Telecom sector in india

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Transcript of Telecom sector in india

  • 1. Overview Indian telecommunication sector has emerged as a strong growth engine for the Indian economy in the last decade. Second largest in the world after China with 897.02 million subscribers. 6-7 million new subscribers are added every month. Government policies and regulatory framework implemented by Telecom Regulatory Authority of India (TRAI).

2. Evolution of Telecom in INDIA Private players were allowed in Value Added ServicesIndependent regulator, TRAI, was established19991994 19921997National Telecom Policy (NTP) was formulatedBSNL was establishe d by DoT2000NTP-99 led to migration from high-cost fixed license fee to low-cost revenue sharing regimeIntra-circle merger ILD services guidelines was opened to were competition Calling Party Go-ahead Pays (CPP) was established to the implemented CDMA 2002 technology 2003 2004 Internet telephony initiated Reduction of licence feesNumber portability was Attempted proposed to boost (pending) Rural telephony 2006Unified Access Licensing (UASL) regime was introduced BroadbandReference Interconne ct order was issuedpolicy 2004 was formulated targeting 20 million subscribers by 201020072005FDI limit was increased from 49 to 74 percentDecision on 3G services (awaited)Department of Telecommunication (DoT) is the main body formulating laws and various regulations for the Indian telecom industry. 3. PEST Analysis POLITICALECONOMIC NTP 99 Establishment of BSNL Global revenues were USD 55 Billion. Expected growth rate: 11% PA. Cost of calls. Middle class consumer base growing. Increase in disposable income. Falling mobile phone prices. Privatization of VSNL Increase in FDI limits from 49 % to 100 %. Mobile number portability Transparency in spectrum and license allocation. 4. PEST Analysis SOCIALTECHNOLOGICAL Fast changing lifestyles. Demand for VAS and Broadband services. New Technology Joint ventures. Employment opportunities. High End Phones becoming status symbol culture. Indian Tech Savvy Generation. Rapid Industrial growth. Strong Fiber Optic Network. Utilization of E- Commerce facilities. Efficient Customer Care Services. GSM CDMA WLL3G / 4G 5. Introduction to Bharti AIRTELLtd.Bharti Enterprises 190 mn customersas of June 2013Strategic business units (SBUs) Mobile Services Airtel Tele-media Services & Enterprise Services.86.6%83.82 mn5,121 census towns and 457,053 non-census towns and villages 6. SWOT analysis STRENGTHSWEAKNESSES Strong Brand image, recognized globally Outsourcing Maximum customer base Network coverage and broadband penetration Strategy alliance with Sony erricson, Nokia, Singtel. Lacking in market investment opportunity Low cost model Poor network in rural areas. Decreasing operating & profit margin.OPPORTUNITIESTHREATS Wide scope for broadband & 4G penetration Falling ARPU Rural tele-density 40.66% Shortage of Bandwidth Strategic tie-ups with GOOGLE, APPLE, BB. Slower adaptation of Technology 3G / 4G Android market. Unhealthy relationship with Vodafone. Cutting down cost in rural market Africa acquisition. Digitalize TV. International players. 7. Core competencies Product InnovationPricingCORE COMPETENCIESMarketing and BrandingVAS 8. 5C Analysis Customers Company Competitors ContextCollaborators 9. Revenue Market shareConsumer Market shareARPUAIRTEL29.1%22%114.2Reliance8.2 %17%45.2IDEA15%10%114.9 10. Context Mobile / Wireless Services 2G / 3G Rural Market Telemedia Services Fixed Line Broadband DTH Enterprise Services Carrier Corporate Passive Infrastructure Bharti Infratel Indus Tower 11. Porters Five Force Customer Bargaining PowerThreat of New EntrantsThreat from CompetitionSupplier Bargaining PowerThreat of Substitutes 12. Competitors Analysis OPERATOR AIRTELRELIANCEIDEAHIGHEBITDA margin analysis 1. 33.6% (FY11) to 35.9% (FY14) 2. cost saving initiatives like BPO, IT and Network management outsourcing, passive infrastructure sharing, etc.1. 29.5% (FY11) 31.9% (FY14) on account of reduced network rollout costs.1. 