PORTER’S FIVE FORCES MODEL-

TELECOMMUNICATION INDUSTRY

PREPARED BY: BHAGYASHRI KADAM

POOJA TOPRANI
SUDHA RANI EDUPUGANTI
HARNOOR SINGH BHATIA
Agenda
• Porter’s 5 Force model
• Analysis into Telecom Industry
• 5 forces discussed
• Conclusion
Porter’s Five Forces
Analysis
• Market Share
 More than 15 players in the market
 Airtel, Vodafone, Idea and RCOM itself captures more than 70%
Facts
• India's telecommunication network is the second largest
in the world based on the total number of telephone
users .
• Revenue: USD 33,350 million
• Contribution : 3% to India’s GDP
• Projected : Mobile sector in India to contribute USD 400
Billion to GDP by 2020
Competitors Analysis
• Market Structure
• Average revenue per user for big players is around Rs. 110 – Rs. 120
• Reliance has lesser ARPU because major of its subscribers are low end
customers
Revenue Market Consumer ARPU
share Market share
AIRTEL 29.1% 19.8% 114.2
Reliance 8.2 % 16.7% 45.2
IDEA 15% 12.3% 114.9

Market leader AIRTEL

Market Challenger Reliance, Vodafone, BSNL
Maket Follower TATA, IDEA
Competitors Analysis
• Global Presence and Marketing Network
• Existing telecom companies are coming up with continuous growth
strategy due to high competition.

AIRTEL Mobile and fixed wireless services (GSM) – 23 telecom circles

RCOM Reliance Communications has IP-enabled connectivity infrastructure

comprising over 150,000 kilometers of fiber optic cable systems in
India, the US, Europe, Middle East, and the Asia Pacific region

IDEA Has a customer base of over 17 million, IDEA Cellular has operations
in Delhi, Maharashtra,Goa, Gujarat, Andhra Pradesh, Madhya
Pradesh, Chattisgarh, Uttaranchal, Haryana, UP West,
Himachal Pradesh and Kerala.
Competitors Analysis
• Future Prospects

AIRTEL Airtel plans to set up 3000 more towers to enhance their

rural coverage and will now focus on rural and
semi-urban areas
RCOM Peak investment phase is over. RCOM continues to be free cash
flow positive and this trend to continue in succeeding years.
RCOM not only reliant on wireless business and also vying the
massive opportunity with DTH and expansion of Enterprise/IDC
IDEA Idea also plans to enter rural and neglected circles as a strategy
to gain subscribers. It also plans for smaller base transmission
stations that will mean lesser infrastructure requirements and
expenses and independent tower operation. Along with its plan
to go for a national long distance license, it will also look at
international long distance in the near future.
Buyer Power Analysis
Buyers in Telecom industry generally land in two categories:
 Individual and
 Enterprise Customers like IT companies, Banks etc.
• Product differentiation
• Airtel, Relience,Idea and all other companies have similar prices for similar
products and less likely for any one to maintain product differentiation and
hence buyers have the option to switch over.

Airtel Relience Idea

----------- ----------- -----------
Prepaid Prepaid Prepaid
MRP(Rs.) DATA USAGE VALIDITY MRP(Rs.) DATA USAGE VALIDITY MRP(Rs.) DATA USAGE VALIDITY
250 1 GB 30 Days 255 1 GB 30 Days 250 1 GB 30 Days
450 2 GB 30 Days 449 2 GB 30 Days 450 2 GB 30 Days
1 Rs./min 300-plan (std) 30 days 1 Rs./min (std) 330-plan 30 days 1 Rs./min (std) 330-plan 30days
Buyer Power Analysis
• Competition between buyer
• The individual buyers don’t have any competition among themselves but
enterprise customers like IT or banks do have. Enterprise customers
generate major part of the revenues for any telecom companies like
Relience, Airtel or Idea which means higher buyer power. But this is not
significant for the one who deals with individual customers

• Size and concentration of buyers relative to products

• The total subscribers, including wireless and wire-line, in India reached
938.34 million in May 2014, with the monthly addition of 2.54
million subscribers. Big size and low concentration of consumption per
individual gives lower leverage to buyer power.
• Enterprise customers – Big size and big concentration of consumption
accrues high buyer power.
• Together we can say its moderate buyer power in terms of size and
concentration.
Buyer Power Analysis
• Buyers’ switching cost
• Low switching cost. Low new connection cost. With Mobile Number
Portability, switching has become more easier. TRAI(Telecom Regulatory
Authority Of India) expected that the subscriber has to pay not more than Rs.
200. Some of the operators have estimated the charges can be as low as Rs.
20.
 December,2013 109.37million
 January, 2014 111.94million
• Meaning Low switching cost and high buyer power.

