You are on page 1of 41

Project

On
Managerial economics

Prof- K.M. KUMAR

NIKHIL CHANDANA -----------31

NITIKA KATARIA -----------32

P.VIJAY KRISHNA MOHAN----33

PANKAJ AGARWAL --------34

PIYUSH SINGH -------------35

CMS-IILM GROUP NO: 7 ROLL NO’S- 31 TO 35 Page 1


TELECOMMUNICATION
Telecommunication is the assisted transmission over a distance for the purpose
of communication. In earlier times, this may have involved the use of smoke signals,
drums, semaphore, flags or heliograph. In modern times, telecommunication typically
involves the use of electronic devices such as the telephone, television, radio or
computer. Early Inventors in the field of Telecommunication include Alexander
Graham Bell, Guglielmo Marconi and John Logie Baird. Telecommunication is an
important part of the world economy .

Key Events

CMS-IILM GROUP NO: 7 ROLL NO’S- 31 TO 35 Page 2


1992 Telecommunication sector in India liberalized to bridge the
gap through government spending & to provide additional
resources for the nation’s telecom target. Private sector
allowed participating

1993 The telecom industry gets an annual foreign investment Rs


20.6 million

1994 License for providing cellular mobile services granted by the


government of India for the Metropolitan cites of Delhi,
Mumbai, Kolkata & Chennai. Cellular mobile service to be
duopoly (i.e. not more than two cellular mobile operators
could be licensed in each telecom circle), under a fixed
license fee regime for 10 years.

1995 19 more telecom circles get mobile licenses

1995(August) Kolkata became the first metro to have a cellular network

1997 Telecom Regulatory Authority of India is set up

1998 Annual foreign investment in telecom stands at Rs 17,756.4


million.

1999 FDI inflow into telecom sector falls by almost 90% to Rs.
2126.7 million

1999 Tariff rebalancing exercise gets initiated

CMS-IILM GROUP NO: 7 ROLL NO’S- 31 TO 35 Page 3


1999(March) National Telecom Policy is announced.

2000(June) FDI inflow drops further down to Rs 918 million coming

2000 Amendment of TRAI Act.


(January)
2001(January)

Global Telecom Scenario


The global telecom scenario presents the overview of number of telephone connections
all over the world. Telecom sector has been growing at the tremendous rate . The
major area contributing to this growth is telephone connections. The data here
represents the number of telephone connections all over the world and highest number
of connections are from Asia.
TELEPHONE CONNECTIONS IN THE WORLD

AFRICA : 220.743
AMERICA : 837.195
ASIA : 1744.815
EUROPE : 1090.504
OEANIA : 35.997

CMS-IILM GROUP NO: 7 ROLL NO’S- 31 TO 35


Tele
Page 4
Overview of Telecom Industry in
India

Telecommunication Sector have grown phenomenally in the past 3 years as has


been surveyed by Indian Ministry of Communications and Information Technology in
New Delhi very recently. The telecom sector is one of the leading contributors to India's
flourishing economy.

According to the report presented by taking into account the statement of Indian
Ministry of Communications and Information Technology, the telecom opportunities in
India has been growing by 20 to 40 percent every year since past 3 years. The
telecom services in India have been recognized as a world-class tool for the socio-
economic development in India. India is known to rank fourth in the telecom industry in
Asia after China, Japan, and South Korea and the telecom network in India is known to
stand in the eighth position across the globe and second among the emerging
economies.

The tele-density has grown leaps and bounds in the past few years from 2.3 percent in
1999 to 4.8 percent in 2002. The world average percentage for the telecom industry as
against the Indian average is 7.5 times while the Asian average against the same was
4.5 times. The current market range of the telecommunication industry in India has
been estimated to USD 8 billion and this is expected to undergo an accretion by the
end of 2012.

The growth witnessed by the telecom market in India has increased the number of
opportunities for the industry and this has been fueled by the growing mobile sector,
which has attained the consumer level of 10 million by the end of December 2002 that
was almost 100 percent in the year. This outstanding growth in the mobile sector
explains the advent of digital cellular technology and reduced tariffs as a consequence
of competitive pressures. The growth in the cellular subscribers has surpassed the
benchmark of subscriber base. The telecom market has increased dramatically with the
advent of Wireless in Local Loop Technology.