24.1% in (FY11) 27.7% (FY14), primarily on the back of higher network utilization.Strong Competition tariffs and simplification of policy environment 13. Customer Bargaining Power Lack of differentiation among Service Providers Cut throat Competition Low Switching Costs Number Portability will have Ve Impact Businesses & ConsumersHIGH 14. Threat of Substitutes Landline CDMAHIGHDIMINISHING MARKET Video Conferencing VOIP - Skype, Gtalk, Yahoo Messenger e-Mail & Social Networking WebsitesBROADBAND SERVICES 15. Buyers Bargaining PowerHIGH Buyers in Telecom industry 1. Individual 2. Enterprise CustomersCheaper prices Options large bargaining leverage. Buyers Price SensitivityRelative Bargaining Power Cost of product relative to total cost (High) Size and concentration of buyers relative to products (high) Product differentiation (High) Buyers switching cost (low) Rs. 20/ Buyers information (High) 16. Buyers Bargaining PowerHIGH Cost of product relative to total cost Telecom products ( e.g. Voice calls, 3g etc ) cost 100% of the total cost of service and buyers are more sensible to pricing. Product differentiationAirtel ----------Prepaid MRP(Rs.) DATA USAGE 250 1 GB 450 2 GB 1 Rs./min 300-plan (std)Relience ----------Prepaid VALIDITY MRP(Rs.) DATA USAGE 30 Days 255 1 GB 30 Days 449 2 GB 30 days 1 Rs./min (std) 330-planIdea ----------Prepaid VALIDITY MRP(Rs.) DATA USAGE 30 Days 250 1 GB 30 Days 450 2 GB 30 days 1 Rs./min (std) 330-planVALIDITY 30 Days 30 Days 30days[Ref:] 17. Suppliers Bargaining PowerLOWThere are two types of tower companies in India 1. Telecos owned tower companies 2. Independently telecom tower companies (ITTC) Share Others3.20%Aster Infrastructure Limited ITTC, 28%Telecos Owned ITTC Telecos Owned, 72%0.30%India Telecom Infra Limited0.30%Tower Vision India Limited0.90%American Tower Company GTL Infrastructure Limited Bharti Infratel Limited (BIL) Viom Networks Limited (Viom) Reliance Infratel Limited (RITL) Bharat Sanchar Nigam Limited Indus Towers Limited (ITL)2.30% Share9.50% 9.70% 11.20% 15.20% 15.20% 32.20% 18. Suppliers Bargaining PowerLOWMobile Phone handsets Leading CDMA phone manufacturers are Samsung, Blackberry, ZTE, Spice etc. Top 4 leading Mobile phone manufacturer(GSM & CDMA) in India (201112) CompanyShareNokia39%Samsung17.2%Micromax6.9%Black Berry5.9% Bargaining power of suppliers are LESS. Little or no threat of Forward integration. 19. Threat of EntryLOW Access to optical fibre network Declining ARPU Government and legal barriers Retaliation by established producersFACTS Bharti has invested close to Rs. 230 billion to create the cellular infrastructure with 45,000 towers across the country.Cost of maintaining one tower (active + passive) is estimated at Rs. 60,000-65,000 per month. 20. Threat of EntryLOWCapital Requirements The cost of active equipment is estimated to be 40 percent of the telecom operator's total capex, while the balance is accounted for by passive infrastructure. Bharti has invested close to Rs. 230 billion to create the cellular infrastructure with 45,000 towers across the country. Typically, a ground based tower costs Rs. 25-30 lakh. A roof-based tower can be built for Rs.13-14 lakh. 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. However, the recent announcement made by BSNL about leasing its towers will help both the older and newer players to penetrate into new markets. This factor makes the telecom industry moderately attractive for the new players and investors 21. Threat of EntryLOWDeclining ARPU The market is maturing and new classes of consumers are mostly rural and their ARPU is well below $5 (probably $3-3.5). So, managing bottom-lines at such low levels of revenue per user will prove to be a challenge for new entrantAccess 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 and difficult terrains. It is fairly difficult and cost- ineffective for new entrants to lay down optical fibre connecting remote places as well. 22. Threat of EntryLOWGovernment And Legal Barriers Private operators will have to enter into an arrangement with fixedservice 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 to pay one-time entry fee of Rs.25 million plus a Financial Bank Guarantee (FBG) of Rs.200 million. The revenue sharing agreement would be to the extent of 6%. Private operators allowed to set up landing facilities that access submarine cables and use excess bandwidth available. No industrial license required for setting up manufacturing units for telecom equipment. 100% Foreign Direct Investment (FDI) is allowed through automatic route for manufacturing of telecom equipment's. Moderate threat entry based on Government Policies. 23. Value Chain Design Value Chain Design is broadly classified into three components : 1. Insourcing / Outsourcing 2. Partner Selection 3. The Contractual Relationship like joint venture, long-term contract, strategic alliance, equity participation, etc. 24. Insourcing / Outsourcing Inspired by C.K.Prahalad mantra Dont do things that you are not good at IT operations (Billing, CRM, enterprise solution) to IBM. Network Infrastructure management to Er