37241333 swot-analysis-of-indian-telecom-industry (1)

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  • 1. PUNJAB TECHNICALUNIVERSITY Assignment on SWOT Analysis Of “Indian Telecom Industry” WITH SPECIAL REFERENCE OF “RETAIL INDUSTRY” In partial fulfillment of the requirement of two years full time Masters of Business Administration (MBA) Program (2009-2011) Of Asian Business School, Noida 201301UNDER THE GUIDENCE OF: SUBMITTED BY:
  • 2. SUSHIL KUMAR HEERA SINGH 3rd Semester ACKNOWLEDGEMENTI am indebted to a multitude of persons who have provided me withvaluable help during our endeavor of research. The project would not haveseen the illumination of the day without the efforts of the many whomanaged the show in the wings. I am thankful to all people who have put ingreat efforts and gave me guidance for the successful completion of theproject.I am indeed grateful to Sushil Kumar for providing me the guidance,advice, constructive suggestions and faith in my ability inspired to performwell who gave me a valuable opportunity of involving me in studying thisproject. Preparing a project of this nature is an arduous task and I amfortunate enough to get support from a large number of people to whom weshall always remain grateful.Finally, I thank all those who directly and indirectly contributed to thisproject.
  • 3. Heera Singh Contents 1. INTRODUSTION OF INDUSTRY ANALYSIS 2. PROFILE OF RETAIL INDUSTRY • Growth of Industry • Structure of Industry • Nature of the Product • Nature of Competition • Government Policies 3. SWOT ANALYSIS • Strengths • Weaknesses • Opportunities • Threats 4. CONCLUSIONS 5. BIBLIOGRAPHIES
  • 4. TELECOM INDUSTRY
  • 5. INDUSTRY ANALYSISINTRODUCTION!All industry is a group of firms that have similar technological structure ofproduction and produce similar products or services. Companies aredistinctly classified to give a clear picture about their manufacturing processand products or services.Industries can be classified on the basis of the business cycle, that means,according to their reactions to the different phases of the business cycle.They are classified into growth, cycle, and defensive cyclical growthindustry.GROWTH INDUSTRY
  • 6. The growth industries have special features of high rate of earnings andgrowth in expansion, independent of the business cycle. The expansion ofthe industry mainly depends on the technological change.CYCLICAL INDUSTRYThe growth and the profitability of the industry move along with thebusiness cycle. During the boom period they enjoy growth and duringdepression they suffer a set backDEFENSIVE INDUSTRYDefensive industry defies the movement of the business cycleCYCLICAL GROWTH INDUSTRYThis is a new type of industry that is cyclical and at the same time growing.INDUSTRY LIFE CYCLEThe industry life cycle theory is generally attributed to Julius Grodensky.The life cycle of the industry is separated into four well defined stages suchas-Pioneering Stage-Rapid Growth Stage-Maturity and Stabilization Stage-Decline Stage
  • 7. POINEERING STAGEThe prospective demand for the product is promising in this stage and thetechnology of the product is low. The demand for the product attracts manyproducers to produce the particular product .There would be severecompetition and only fittest companies survive this stage. The producers tryto develop brand name, differentiate the product and create a productimage. This would lead to non-price competition too. The severecompetition often leads to the change of position of the firms in terms ofmarket shares and profit. In this situation, it is difficult to select companiesfor investments because the survival rate is unknown.RAPID GROWTH STAGEThis stage starts with the appearance of surviving firms from the pioneeringstage. The companies that have withstood the competition grow strongly inmarket share and financial performance. The technology of the productionwould have improved resulting in low cost of production and good qualityproducts. The companies have stable growth rate in this stage and theydeclare dividend to the shareholders. It is advisable to invest in the sharesof other companies. In this stage growth rate is more than the industry’saverage growth rate.MATURITY AND STABLISATION STAGEIn the stabilization stage, the growth rate tends to moderate and the rate ofgrowth would be more or less equal to the industrial growth rate of thegross domestic product growth rate. Symptoms of obsolescence may
  • 8. appear in the technology. To keep going technological innovations in theproduction in process and products should be introduced. The investorshave to closely monitor the events that take place in the maturity stage ofindustry.DECLINING STAGEIn this stage, demand for the particular product and the earnings of thecompanies in the industry7 decline. The specific feature of the decliningstage is that even in the boom period; the growth of the industry would below and decline at a higher rate during the investment in the shares ofthese types of companies leads to erosion of capital.CONSIDERABLE FACTORS OF INDUSTRY ANALYSISGROWTH OF THE INDUSTRYThe historical performance of the industry in terms if growth and profitabilityshould be analyzed. Industry wise growth is published periodically by theCenter for Monitoring Indian Economy. The past variability in return andgrowth in reaction to macro economic factors provide an insight into thefuture. Even though history may not repeat in the exact manner, lookinginto the past growth of the industry, the analyst can predict the future.COST STRUCTURE AND PROFITABILITY
  • 9. The cost structure, that is the fixed and variable cost, affects the cost ofproduction and profitability of the firm. Higher the fixed cost component,greater sales volume is required to reach the firm’s breakeven point. Oncethe breakeven point is reached and the production is on the track, theprofitability can be increased by utilizing the capacity to full. Once themaximum capacity is reached, again capital has to be invested in the fixedequipments. Hence, lower the fixed cost, adjustability to the changingdemand and reaching the break even points are comparatively easier.NATURE OF THE PRODUCTThe products produced by the industries are demanded by the consumersand other industries. The investor has to analyse the conditions of relatedgoods producing industry and the end user industry to find out the demandfor industrial goods.In the case of consumer goods industry, the change in the consumers’preference, technological innovations and substitute products affect thedemand.