CMS-IILM GROUP NO: 7 ROLL NO’S- 31 TO 35 Page 5


Telecommunication Sector Opportunities in India assures a transparent, safe, and
secured ambiance for the telecom market. Around 300 million population of highly
consumable middle-class status that is advantageous for the industry surrounds the
telecom sector in India. This is because, in some of the Indian that possess land line
telephones can be substituted by mobile phones that is very unlike the developed
countries. Therefore, it adds up to the growth in mobile sector in Indian telecom
industry.

Few more Telecommunication Sector Opportunities in India include introduction of


Internet telephony services, privatization of VSNL, and introduction of a number of
international long distance services sector. The opportunities in the Indian telecom
sector is increasing at a massive pace with the introduction of newer and innovative
schemes in various sectors and at present the telecom sector in India is claimed to be
one of the major contributors in India's flourishing economy.

Graph showing lowest tariff in INDIA

CMS-IILM GROUP NO: 7 ROLL NO’S- 31 TO 35 Page 6


INVESTMENT AND GROWTH

In 2005-2006, the telecom industry witnessed a growth of 21% with a total revenue of
Rs. 86,720 crores, and the total investment rising to Rs. 2,00,660 crores. It is projected
that the telecom industry will be enjoying over 150% growth in the next 4-6 years. The
growth also requires a huge investment by the players in the sector. Bharti Airtel is
planning to invest about $8 billion by the year 2010.

Liberalization policy and some socio-economic factors are mainly responsible for the
immense growth in the sales volumes. The lifestyle of the people has changed. They
need to be connected to the other people all the time. With the lowering down of the
tariffs the affordability of the mobile phones has increased. The finance sector has also
come up with loans for handsets on 0% interest. Mobile services providers are also
expanding their coverage area by installing more and more antennas and other
equipments.

The telecom sector in the country has already adopted the latest technological
advancements to cater to the demands of the growing market. Telecom Expo India,
Convergence India, VAS India and IPTV India being organized year to year are all
efforts in this direction.

Budget 2007 has brought disappointment to the telecom sector. Mobile service
providers have been asked to cut down their roaming rentals as well as their long
distance and international call tariffs. This has led to discontent on the part of the
service providers. However, Telecom Regulatory Authority of India (TRAI) is of the
opinion that this will lead to increased use of roaming, which will ultimately lead to more
revenue generation. Moreover, with cheaper handsets and lesser tariffs, it is expected
that by the year 2010 there will be over 500 million subscribers in the Indian telecom
market.

Also, the telecom industry this year will be focusing more on rural areas to connect
them with the urban areas so that the farmers and the small-scale industries can have
faster access to information related to weather and market conditions

CMS-IILM GROUP NO: 7 ROLL NO’S- 31 TO 35 Page 7


Teledensity
70

60 Rural Urban Total 60.04

50 48.52

40 39.45

30
26.88
23.21
20 20.74
18.31
14.32 12.74
10.37 12.2
10 8.36 8.95 7.9
6.94 5.11 7.02 5.88
2.32 2.86 3.58 4.29
0.52 0.68 0.93 1.21 1.49 1.57 1.73 1.86
0
Compared Teledensity between urban and rural areas
1999

2003

2006

2007
2000

2001

2002

2004

2005

2007(Nov)
Year
Revenue
According to Gartner, a global information technology research and advisory firm, the
revenue from India’s telecom Sector will cross $30 billion by 2013.
The total mobile services revenue is projected to grow at a compound annual growth
rate (CAGR) of 12.5 percent during 2009-2013 to exceed $30 billion. At the same time
the telecom subscriber base is expected to cross 770 million connections by 2013,
growing at a CAGR of 14.3 percent from 452 million in 2009.
The factors supporting this increase are:
• increased focus of operators on rural areas
• increased adoption of value Added Services
• availability of cheaper handsets
• entry of consumer durable and electronic companies into the mobile handset
segment
The number of prepaid subscribers is expected to cross 740 million ( about 96 percent)
by 2013. At the same time the postpaid subscriber base will exceed 29 million
subscribers by 2013, growing 2.5 percent from 2008. Gartner also predicted that the
churn rate (the rate at which a subscriber switches from one operator to another) will
cross 59 percent in 2013 from 53 percent currently.

