Porter analysis of Indian Telecom Industry
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Transcript of Porter analysis of Indian Telecom Industry
INDIAN TELECOM INDUSTRY OVERVIEW
315 mn mobile subscribers by September 08
39 mn fixed line subscribers by September 08
Crossed 25% teledensity mark in March 08
10.42 mn subscribers added in month of October 08
There are 6-7 telcos operating in each of 23 license areas. Airtel, Reliance,
Vodafone & BSNL, who are “the Big 4” have 74% market share
Growth is expected to continue and even accelerate, reaching a projected
496 mn mobile subs by 2010
Fixed vs. Mobile
No of new subscribers
Threat from New EntrantsSupply Side Economies Of Scale
• declining ARPU
• Infrastructure tenancy costs
• Other FC like BPO
Demand Side Benefits
• Brand pull exists to some extent for brands like airtel /idea/ vodafone
Threat from New Entrants (Cont.)Customer Switching Costs
• Cost of new connection low
• Proposed number portability
Capital Requirement
• Extremely high infrastructure setup costs
• Spectrum License cost
Threat from New Entrants (Cont.)Incumbent Advantages
Established brand image
Reliability of network
Uneven access to Distribution Channels
Not a factor
Threat from New Entrants (Cont.)Restrictive Govt Policy
Spectrum and license allocation
3G and Number portability policy still unclear.
74% FDI cap.
Minimum requirement of number of towers.
Power of the buyerLack of differentiation among the service provider
Cut throat competition
Customer is price sensitive
Low switching costs
Number portability to have negative impact
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.
Medium cost of switching since changing their
hardware would lead to additional cost in
modifying the architecture.
Overall influence on the industry - medium
Physical Infra Supplier
Network Infrastructure
-Ericsson
-Siemens Networks-Cisco
-Huawei
Information Technology
-IBM
-TCS
Passive Infrastructure
-Bharti Infratel
-Indus Towers
Call Center Outsourcing
-IBM Daksh
-Mphasis
-Hinduja TMT
-Aegis BPO
-Nortel
Rivalry among Existing Competitors High Exit Barriers
High Fixed Cost
6-7 players 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
Market Share
Presence in States
Threat of SubstitutesSome Substitutes:
VOIP (Skype, Messenger etc.)
Online Chat
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.