• Buyers’ information
• Buyers information regarding the availability of other options has become
high
• Increased social networking, high advertisements through TV, hoardings,
banners and word of mouth, buyers are well informed about the substitute
products with better offerings urban as well as rural areas.
• Means high buyer power
Suppliers Power Analysis
• Suppliers for the Telecom Operators

• There is a price war happening between the different mobile operators,

so even the suppliers are chosen carefully so that they do not drag down
the profitability of the company .So the suppliers have less bargaining
power in this industry.

1. Mobile Tower Companies

2. SIM cards
3. Mobile phone handsets
Suppliers Power Analysis
List of Mobile Operator and their Tower Services.
Operator Tower Service
Bharti BIL/ITL
Reliance RITL
Vodafone ITL
BSNL MTNL, BSNL and Others
Idea ITL
Tata Viom

• Less Bargaining power because of more number of suppliers.

• Sim Card Manufacturers

• Sim card for the mobile operators are mostly produced in India and some
are imported.
• The mobile operators doesn’t always procure the sim card from a single
supplier to avoid any delays.
• The Bargaining power of suppliers is less.
Suppliers Power Analysis
• Mobile Phone handsets
• Two types of mobile phones are genereally used. (CDMA & GSM).
• The leading CDMA phone manufacturers are Samsung, Blackberry, ZTE,
Motorola , Spice e.t.c
Top leading Mobile phone manufacturer(GSM & CDMA) in India by Q4
2014.
Company Share
Samsung 17.2%
Micromax 15%
Nokia 10%

• Bargaining power of suppliers are less.

Threat of Substitutes
• Buyer Propensity to Substitute
• Internet subscriber base increasing in India by 18.06% , compared to
10.60% for GSM/CDMA services.
• Representations from the industry and from within the DoT to open up
Net telephony.
• Dot also contemplating allowing operators without a unified access
license, which includes broadband and Internet companies such as
Google and Skype to offer telephony services for international calling
and PC-to-PC domestic calls.
• Relative Prices
• Internet Telephony eating into the revenue of GSM/CDMA telephony.
• Flat/ fixed rate revenues from internet services - cannibalization of
revenues from GSM/CDMA services.
• Performance of Substitute
• Voice quality is an issue with internet telephony.
• Internet voice services also currently limited due to regulatory road
blocks.
Threat Of Entry
• Capital Requirements
• Cost of maintaining one tower (active + passive) is estimated at
Rs. 60,000-65,000 per month.
• If tower is rented then monthly rent of Rs. 40,000-45,000 for
active network.
• The monthly outflow of a TSP would be close to Rs. 80,000-
85,000 per tower per month.
• Bharti has invested close to Rs. 230 billion to create the cellular
infrastructure with 45,000 towers across the country.
• Access To Optical Fibre Network
• The largest optical fibre has been built by the incumbent operator
BSNL who is also the long distance operator.
• The private sector players such as Bharti and Reliance have also
constructed optical fibre cable network connecting mainly cities
and towns but their presence is very limited in the rural areas.
• It is fairly difficult and cost- ineffective for new entrants to lay
down optical fibre connecting remote places as well.
Threat Of Entry
• Government And Legal Barriers

• Private operators will have to enter into an arrangement with

fixed-service providers within a circle for traffic between long-
distance and short-distance charging centres.
• Seven years time frame set for rollout of network, spread over
four phases. Any shortfall in network coverage would result in
encashment and forfeiture of bank guarantee of that phase.
• Private operators allowed to set up landing facilities that access
submarine cables and use excess bandwidth available.
• 100% Foreign Direct Investment (FDI) is allowed through
automatic route for manufacturing of telecom equipments.
Conclusion
• Taken as Booming sectors
• The tide has turned for the telecom sector in India, as growth
and profitability has accelerated in recent times. Tower
companies are reaping benefits of a turnaround in the sector
as operators have started investing in networks to boost data
penetration.
• However it is in the country’s booming mobile segment in
which the major battles are being fought. Three major private
players – Bharti, Reliance and Vodafone - with a formidable
54% share of the market between them, lead a large field of
mobile operators. State-owned enterprises –BSNL and MTNL –
have also been making their presence felt with a combined
market share of 12%.
• Consumers are getting addicted to connectivity and speed.
THANK YOU