  • 10. NATURE OF THE COMPETITIONNature of the competition is an essential factor that determines the demandfor the particular product, its profitability and the price of the concernedcompany scrip. The supply may arise from indigenous producers andmultinationals. If too many firms are present in the organized sector, thecompetition would be severe. The competition would lead to a decline inthe price of the product. The investor before investing in the scrip of acompany should analyze the market shares of the particular company’sproduct and should compare is with the top five companies.GOVERNMENT POLICYThe government policies affects the very, never of the industry and theeffects differ from industry to industry. Tax subsidies and tax holidays forexport oriented products. Government regulates the size of the productionand the pricing of certain products. When selecting an industry, thegovernment policy regarding the particular industry should be carefullyevaluated. Liberalization and deli censing have brought immense threat tothe existing domestic industries in the sectors.RESEARCH AND DEVELOPMENT
  • 11. For any industry to survive the competition in the national and internationalmarkets, products and production process have to be technicallycompetitive. This dependent on the research and development in theparticular industry. Economies of scale and new market can be obtainedonly through research and development. The percentage of expendituremade on research and development should be studied diligently beforemaking an investment.SWOT ANALYSISThe above mentioned factors themselves would become strengths,Weakness, opportunity and threat (swot) for the industry. Increase in thedemand for the industry’s product becomes its strength; presence ofnumerous players in the market, that competitor becomes the threat to aparticular company in the respective industry. The progress in the researchand development in the particular industry is an opportunity and entry ofmultinationals in the industry and cheap imports of the particular productsare threat to that industry. In this way the factors have to be arranged andanalyzed in swot analysis.
  • 12. TELECOM IN INDIAThe Indian telecommunications market has been displaying sustained highgrowth rates. Riding on expectations of overall high economic growth andconsequent rising income levels, it offers an unprecedented opportunity forforeign investment. A combination of factors is driving growth in thetelecom market, promising rich returns on investments.Over the past 10 years, India has registered the fastest growth amongmajor democracies, having grown at over 7 per cent in four years duringthe 1990s. It represents the fourth largest economy in terms of PurchasingPower Parity. According to a recent Goldman Sachs report, over the nextfifty years, Brazil, Russia, India and China - the BRIC economies- couldbecome a much larger force in the world economy. It reports, “India could
  • 13. emerge as the world’s third largest economy and of these four countries;India has the potential to show the fastest growth over the next 30 to 50years”. The report also states that, “Rising incomes may also see theseeconomies move through the ‘sweet spot’ of growth for different kinds ofproducts, as local spending patterns change. This could be an importantdeterminant of demand and pricing patterns for a range of commodities”.The share of the services sector as a percentage of total GDP is alsopredicted to rise from the current 46 per cent to about 60 per cent by 2020.Population projections from the Planning Commission of India suggest thatthe share of the working age population (15-64 years) in total populationwill grow from the current 59 per cent to about 65 per cent, translating into882 million by year 2020.According to the Vision 2020 document for thePlanning Commission of India, the country will witness continuedurbanization. The urban population is expected to rise from 28 per cent to40 per cent of total population by 2020.Future growth is likely to beconcentrated in and around 60 to 70 large cities, each having a populationof one million or more.Over the years, spending power has steadilyincreased in India. Between 1995 and 2002, nearly 100 million peoplebecame part of the consuming and rich classes. Over the next five years,180 million people are expected to move into the consuming and very rich
  • 14. classes. On an average, 30-40 million people are joining the middle classevery year, representing huge consumption spending in terms of thedemand for mobile phones, televisions, scooters, cars, credit goods and aconsumption pattern associated with rising incomes.NATURE OF THE COMPETITIONMARKET PLAYERS:
  • 15. No. Service Total sub Market Trends Providers figures share (%)
