Telecom Industry in INDIA

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).

Go-ahead to the CDMA technology

Private players were allowed in Value Added Services

National Telecom Policy (NTP) was formulated

1992

1994

1997

Independent regulator, TRAI, was established

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

1999

2000

2002

BSNL was established by DoT

ILD services was opened to competition

Internet telephony initiated

Reduction of licence fees

2003

Calling Party Pays (CPP) was implemented

Unified Access Licensing (UASL) regime was introduced

Reference Interconnect order was issued

2004

Intra-circle merger guidelines were established

Broadband policy 2004 was formulated—targeting 20 million subscribers by 2010

2005

FDI limit was increased from 49 to 74 percent

Attempted to boost Rural telephony

2006

Number portability was proposed (pending)

Decision on 3G services (awaited)

2007

Evolution of Telecom in

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

INDIA

PEST Analysis

POLITICAL

• NTP – 99

• Establishment of BSNL

• Privatization of VSNL

• Increase in FDI limits from 49 % to 100 %.

• Mobile number portability

• Transparency in spectrum and license allocation.

• 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.

ECONOMIC

SOCIAL

• Fast changing lifestyles.

• Demand for VAS and Broadband services.

• Joint ventures.

• Employment opportunities.

• High End Phones becoming status symbol culture.

• Indian Tech Savvy Generation.

PEST Analysis

• New Technology• GSM

• CDMA

• WLL

• 3G / 4G

• Rapid Industrial growth.

• Strong Fiber Optic Network.

• Utilization of E- Commerce facilities.

• Efficient Customer Care Services.

TECHNOLOGICAL

Introduction to Bharti AIRTELBharti Enterprises

Ltd.

83.82 mn86.6%

190 mn customersas of June 2013

5,121 census towns and 457,053 non-census towns and villages

Strategic business units (SBU’s)

Mobile ServicesAirtel Tele-media Services

& Enterprise Services.

SWOT analysis

STRENGTHS

• Strong Brand image, recognized globally

• Maximum customer base

• Strategy alliance with Sony erricson, Nokia, Singtel.

• Low cost model

WEAKNESSES

• Outsourcing

• Network coverage and broadband penetration

• Lacking in market investment opportunity

• Poor network in rural areas.

• Decreasing operating & profit margin.

OPPORTUNITIES

• Wide scope for broadband & 4G penetration

• Rural tele-density 40.66%

• Strategic tie-ups with GOOGLE, APPLE, BB.

• Android market.

• Cutting down cost in rural market

• Digitalize TV.

THREATS• Falling ARPU

• Shortage of Bandwidth

• Slower adaptation of Technology 3G / 4G

• Unhealthy relationship with Vodafone.

• Africa acquisition.

• International players.

Core competencies

CORE COMPETENCIES

Product Innovati

on

VAS

Marketing and

Branding

Pricing

5C Analysis

Customers

Company

Competitors

Context

Collaborators

Revenue Market share

Consumer Market share ARPU

AIRTEL 29.1% 22% 114.2

Reliance 8.2 % 17% 45.2

IDEA 15% 10% 114.9

Competitors

Context

Mobile / Wireless Services

• 2G / 3G• Rural Market

Telemedia Services

• Fixed Line• Broadband• DTH

Enterprise Services

• Carrier• Corporate

Passive Infrastructure

• Bharti Infratel• Indus Tower

Porter’s Five Force

Threat from

Competition

Customer Bargaining

Power

Threat of Substitute

s

Supplier Bargaining

Power

Threat of New

Entrants

Competitors Analysis

OPERATOR EBITDA margin analysis

AIRTEL

1. 33.6% (FY11) to 35.9% (FY14) 2. cost saving initiatives like BPO, IT and Network

management outsourcing, passive infrastructure sharing, etc.

RELIANCE 1. 29.5% (FY11) 31.9% (FY14) on account of reduced network rollout costs.

IDEA 1. 24.1% in (FY11) 27.7% (FY14), primarily on the back of higher network utilization.

