*Identify an industry, analyze the growth of that

industry in the contemporary economic dimension?.

From Kashmir to Kanyakumari… Empowering and Integrating

The Indian Telecommunication Industry…

What is Telecommunication
Technical: “Telecom in the real sense means transfer of information between two distant points in space.”

Managerial: “Telecom is a huge and varied bastion of technologies, companies, services and politics that is truly global in nature.”

HISTORY
 1881 Telecom Services Introduced in India.  1947 Posts, Telegraph and Telephones(PTT) come under the aegis of the Ministry of Communication.  1985 The Department of Telecommunication(DoT) comes into existence which would be a self regulator.  1986 DoT converted into two wholly government-owned companies: The Videsh Sanchar Nigam Limited (VSNL) for international telecommunications and Mahanagar Telephone Nigam Limited (MTNL) for service in metropolitan areas.

HISTORY
 1996 Cellular Services launched in India. Introducing private players in the market.

 1997 Telecom Regulatory Authority of India (TRAI) formed.
 2000 DoT becomes a corporation, Bharat Sanchar Nigam Limited (BSNL).  2005 Foreign Direct Investment(FDI) increased to 74%.  2008 India becomes 2nd largest Telecom Market in the World.

Industry Overview
• The telecom sector in India was a government monopoly until the year 1994 when liberalization was gradually unrolled. For the first time, cellular services were launched in India in Kolkata in the year 1995 • Indian telecom market is one of the fastest growing markets in the world • Indian telecom network has about 885.99 million connections as on 30

June 2011 (Source : TRAI)
• With 851.70 million wireless connections, Indian telecommunication network has become the third largest wireless network and 2nd largest in

Asia, after China

Some Quick Facts : : Quick Facts :
Population of India -120 Crore Total Telephone Subscriber Base-621.28 Million. Wireline Subscription- 36.96 Million. Wireless Subscription- 584.32 Million. Broadband Subscription – 8.75 Million. PC Base – 35 Million. Internet Users – 81 Million. Internet Penetration – 7 % . Total GPRS Base – 60 Million. Only 4 % of the 36 Million Activate Internet Users. In India people access the Net over Cell phone once a Month. ( INTERNET & MOBILE ASSOCIATION OF INDIA )

TRAI REPORT IN 2009
7

Market Structure
• Divided into 22 circles – 4 metros – 19 circles • Further divided into A, B and C category based on economic parameters and revenue potential • Each circle has a licenses – Four operators per circle are allowed – Licenses are saleable
Jammu & Kashmir Himachal Pradesh Punjab Haryana Uttar Pradesh W

DELHI Rajasthan Uttar Pradesh E Bihar Gujarat Madhya Pradesh West Bengal

Maharashtra MUMBAI Andhra Pradesh Karnataka

Orissa

KOLKATA

METRO Circles
CHENNAI Tamil Nadu Kerala

A Circles B Circles C Circles

Different Players of Indian Telecom Industry :

I NEED ONLY 1 SIM CARD

9

Pre-Liberalization Era
1991-96
16 14 12 10 8 6 4 2 0 1991 1992 1993 1994 1995 1996 Supply Demand

Growth of Subscriber base from 1999 to 2009

Teledensity - Urban vs. Rural
35 30 25 20 15 10 5 0 1997 1998 1999 2000
Urban

2001

2002
Rural

2003

2004
Total

2005

2006

2007

Competitiveness
• 10 players, on average, in the industry which is the highest in
the world • Four firm HH index is 0.10 and eight firm HH index is 0.13 indicating low concentration • Oligopoly structure with top four firms commanding around

64% of market
• Fierce competition in a regulated environment

Source : www.investorzclub.blogspot.com www.coai.com

Total GSM subscriber

Regulatory Framework provides level playing field for all operators
The Department of telecommunications (Government of India) is the main governing body for the industry. Telephone Regulatory Authority of India (TRAI) assists the Government of India (GoI) to take timely decisions and introduce new technologies in the country.

Indian Telecom Industry Framework

Indian Government Bodies

Independent Bodies

They formulate various policies and pass laws to regulate the telecom industry in India.

They undertake various research activities and monitor the quality of service provided in the Indian telecom industry. They also provide various recommendations to improve the status of telecom operations in India.
Telecom Regulatory Authority of India (TRAI)

Wireless Planning and Coordination (WPC)

Handles spectrum allocation and management DoT – Licensee and frequency management for telecom Exclusive policy making body of DoT

Independent regulatory body

Department of Telecommunications

Telecom Disputes Settlement and Appellate Tribunal (TDSAT)

Telecom disputes settlement body

Telecom Commission

Group on Telecom and IT (GoT-IT)

Handles ad hoc issues of the telecom industry

Ministry of Communication & Information Technology
Licensor Dept of Telecom
Regulator Telecom Regulatory Authority of India Judiciary Telecom Dispute Settlement Appellate Tribunal

Unified License Operators Fixed Line Operators National Long Distance Operators CDMA International Long Distance Operators Wireless Operators GSM 900 & 1800 1800Mh z

FDI in telecom recently revised to 74%. Government gets 15% of revenues from Unified Licensing

Various important regulations and laws have been passed in the Indian telecom industry post-liberalisation era