CMS-IILM GROUP NO: 7 ROLL NO’S- 31 TO 35 Page 8


Grow
FIXED VS MOBILE
The graph shows the comparative study between the mobile and fixed line
subscription. W ireline

250

200
tions (in

CMS-IILM GROUP NO: 7 ROLL NO’S- 31 TO 35 Page 9

150
s)
Fixed vs. Mobile

Fixed line Telephony


Fixed Line Telephony can be further categorized as fixed wireline telephony and
fixed wireless telephony (known as WLL (F)). Fixed Line Telephony provides
services such as local calls and long distance calls- national and international. The

CMS-IILM GROUP NO: 7 ROLL NO’S- 31 TO 35 Page 10


Government of India is now taking actions to convert all national long distance calls
to local calls. In this regard, Public Players have already started their 1Rs. call
service. In India at present, fixed line telephone numbers are of 8 digits, (initially 5
and 7 digits). The sector is in the process of converting all fixed line numbers to 10
digits. Both Public Players and Private Players are competing hard to capture more
and more market share. MTNL and BSNL are the leading public sector players,
whereas Reliance Infocomm, Tata Teleservices and Touchtel are the leading private
sector players.

Market shares of public and Private Players

CMS-IILM GROUP NO: 7 ROLL NO’S- 31 TO 35 Page 11


During financial year 2005-06, Fixed Line Telephony segment in Indian telecom sector
witnessed a growth of 8.64%. The total subscriber base of fixed lines including
WLL(F) touched the figure of 50.2 million and was showing an upward trend.

Subscriber trend of Fixed Line Telephony in Indian market

Private Players
Private Players are providing services to the whole of India. The companies are

CMS-IILM GROUP NO: 7 ROLL NO’S- 31 TO 35 Page 12


serving both urban and rural areas. Tata Teleservices, HFCL, Shyam, Reliance,
Touchtel are the leading Private Players in fixed line segment.
With more than 80% share with Public Players, Private Players are now striving hard
to capture more and more customers. Since 1997, the year they entered Fixed Line
Telephony, they have been increasing their market share every year.

Market shares of Private Players (18%) in Fixed Line Telephony

CMS-IILM GROUP NO: 7 ROLL NO’S- 31 TO 35 Page 13


Public Players
The two Public Players, Mahanagar Telephone Nigam Limited (MTNL) and Bharat
Sanchar Nigam Limited (BSNL), are providing services to the whole of India. The
companies are serving both urban and rural areas. MTNL is providing services to
two metropolitan cities, Delhi and Mumbai, whereas BSNL provides services to the
rest of India.

Market shares of Public Players in Indian Fixed Line Telephony

CMS-IILM GROUP NO: 7 ROLL NO’S- 31 TO 35 Page 14


Since, Private Players entered Indian Fixed Line Telephony, market shares of Public
Players started declining. This can be easily seen by the trend of number of
subscribers (increasing or decreasing) of Public Players. MTNL has showed a
declining trend in the last three years. BSNL is adding new customers but with a
declining growthh rate.

CMS-IILM GROUP NO: 7 ROLL NO’S- 31 TO 35 Page 15


Subscriber trend of MTNL in Fixed Line Telephony

Subscriber trend of BSNL in Fixed Line Telephony

CMS-IILM GROUP NO: 7 ROLL NO’S- 31 TO 35 Page 16


* Figures are based on TRAI reports and individual company's reports

CMS-IILM GROUP NO: 7 ROLL NO’S- 31 TO 35 Page 17


Mobile Telephony
Mobile telephony was introduced in Indian markets in mid- 1990s. In the last few
years, the sector has witnessed tremendous growth. The subscriber base is adding
more and more customers every year. Mobile telephony recorded more than 52.2
million users in FY 2004-05, exceeding fixed line telephone subscriber base. Also,
mobile segment has welcomed more and more players every year. Liberalized
policies have ensured lower tariffs and reduced roaming rentals. This will lead to
increased usage of mobile phones. Mobile telephony can be further categorized into
WLL, CDMA and GSM. The much-awaited 3G mobile technology is going to enter
soon in Indian telecom sector.

Mobile telephony provides services such as messaging- text and multimedia- mobile
commerce through GPRS enabled mobile Internet, with local calls and long distance
calls- national and international.
Not only service providers but also equipment manufacturers are contributing towards
the growth of the sector. Mobile telephony started up with bulky handsets and has

CMS-IILM GROUP NO: 7 ROLL NO’S- 31 TO 35 Page 18


now reached to smart phones with cameras, radio facility and lots of other multimedia
applications. Also, PDAs have entered Indian markets with operating systems that
make it a pocket PC.
Both Public Players and Private Players are competing hard to capture more and
more market share. Leaders in Fixed Line Telephonyhave now started providing
mobile services, such as MTNL's Garuda and Dolphin. Private Players capture most
of the market share in Indian mobile segment.