Strong Competition tariffs and simplification of policy environment

HIGH

Customer Bargaining Power

• Lack of differentiation among Service Providers

• Cut throat Competition

• Low Switching Costs

• Number Portability will have –Ve Impact

• Businesses & Consumers

HIGH

Threat of Substitutes

• Landline

• CDMA

• Video Conferencing

• VOIP - Skype, Gtalk, Yahoo Messenger

• e-Mail & Social Networking Websites

BROADBAND

SERVICES

DIMINISHING MARKET

HIGH

Buyers Bargaining Power

• Buyers in Telecom industry 1. Individual2. Enterprise Customers

Cheaper prices Options large bargaining leverage.

HIGH

Buyers’ Price Sensitivity

Cost of product relative to total cost (High)

Product differentiation (High)

Relative Bargaining Power

Size and concentration of buyers relative to products (high)

Buyers’ switching cost (low) Rs. 20/-

Buyers’ information (High)

• 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 differentiation

Buyers Bargaining Power HIGH

MRP(Rs.) DATA USAGE VALIDITY MRP(Rs.) DATA USAGE VALIDITY MRP(Rs.) DATA USAGE VALIDITY250 1 GB 30 Days 255 1 GB 30 Days 250 1 GB 30 Days450 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

Airtel-----------Prepaid

Relience-----------Prepaid

Idea-----------Prepaid

[Ref: http://im.tech2.in.com]

There are two types of tower companies in India1.Telecos owned tower companies2.Independently telecom tower companies

(ITTC)

LOW

Telecos

Owned; 72%

ITTC; 28%

Telecos Owned

ITTC

Indus Towers Limited (ITL)

Bharat Sanchar Nigam Limited (BSNL)

Reliance Infratel Limited (RITL)

Viom Networks Limited (Viom)

Bharti Infratel Limited (BIL)

GTL Infrastructure Limited (GTL)

American Tower Company Limited (ATC)

Tower Vision India Limited (TVIL)

India Telecom Infra Limited (ITIL)

Aster Infrastructure Limited (Aster)

Others

32.20%

15.20%

15.20%

11.20%

9.70%

9.50%

2.30%

0.90%

0.30%

0.30%

3.20%

Share

Share

Suppliers Bargaining Power

Mobile Phone handsets• Leading CDMA phone manufacturers are Samsung, Blackberry,

ZTE, Spice etc.• Top 4 leading Mobile phone manufacturer(GSM & CDMA) in India

(2011-12)

• Bargaining power of suppliers are LESS.• Little or no threat of Forward integration.

Suppliers Bargaining Power LOW

Company Share

Nokia 39%

Samsung 17.2%

Micromax 6.9%

Black Berry 5.9%

Threat of Entry

• Access to optical fibre network

• Declining ARPU

• Government and legal barriers

• Retaliation by established producers

LOW

FACTS

• 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.

Capital 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

Threat of Entry LOW

Threat of Entry LOW

Declining 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 entrant

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 and difficult terrains.

• It is fairly difficult and cost- ineffective for new entrants to lay down optical fibre connecting remote places as well.

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 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.

Threat of Entry LOW

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.

Insourcing / Outsourcing

• Inspired by C.K.Prahalad mantra

“Don’t do things that you are not good at “

• IT operations (Billing, CRM, enterprise solution) to IBM.

• Network Infrastructure management to Ericsson, Huawei and Nokia-Siemens network.

Value Chain Design

SURVEY

• Which telecom company's service are you currently using ? AIRTEL (40%) & VODAFONE (35%)

• Which parameter do you look for while selecting a service provider ?

Offers and Schemes & Customer Service

• What are the key factors/reasons for your association with the current cellular service provider?

Awareness of service provider (80%) & Advertisements (25%)

• Which company's advertisement you like the most? Vodafone (50%) & TATA Docomo (25%)

• What features attract you most in the above advertisement? Creativity (55%) & Humor (25%)

• Kindly assess the perceived value in terms of the tariffs / rentals for the cellular services used by you.