INDIA
3G Spectrum Was Auctioned. In April Airtel launched 3G Service and MTNL in December 11

Private players were allowed in Value Added Services 1994
1992

Independent regulator, TRAI, was established

BSNL was established by DoT

ILD services was opened to competition Go-ahead to the CDMA technology 2002

Calling Party Pays (CPP) was implemented 2003

Number portability Intra-circle merger was proposed guidelines were established Attempted to (pending) boost Rural telephony 2004 2005 2006 Broadband policy 2004 was formulated— targeting 20 million subscribers by 2010 2007

1999 1997 2000

Internet telephony initiated Reduction of licence fees

National Telecom Policy (NTP) was formulated

Unified Access Licensing (UASL) regime was introduced
Reference Interconnect order was issued

2008

NTP-99 led to migration from highcost fixed license fee to low-cost revenue sharing regime

Decision on 3G services (awaited) FDI limit was increased from 49 to 74 percent

Department of Telecommunication (DoT) is the main body formulating laws and various regulations for the Indian telecom industry.

ILD – International Long Distance

SWOT ANALYSIS

21

 Strengths
 Huge Customer potential – Tele-density still being 73.97. Rural tele-density 35.6. Urban tele-density is 163.13. ( Tele- density : No. of connections per 100 users) – The broadband subscribers grew from about 7.98 million at the end of the December 2009 to 12.35 million by June 2011.  High Growth Rate

– Wireless subscribers growing at a CAGR of 40 per cent per annum since 2009.
 Allowed FDI limit of 74% – The total FDI equity inflows in telecom sector have been US$ 2558 million during 2009-10 and US$ 1665 million in 2010-11.  Liberalization efforts by Govt. – The share of private sector in total telephone connections is now 85.62% as per the latest statistics available as against a meager 5% in 1999. – Draft NTP (New Telecom Policy)

Growth of Telecom

SOURCE : TRAI

 Weakness
 Telecommunication Infrastructure

23

– Result : Large number of call drops.
 Late adopters of New Technology – India among the last countries in the world to get access to 3G technology.

 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.  Slowdown in addition of subscribers  Difficult to enter because of requirement of huge financial resources. • e.g Auction of 3G license was awarded for Rs 50995.37 crores. (Source : DoT, Govt. Of India)

GSM Subscriber Base

 Opportunities
 3G Telecom services and 4G services

25.1

 More Quality Service
– Mobile Number Portability has forced 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, mobile TV, sophisticated m-commerce applications etc.  Boost to Telecom Equipment Manufacturing Companies – Production of telecom equipments in 2011 has been 213 million units. It is expected to grow to 231 million units in 2012 (8.5% growth).  The Indian telecom industry is expected to reach a size of Rs. 3,44,921 crore by 2012 at a growth rate of over 26 per cent.

Threats
• Telecommunication Policies

5

– TRAI's 2G direction affecting new players
– 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 soon, raising fears that 3G services would become somewhat obsolete. • Declining ARPU (average Revenue per user) – 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. – Allowing 3G service in a PSU (MTNL,BSNL) before auctioning to Private Sector . • Content Piracy

PORTER FIVE FORCE ANALYSIS


• •

Threat of new entrants
Unfavorable for new entrants

Favorable for new entrants

Low Customer Switching Costs
Cost of new connection low Mobile number portability

Declining ARPU

Capital Requirement

•Extremely high infrastructure setup
costs •Spectrum License cost Incumbent Advantages •Established brand image •Reliability of network Restrictive Govt Policy Spectrum and license allocation 74% FDI cap.

Overall Influence on the Industry - “LOW”

 Power of the buyer
• Lack of differentiation among the service provider • Cut throat competition • Customer is price sensitive • Low switching costs • Number portability to have negative impact Overall influence on the industry – “HIGH”

 Supplier Bargaining Power
• Large number of suppliers. • Shared tower infrastructure. • Limited pool of skilled managers and engineers especially those well versed in the latest technologies. • Supply of Spectrum • Medium cost of switching since changing their hardware would lead to additional cost in
Information Technology
Passive Infrastructure Call Center Outsourcing

Physical Infra
Network Infrastructure

Supplier
-Ericsson -Siemens Networks -Cisco -Huawei -IBM -TCS
-Bharti Infratel -Indus Towers -IBM Daksh -Mphasis -Hinduja TMT -Aegis BPO -Nortel

modifying the architecture.
Overall influence on the industry – “MEDIUM”

 Rivalry among Existing Competitors
• High Exit Barriers • High Fixed Cost • Around 10 players on average in each region • 3 out of 4 BIG-Four present in each region

• Very less time to gain advantage by an innovation (Eg. Caller tunes,
life time card) • Price wars Overall influence on the industry – “HIGH”

Threat of Substitutes
• Some Substitutes:
– VOIP (Skype, Messenger etc.) – Online Chat

– Email
– Satellite phones • None of the above a major threat in current scenario. • Price-Performance trade-off very high. • Issues of mobility and penetration with the substitutes. Overall influence on the industry – “LOW”

 Summary of the Five Forces
Supplier bargaining power (medium)

Threat of new entrants (low)

Rivalary among competitors (high)

Threat of substitute

(low

Customer bargaining power

(high)

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