Market shares of public and private players

CMS-IILM GROUP NO: 7 ROLL NO’S- 31 TO 35 Page 19


During financial year 2005-06, mobile telephony segment in Indian telecom sector
witnessed a growth of 72%. The total subscriber base of mobile phones touched a
figure of 90.14 million in 2006.

Subscriber trend of mobile telephony in Indian market

CMS-IILM GROUP NO: 7 ROLL NO’S- 31 TO 35 Page 20


Private Players'
Private Players are providing services to the whole of India. Tata Teleservices,
Reliance Communications, Bharti Airtel, Idea cellular, Hutch, etc are the leading
Private Players in cellular services. They are providing cellular services through
CDMA, GSM and WLL networks.

With more than 70% share in market, Private Players are introducing more and
more discount schemes and tariff plans and call rentals to capture more and more
customer base. Even the handset manufacturers are coming up with advanced
multimedia applications to attract customers.

CMS-IILM GROUP NO: 7 ROLL NO’S- 31 TO 35 Page 21


Market shares of Private Players (78%) in mobile telephony

Subscriber base of Private Players in mobile telephony

CMS-IILM GROUP NO: 7 ROLL NO’S- 31 TO 35 Page 22


Public Players

The two Public Players, Mahanagar Telephone Nigam Limited (MTNL) and Bharat
Sanchar Nigam Limited (BSNL), are providing mobile services in India. MTNL's

CMS-IILM GROUP NO: 7 ROLL NO’S- 31 TO 35 Page 23


Garuda, Trump and Dolphin and BSNL's Cellone and Excel are running successfully
on CDMA, WLL and GSM technologies.

Market shares of Public Players in Indian mobile telephony

Since, Private Players entered Indian Fixed Line Telephony, market shares of Public
Players started declining. This can be easily seen by the trend of number of
subscribers (increasing or decreasing) of Public Players. MTNL has showed a

CMS-IILM GROUP NO: 7 ROLL NO’S- 31 TO 35 Page 24


declining trend in the last three years. BSNL is adding new customers but with a
declining growth rate.

CMS-IILM GROUP NO: 7 ROLL NO’S- 31 TO 35 Page 25


Subscriber trend of MTNL in mobile telephony

Subscriber trend of BSNL in mobile telephony

CMS-IILM GROUP NO: 7 ROLL NO’S- 31 TO 35 Page 26


* Figures are based on TRAI reports and individual company's reports

ELASTICITY
The responsiveness of one variable to changes in another is known as
elasticity.
The elasticity can be of 3 types:
1. Price elasticity
2. Income elasticity
3. Cross elasticity

1. Price elasticity
• Price Elasticity of Demand
– The responsiveness of demand
to changes in Threat from New Entrants

CMS-IILM GROUP NO: 7 ROLL NO’S- 31 TO 35 Page 27


– Where % change in demand
is greater than % change in price – elastic
– Where % change in demand is less than % change in price - inelastic
The telecom industry is highly elastic that is whenever there is a small shift in the
price of the product the quantity demanded varies drastically. With the fall in the
price demand increases, and with the increase in the price, demand decreases.

CMS-IILM GROUP NO: 7 ROLL NO’S- 31 TO 35 Page 28


Key 5
Major players
Of
Telecom sector

CMS-IILM GROUP NO: 7 ROLL NO’S- 31 TO 35 Page 29


VODAFONE
Corporate Overview:
Vodafone Group Plc is one of the worlds leading mobile telecommunications company,
offering an extensive range of services, including voice and data communications.
Corporate History
The Vodafone network was launched on January 1, 1985, which was the first cellular
network to be launched in the UK.
In 2005, Vodafone launched of PC-to-mobile instant messaging.
Key Facts
Sales (FY05) US$62.9 billion, Assets (FY05) US$252.8 billion.

SWOT Analysis
1. Strengths
➢ Dominance in Cellular Market.
➢ Wide Geographical Presence.

2 Weaknesses
➢ Declining Market Share in Japanese Market.
➢ Limited Exposure to Emerging Markets.
➢ Dispute over Corporate Tax Bill in Europe.