High (50%) & Moderate (40%)

• Are you satisfied with your current service provider? Yes (75%) & No (25%)

• Are you loyal to your current brand of mobile service provider? Continue with same service provider (60%) and Change over to

other company (25%)

SURVEY

VALUE ADDED SERVICES

WHAT IS VAS ?

Non-Core service

Beyond standard voice calls or text transmissions

Little or NO cost

Promotion of primary business

Provided by Mobile network operator or by a third party value-added service provider (VASP), also called as Content Providers

(CP).

MVAS SIMPLIFIED

COLLEGE KID

BUSINESS PROFESSIONAL

PLUMBER

FARMER

However, Mobile infotainment, gaming, social networking, commerce and email are the killer applications.

Increasing Usage

Source : http://www.thehindubusinessline.com/industry-and-economy/info-tech/mobile-valueadded-services-market-will-touch-95-b-in-2-years/article4546790.ece

“ MVAS market will reach $9.5 billion by 2015 ”

research conducted by Wipro technologies & Internet & Mobile Association of India (IAMAI) called Future Thought of Business : MVAS.

“ Basic informational mobile services are set to decline in India. We have found that India’s consumers will

increasingly purchase enriched and transformational education, health,

finance and entertainment services,”

said Ayan Mukerji, Senior Vice-President, Global Head - Media and Telecom, Wipro Technologies. 

• mEntertainment : Localised vernacular content, on-demand music & video content and live TV shows and events.

• mEducation : English language learning services, competitive examination preparation solutions, tutor-on-call and vocational training.

• mHealth : Improve healthcare access and affordability, remote diagnostics, chronic disease management and material care.

• mFinance : Extending financial services to remote areas, mobile wallet services etc.

Increasing Usage

Mobile VAS Activations In India Down 60%

Since June 2013

Factors driving vas

• Booming Economy

• Personalization of digital world and digital services

• Reduction in tariffs and CPP and CPHP initiations.

• Focus on movies and music (Entertainment).

• SMS contests like KBC, Indian Idol etc.

Need for differentiation is the major factor driving MVAS.

Survey Report

• Sample size : 40

• Sample location : Hosur Village – Tamil Nadu, Koramangala – Bangalore

• Samsung Note 3, wave 2 and Micromax canvas are used as a Status Symbol.

• Gaming is a major interest in rural & urban India.

• Issues1. Unawareness, poor user interface due to language

barrier 2. Login problems with applications due to unknown or

unaware Customization options3. Feeding contact details and retrieving them correctly.

Anticipations

• Pictorial representation for commands and navigation between pages.

• People who use low end phones do not expect any value added services apart from calling, messaging, torch and radio. However, youth aspire for high end phones.

• Urban people anticipate improvements in Medical & Health applications. Satisfied with services in Entertainment & Finance

Blooming ideas

• Imagining if prepaid cash would be available ? In order to reach 58.36% of rural sector in India.

• Find your phone anywhere on earth ? Interact with it .

• Automatic data and contact storage which enables users to access their contacts, photos and videos content anytime, anywhere from any of their devices and share them with any contact or group of contacts.

Prepaid Cash Transfer

• Instant service to transfer money.

• 58% unbanked rural sector.

• Low end phone users like laborers, government services.

• User Retailer User

• Lower money transfer cost

• Banking the Unbanked

Data management

Automatic data storage. Contacts, Memo, Messages.

Low end phones without GPRS, external memory

Advantageous incase of damage, theft.

Accessibility to other phones

Health Connect

• Application to provide medical assistance.

• Tracking current location and providing details regarding nearest 24X7 medical stores, Hospitals and Diagnostic centers.

• Visiting hours

• Availability of doctors to take appointments in major Hospitals.

• First aid solutions.

• Emergency solutions.

• General medicinal information help.

• Audio and Video conferencing facilities in case of emergency.

• Hospital Map.• Online Reports • Payment Solutions• Saving TIME, MONEY & EFFORTS.

Health Connect

THANKS FOR YOUR PATIENCE

Aditya Chirravuri Vipul Agarkar