and emerge as a world class entity. .STRATEGY • • • Airtel partnered with leading players in telecommunication players across the globe. Partnerships include operational contracts with vendors and strategic investors ranging from private equity investors to global telecom giants.

 Was also affiliated with Singapore Telecom.  Vodafone was a strategic investor in Airtel.STRATEGIC PARTNERSHIPS/ SHAREHOLDERS – TECHNOLOGY AND CAPITAL Warburg Pincus – a celebrated PE investor held a stake for a substantial period of time and was instrumental in providing Airtel support in its early stages.  Temasek – the Singapore based investor holds a considerable stake in it.  .

manage and maintain the equipment as well as provide quality assurance in Airtel  IBM was given the mandate to handle the back office requirements of Airtel’s presence in India  .OUTSOURCING DEALS IN 2004 Ericsson was given the mandate to provide.

• • • • Higher emphasis on ARPU/min – stark contrast with other operators who concentrate on ARPU only.OPERATIONAL STRATEGIES. Hived off tower infrastructure into a separate entity. . Exploring opportunities in international markets. Aim to become a one stop shop for all telecommunication services under the Bharti umbrella.

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