3 Opportunities
➢ Expanding Geographic Presence.
➢ Growth through 3G.

4 Threats

CMS-IILM GROUP NO: 7 ROLL NO’S- 31 TO 35 Page 30


➢ Emergence of Low-Cost Brands.
➢ Market Saturation in Europe.
➢ Increased Competition in Core Markets.

Competitive Positioning
On the basis of parameters such as:-
➢ Number of customers
➢ Total revenue
➢ Voice revenue

BSNL

➢ Company Profile (as on 31.12.2007)

➢ Corporatized on 1st October 2000

CMS-IILM GROUP NO: 7 ROLL NO’S- 31 TO 35 Page 31


➢ Connects length and breadth of INDIA except Delhi & Mumbai

➢ 37516 Digital Exchanges with 29051 exchanges in rural areas on reliable


media.

SWOT ANALYSIS

STRENTHS WEAKNESSES

CMS-IILM GROUP NO: 7 ROLL NO’S- 31 TO 35 Page 32


➢ Pan-India reach ➢ Non-optimization of network capabilities
➢ Experienced telecom service provider ➢ Poor marketing strategy
➢ Total telecom service provider ➢ Bureaucratic organizational set up
➢ Huge Resources (financial & technical pool) ➢ Inflexibility in mindset (DOT period
➢ Huge customer base legacies)
➢ Most trusted telecom brand ➢ Limited number of value added services
➢ Transparency in billing ➢ Poor franchisee network
➢ Easy deployment of new services ➢ Legacy of poor service image
➢ Copper in last mile can be used for easy ➢ Huge and aged manpower
broadband deployment ➢ Procedural delays
➢ Huge Optical Fibre network and associated ➢ Lack of strategic alliances
bandwidth ➢ Problems associated with incumbency like
outdated technologies, unproductive rural
assets, social obligations, political
interference,
➢ Poor IT penetration within organization
➢ Poor knowledge Management

OPPORTUNITIES THREATS

➢ Tremendous market growing at 20 lac ➢ Competition from private operators


customers per month ➢ Keeping pace with fast technological
➢ Untapped broadband services changes
➢ Untouched international market ➢ Market maturity in basic telephone
➢ Can capitalize on public sector image to segment
grab government’s ICT initiatives ➢ Manpower churning
➢ ITEB service markets ➢ Multinational eyeing Indian telecom
➢ Diversification of business to turn-key market
projects ➢ Private operators demand for sharing last
➢ Leveraging the brand image to source mile
funds ➢ Decreasing per line revenues due to
➢ Almost un-invaded VSAT market competitive pricing
➢ Fuller utilization of slack resources ➢ Private operators demand to do away
➢ Can make a kill through deep penetration with ADC can seriously effect revenues
and low cost advantage ➢ Populist policies of government like
➢ Broaden market expected from “OneIndia” rates

CMS-IILM GROUP NO: 7 ROLL NO’S- 31 TO 35 Page 33


convergence of broadcasting, telecom and
entertainment industry

Having analysed the external environment and assessed the internal strengths and
weaknesses of BSNL, the key issues can be summarized as follows:

BSNL – The key issue


➢ To provide high speed Internet connectivity (upto 8 Mbps)
➢ To provide Virtual Private Network (VPN) service to the broadband customers
➢ To provide dial VPN service to MPLS VPN customers.
➢ To provide multicast video services, video-on-demand, etc. through the Broadband Remote
Access Server (BRAS).
➢ To provide a means to bill for the aforesaid services by either time-based or volume-based
billing. It shall provide the customer with the option to select the services through web server
➢ To provide both pre-paid and post paid broadband services.

Teleph
Bharti Airtel

80
Airtel comes to you from Bharti Airtel Limited, India’s largest integrated and the first
private telecom services provider with a footprint in all the 23 telecom circles. Bharti
ections

Airtel since its inception has been at the forefront of technology and has steered the

CMS-IILM GROUP NO: 7 ROLL NO’S- 31 TO 35


70 Page 34

60
n)
course of the telecom sector in the country with its world class products and services.
The businesses at Bharti Airtel have been structured into three individual strategic
business units (SBU’s) - Mobile Services, Airtel Telemedia Services & Enterprise
Services. The mobile business provides mobile & fixed wireless services using GSM
technology across 23 telecom circles while the Airtel Telemedia Services business
offers broadband & telephone services in 95 cities and has recently launched India's
best Direct-to-Home (DTH) service, Airtel digital TV. The Enterprise services provide
end-to-end telecom solutions to corporate customers and national & international long
distance services to carriers. All these services are provided under the Airtel brand.

