INDUSTRY ANALYSIS

TELECOMMUNICATION INDUSTRY

 Indian telecom sector is more than 165 years old. Telecommunications was first introduced in India in 1851 when the first operational land lines were laid by the government near Kolkata (then Calcutta), although telephone services were formally introduced in India much later in 1881. Further, in 1883, telephone services were merged with the postal system. In 1947, after India attained independence, all foreign telecommunication companies were nationalised to form the Posts, Telephone and Telegraph (PTT), a body that was governed by the Ministry of Communication.

The Indian telecom sector was entirely under government ownership until 1984, when the private sector was allowed in telecommunication equipment manufacturing only. The actual evolution of the industry started after the Government separated the Department of Post and Telegraph in 1985 by setting up the Department of Posts and the Department of Telecommunications (DOT)

 Plain old telephone calls continue to be the industry's biggest revenue generator, but thanks to advances in network technology, this is changing. Telecom is less about voice and increasingly about text and images. High-speed internet access, which delivers computerbased data applications such as broadband information services and interactive entertainment. The main broadband telecom technology - Digital Subscriber Line (DSL) - ushers in the new era. The fastest growth comes from services delivered over mobile networks.

 According to the Telecom Regulatory Authority of India (TRAI), the number of telephone subscriber base in the country reached 742.12 million as on October 31, 2010, an increase of 2.61 per cent from 723.28 million in September 2010. With this the overall tele-density (telephones per 100 people) has touched 62.51. The wireless subscriber base has increased to 706.69 million at the end of October 2010 from 687.71 million in September 2010, registering a growth of 2.76 per cent. Growing at a CAGR AT 21%

POLITICAL FACTORS
POLICIES OF GOVERNMENT 1.Telecom Regulatory Authority of India(TRAI)

2.Telecom Dispute Settlement and Appellate Tribunal (TDSAT)

3.Unified Licensing Policy(ULP).

ECONOMICAL FACTORS
GDP trends

Interest Rates

Inflation Rates

SOCIOCULTURAL FACTORS
Lifestyle Changes

Career expectation Growth rate of population

Regional shift in population

TECHNOLOGICAL FACTORS
Focus of Technological Efforts
convergence of voice and data received from multiple sources, both web based and real time video streams, in mobile handheld devices. Global satellite systems, mobile handsets and calling cards have made virtual presence possible almost everywhere and anywhere overcoming the barriers of distance, topography and remoteness. Mobile number portability 2G,CDMA,3G SERVICES

LEADER IN THE INDUSTRY

Bharti Airtel Limited (BAL) is the market leader in the Indian telecom market.

It has established itself as the leader in the market by differentiating itself with its focus on building a strong brand through innovation in sales, marketing, and customer service, and an innovative cost effective business model.

INDUSTRY ATTRACTIVENESS
Potential to achieve 700 million telecom subscribers by 2012 from 374 million currently Mobile subscribers at 350 million, second only to China High on M&As - NTT DoCoMo acquires 26% stake in Tata Teleservices for $2.7 billion; and Telenor buys 60% of Unitech Wireless for $1.07 billion Launch of New Platforms : 3G services

Top players: (BSNL , Airtel , Idea , Reliance,Vodafone)

Total market size: 114460.71 crores

Relative share of the players: Airtel-31.11% , BSNL24.38%, Idea-10.35%, Reliance-10.73%

Nature of competition : Oligopolistic

INDUSTRY STRUCTURE
HERFINDAHL INDEX: 55 telecom players Herfindahl Index is a measure of the size of firms in relationship to the industry and an indicator of the amount of competition among them. H=1829.89

 Since Herfindahl index lies between 1800 and 10,000, the concentration ratio is between 80 to 100% and we conclude that industry concentration is relatively high which makes entry for new firms very difficult.

 Barriers in the industry: Entry barriers: High capital investments well-established players who have a nationwide network license fee continuously evolving technology

SWOT ANALYSIS OF INDUSTRY

STRENGTH: 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

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.

 OPPURTUNITIES
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 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 increased to Rs. 575840 million during 2009-10.

 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

SWOT ANALYSIS OF BHARTI AIRTEL STRENGTHS

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

WEAKNESS
The start-up business had to outsource to industry experts in the field. 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.

OPPURTUNITIES
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

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.

Marketing mix of Bharti airtel

PRODUCT: Airtel prepaid Airtel postpaid VAS(VALUE ADDED SERVICES) Instant balance enquiry 24 hr recharge facility Airtel live portal

 PRICE: Customer based pricing strategies Flexible pricing mechanism Controlled by TRAI

 PLACE: Wide and extensive network Airtel customer care touch points Distributors like: paan shops,chemists,outlet

 PROMOTION: PRINT AND VIDEO ADVERTISING Endrosed by shahrukh and sachin In 2002,got its signature tune from A R Rahman ,most downloaded tune

MARKETING INTENSITY

B ARTI AIRTE

RE

BSN

I EA E

AR

FOREIGN EXPOSURE
EXPORT INTENSITY

EXPORT INTENSITY(%)

R I IR E RE SN I E E U R O

FIRMS

IMPORT INTENSITY
40 35 30 25 20 15 10 5 0 2005 2006 2007 FIRMS 2008 2009 2010

BHARTI AIRTEL REL COM BSNL IDEA CELLULAR

IMORT INTENSITY(%)

LEVERAGE OF THE FIRMS

DEBT EQUITY STRUCTURE

DEBT EQUITY RATIO

I EA ELL LAR SL R O EL M H T AIR EL AR I T

WORKING CAPITAL RATIO

WORKING CAPITAL RATIO

I A C LL LAR WC RATIO NL R L CO ART AIRT L I

YEARS(2005-10)

GROWTH ANALYSIS
GROWTH ANALYSIS

ANNUAL GROWTH RATE

H T AIR L AR I T RL O SN L I A LL LAR

YEARS(2005-10)

PROFITABILITY TREND
PROFITABILITY TREND

ID ELL LAR EA PAT/NET SALES BSN L R O EL BHAR I AIR EL T T

YEARS(2005-10)

RETURN ON ASSETS
RETURN ON ASSETS

ART ARTE RE SN EA E U AR O

YEARS(2005-10)

RETURN ON SALES
RETURN ON ASSETS

A T AR E R TL ROS RL O E SL N E E LA A LLU R

YEARS(2005-10)

PORTERS FIVE FORCES MODEL

Threats from new entrants

Demand side benefits Customer swtiching costs Proposed number portability Capital requirement Establish brand image Network reliability Restrictive Government Policies

Power of the buyer

Lack of Differentiation among the service providers Cut throat competition Customer is Price sensitive Low switching costs Number portability has negative effect

Supplier Bargaining Power

Large number of suppliers Shared Tower infrastructure Limited number of skilled manpower

Rivalry among existing competitors

High exit barriers High fixed cost 6-7 players in each region Very less time to gain advantage by an innovation Price wars

Threat of Substitues
Some substitutes: VOIP(skype,messenger) Price performance trade off very high. Issues of mobility and penetration with the substitutes.

OVERVIEW
History Overview of industry Value added services Major investments in the sector Rural telephony in India Policy initiatives Impact of telecom industry on the Indian economy Prospective future ahead