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SWOT ANALYSIS OF INDIAN TELECOM INDUSTRY

Facts

Presented by Rahul Kalra

Indian Telecom market is one of the fastest growing markets in the world. Indian telecom network has about 562.21 million connections as on 31 December 2009. With 525.15 million wireless connections, Indian telecom has become the second largest wireless network in the world after China. About 15 million connections are being added every month. Wireless telephones are increasing at faster rate. The share of wireless telephones as on December 31, 2009 is above 93% of the total phones. The share of private sector in total telephone is about 82.33%.

Strengths
Huge Customer potential
Teledensity still being 48% and rural tele-density 21%. The broadband subscribers grew from 0.18 million in 2005 to6.2 million as on 30 April 2009 and about 7.98 million, at the end of the December 2009.

High Growth Rate

Wireless subscribers growing at a CAGR of 60 per cent per annum since 2004.

Allowed FDI limit ranging from 74% to 100%

The total FDI equity inflows in telecom sector have been US$ 2223 million during April-November 2009-10

High return on Investment

Easier to create economies of scale thereby increasing return on investment

Liberalization efforts by Govt.

The share of private sector in total telephone connections is now 82.33% as per the latest statistics available for December 2009 as against a meager 5% in 1999.

Lower capital expenditure

The Indian telecom market is a high density area, which means more population per tower. This means lower capital expenditure cost.

Weakness
Poor Telecommunication Infrastructure Result : Large number of call drops. Late adopters of New Technology India will be among the last countries in the world to get access to 3G technology. Some estimates suggest that nearly 132 countries across the world already have 3G technology and mobile services in one form or the other. Most competitive market 10 to 12 companies offer mobile services in most parts of India, globally, the average is 4. A market strongly regulated by Government. Difficult to enter because of requirement of huge financial resources. E.g Auction of 3G license has reached Rs 15814.15 crores.

Opportunities
3G Telecom services and 4G services More Quality Service
Mobile Number Portability will force the Service provider to improve their quality to avoid losing subscribers

4.1

Value added Services (VAS)

The mobile value added services include, text or SMS, menu based services, downloading of music or ringtones, mobile TV, videos, streaming,

sophisticated m-commerce applications etc. Mobile banking, Mobile Ticketing etc Boost to Telecom Manufacturing Companies
Production of telecom equipments in value terms has increased from Rs. 412700 million (2007-08) to Rs.488000 million during 2008-09 and expected to increase to Rs. 575840 million during 2009-10.

Telecom Equipment Exports

The Indian telecom industry is expected to reach a size of Rs 344,921 crore by 2012 at a growth rate of over 26 per cent, and generate employment opportunities for about 10 million people during the same period.The sector would create direct employment for 2.8 million people and for 7 million indirectly, according to a Frost and Sullivan report.

4.2

Horizontal Integration Entry Into other consumer segments leveraging the present channels E.g. DTH service like Reliance BIG TV, Tata SKY, Airtel digital TV by telecom majors like Reliance, Tata and Airtel Respectively. Other examples : Airtel website builder Providing fibre Connectivity to 2,50,000 village panchayat by 2012. More scope in content related services, since, the consumer is influenced by local culture. Local festivals like Baisakhi, Chhath Puja, religious festivals like Diwali, Chrismas etc., National festivals like Independence Day etc.

Threats
Telecommunication Policies
e.g. Trai's 2G direction affecting new players most notably Tata Teleservices, Norways Telenor and Essar-owned Loop Telecom Renewal of 2G license on the basis of market rates of 3G auctions TRAI intentions of rolling out 4G or the fourth-generation technology, known as the ultra-broadband in 2-3 years raising fears rendering 3G services somewhat obsolete.

Declining ARPU (average Revenue per user)

E.g. price wars like per-second billing which is deflating revenues and making sure the survival of the fittest

Partiality on the part of the Govt.

E.g.Allowing 3G service in a PSU (MTNL,BSNL) before auctioning to Private Sector .

Content Piracy

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