SWOT ANALYSIS
Strengths:
➢ Bharti Airtel has more than 65 million customers (July 2008). It is the largest
cellular provider in India, and also supplies broadband and telephone services –
as well as many other telecommunications services to both domestic and
corporate
customers.

➢ Other stakeholders in Bharti Airtel include Sony-Ericsson, Nokia - and Sing Tel,
with whom they hold a strategic alliance. This means that the business has
access to knowledge and technology from other parts of the telecommunications
world

➢ .The company has covered the entire Indian nation with its network. This has
underpinned its large and rising customer base.

Weaknesses:
➢ An often cited original weakness is that when the business was started by Sunil
Bharti Mittal over 15 years ago, the business has little knowledge and experienceof
how a cellular telephone system actually worked. So the start-up business had to
outsource to industry experts in the field.

➢ Until recently Airtel did not own its own towers, which was a particular strength of
some of its competitors such as Hutchison Essar. Towers are important if your
company wishes to provide wide coverage nationally
.

CMS-IILM GROUP NO: 7 ROLL NO’S- 31 TO 35 Page 35


➢ The fact that the Airtel has not pulled off a deal with South Africa's MTN could signal
the lack of any real emerging market investment opportunity for the business once
the Indian market has become mature.
Opportunities:
➢ The company possesses a customized version of the Google search engine which
will enhance broadband services to customers. The tie-up with Google can only
enhance the Airtel brand, and also provides advertising opportunities in Indian for
Google.
.
➢ Global telecommunications and new technology brands see Airtel as a key
strategic player in the Indian market. The new iPhone will be launched in India
via an Airtel distributorship. Another strategic partnership is held with
BlackBerry Wireless Solutions.

➢ Despite being forced to outsource much of its technical operations in the early
days, this allowed Airtel to work from its own blank sheet of paper, and to
question industry approaches and practices,for example replacing the
Revenue-Per-Customer model with a Revenue-Per-Minute model which is better
suited toIndia, as the company moved into small and remote villages and towns.

➢ The company is investing in its operation in 120,000 to 160,000 small villages


every year. It sees that less well-off consumers may only be able to afford a few
tens of Rupees per call, and also so that the business benefits are scalable - using
its 'Matchbox' strategy.

➢ Bharti Airtel is embarking on another joint venture with Vodafone Essar and Idea
Cellular to create a new independent tower company called Indus Towers. This new
business will control more than 60% of India's network towers. IPTV is another
potential new service that could underpin the company's long-term strategy.
Threats
➢ Airtel and Vodafone seem to be having an on/off relationship. Vodafone which
owned a 5.6% stake in the Airtel business sold it back to Airtel, and instead invested
in its rival Hutchison Essar. Knowledge and technology previously available to Airtel
now moves into the hands of one of its competitors.

➢ The quickly changing pace of the global telecommunications industry could tempt
Airtel to go along the acquisition trail which may make it vulnerable if the world goes
into recession. Perhaps this was an impact upon the decision not to proceed with
talks about the potential purchase of South Africa's MTN in May
2008.This opened the door for talks between Reliance
Communication's Anil Ambani and MTN, allowing a competing

CMS-IILM GROUP NO: 7 ROLL NO’S- 31 TO 35 Page 36


Inidan industrialist to invest in the new emerging African
telecommunications market.

➢ Bharti Airtel could also be the target for the takeover vision of
other global
telecommunications players that wish to move into the Indian market.

RELIANCE COMMUNICATION
Reliance Communications (formerly Reliance Infocomm), along with Reliance Telecom
and Flag Telecom, is part of Reliance Communications Ventures (RCoVL). It is an
Indian telecommunications company. According to National Stock Exchange data, Anil
Dhirubhai Ambani controls 66.77 per cent of the company, which accounts for more
than 1.36 billion shares.[3] It is the flagship company of the Reliance-Anil Dhirubhai
Ambani Group, comprising of power (Reliance Energy), financial services (Reliance
Capital) and telecom initiatives of the Reliance ADAG. It uses CDMA2000 1x
technology for its existing CDMA mobile services, and GSM-
900/GSM-1800 technology for its existing/newly launched
GSM services.

CMS-IILM GROUP NO: 7 ROLL NO’S- 31 TO 35 Page 37


RelCom is also into Wireline Business throughout India and has the largest optical fiber
communication (OFC) backbone architecture [roughly 110,000 km] in the country.
Reliance Communications has interests in Direct To Home (DTH) TV also, known as
"Big TV". It plans to launch its DTH business by July 2008. Once launched, RelCom will
have presence across all B2C communications channel in one of the fastest growing
markets in the world.
SWOT Analysis
Strengths
➢ Mobile Communications Arm of a Large, Well-Funded, Well-Connected and
Ambitious Indian Conglomerate
➢ Economies of Scale From Large Subscriber Base
➢ Expertise in a Business Model That Allows It to Maintain High Profitability
From Lower-Yielding Subscribers

Weaknesses
➢ Cost Structure Disadvantage With Subscribers Spread Across Two Different
Mobile Networks
➢ Low ARPU Compared With Competitors
➢ Weakness in Rural Markets
➢ Brand Positioning
➢ Limited Availability of Value-Added Services

Opportunities
➢ Aggressive Move Into the Rural Market
➢ Use Upcoming Mobile Number Portability as "Launching Pad" to Grab
Market Share of Higher ARPU Users — and Ramp Up Focus on Data
Revenue
➢ Overseas Investments
➢ Lease Spare Capacity on Its CDMA Network to Mobile Virtual Network
Operators

Threats
➢ Quicker Than Expected Slowing of Growth in the Indian Marketplace

CMS-IILM GROUP NO: 7 ROLL NO’S- 31 TO 35 Page 38


➢ Mobile Number Portability Risks Accelerating Churn of Subscribers From
CDMA to GSM
➢ New Competitors

IDEA
Background
Idea Cellular is one of the leading mobile operators in India. It was originally
incorporated as Birla Communications Limited, with the license to operate in
Maharashtra and Gujarat. The name was changed to Birla Tata AT&T Limited,
consequent to stake acquisition by AT&T Corporation and Tata Group. In 2002, the
company's name was changed to Idea Cellular Limited. Due to stake sale by AT&T
Corporation and Tata Group, Aditya Birla Group is now the sole promoter of Idea
Cellular.
SWOT Analysis
Strength
○ Attractive existing footprint.
○ Original licensee in seven of the Established Circles, providing
incumbency advantages;
○ Market leader in two of, and established positions in the remainder of, the
Established Circle
○ Strong distribution channels;
○ High quality network structure;
○ A national brand;
○ Part of the Aditya Birla Group
○ Attractive growth
Weaknesses

CMS-IILM GROUP NO: 7 ROLL NO’S- 31 TO 35 Page 39


○ High Debt-Equity Ratio: The Company's Debt-Equity ratio is high as
compared to its peers. Moreover, the Company needs the approval of the
lenders under its financing arrangements before undertaking certain
significant corporate actions
○ Concentration: The Company revenues are derived solely from providing
mobile services and it is dependent on four of the Established Circles for
a significant proportion of its revenues.
○ The Company had accumulated losses amounting to Rs. 19.23 billion and
Rs. 17.23 billion for financial years 2005 and 2006 respectively. The
Company may not be in a position to pay dividends until it clears its
accumulated losses

Oppor tunities
○ The Indian telecommunication industry is expected to continue to enjoy
growth due to its low-teledensity and increasing affordability of mobile
telephone and services.
○ The contribution of service sector to the GDP has improved significantly from
29% in 1950 to 54% in 2005. This is primarily due to growth of information-
technology and information technology enables services. This will further
stimulate the demand for mobile telecommunication services.
○ The regulatory environment is improving and there is greater clarity in
existing rules and procedures. This would enable operators in improving
network quality. Also raising of funds will become easier due to greater
predictability of operational environment.
T hreats
○ There is intense competition in the Indian telecommunication industry. Idea
Cellular faces significant competition from private companies that have a
pan-India footprint such as Bharti Airtel, Tata Teleservices and Reliance
Communication Ventures. Also it faces competition from government owned
companies such as BSNL and MTNL.

○ Alternative technology is evolving very rapidly in the telecommunications


industry. For instance, "Wi-Fi" and Wi-Max" which allows for voice data
transfer have been tested and handsets with such technology may soon be
available in the Indian market. Moreover, satellite communication voice data
transport medium like "Skype" may become a serious competitor in the long
distance voice data transfer business.

CMS-IILM GROUP NO: 7 ROLL NO’S- 31 TO 35 Page 40


CMS-IILM GROUP NO: 7 ROLL NO’S- 31 TO 35 Page 41

You might also like