  • 16. 1. BHARTI AIRTEL 58037920 25.40 Integrated Telco, with presence in all sectors - Cellular, Basic, National Long Distance (NLD) & International Long Distance (ILD). Currently offering only GSM based cellular services. No CDMA based cellular services being offered.2. RELIANCE 52540000 22.99 Operating GSM wireless services in 7 COMMUNICATIO circles and subsequently acquired NS Madhya Pradesh circle from RPG. Reliance is currently focusing on rollout of CDMA based wireless services.3. VODAFONE 44126243 19.31 Pure play GSM mobility player offering ESSAR cellular services in 16 circles. Has been working on a model of being associated with the high ARPU subscribers4. BSNL 34251334 14.99 Incumbent operator, virtual monopoly in the basic services. Very strong NLD operator; and, has been able to quickly ramp up GSM subscribers due to nationwide network reach. Pan country presence in both basic (except Mumbai and Delhi) and cellular services.5. IDEA 24001573 10.50 A 3 way GSM mobility joint venture between Tatas, Birlas and AT&T Wireless offering cellular services in 11 circles.6. AIRCEL 6805066 2.98 Operates only in Metro(Chennai) and Circle A(Tamil Nadu)7. SPICE 4210669 1.84 Pure play GSM based mobility player offering services in 2 circles – Punjab and Karnataka.
  • 17. 8. MTNL 3241851 1.42 Integrated incumbent operator also offering GSM based mobility in Delhi and Mumbai.9. BPL 1294762 0.57 Pure play cellular operator along with Spice and Aircel. the demand in the telecom industry in year 2007 is around 230 million now we will see does the main players in the industry has the capacity to fulfil the appetite of the demand side. Here we are considering only the top 2 companies which almost consist 50% of the market shares. • Bharti Airtel • Reliance communications
  • 18. About ReliAnce infocomm:-The Late Dhirubhai Ambani dreamt of a digital India — an India where thecommon man would have access to affordable means of information andcommunication. Dhirubhai, who single-handedly built India’s largest privatesector company virtually from scratch, had stated as early as 1999: “Makethe tools of information and communication available to people at anaffordable cost. They will overcome the handicaps of illiteracy and lack ofmobility.” It was with this belief in mind that Reliance Communications(formerly Reliance Infocomm) started laying 60,000 route kilometers of apan-India fibre optic backbone. This backbone was commissioned on 28December 2002, the auspicious occasion of Dhirubhai’s 70th birthday,though sadly after his unexpected demise on 6 July 2002. Reliance
  • 19. Communications has a reliable, high-capacity, integrated (both wirelessand wire line) and convergent (voice, data and video) digital network. It iscapable of delivering a range of services spanning the entire Infocomm(information and communication) value chain, including infrastructure andservices — for enterprises as well as individuals, applications, andconsulting. Today, Reliance Communications is revolutionizing the wayIndia communicates and networks, truly bringing about a new way of life.Vision:-India’s leading integrated telecom company RelianceCommunications is the flagship company of the Anil Dhirubhai AmbaniGroup (ADAG) of companies. Listed on the National Stock Exchange andthe Bombay Stock Exchange, it is India’s leading integratedtelecommunication company with over 60 million customers. Our businessencompasses a complete range of telecom services covering mobile andfixed line telephony. It includes broadband, national and international longdistance services and data services along with an exhaustive range ofvalue-added services and applications. Our constant endeavor is toachieve customer delight by enhancing the productivity of the enterprisesand individuals we serve. Reliance Mobile (formerly Reliance India Mobile),launched on 28 December 2002, coinciding with the joyous occasion of thelate Dhirubhai Ambani’s 70th birthday, was among the initial initiatives of
  • 20. Reliance Communications. It marked the auspicious beginning ofDhirubhai’s dream of ushering in a digital revolution in India. Today, we canproudly claim that we were instrumental in harnessing the true power ofinformation and communication, by bestowing it in the hands of thecommon man at affordable rates. We endeavor to further extend our effortsbeyond the traditional value chain by developing and deploying completetelecom solutionsBoard of director:-Shri Anil D. Ambani – ChairmanProf. J RamachandranShri S.P. TalwarShri Deepak ShourieShri A.K.Purwar
  • 21. BHARTI AIRTELWe are one of Asia’s leading providers of telecommunication services withpresence in all the 22 licensed jurisdictions (also known as TelecomCircles) in India, and in Srilanka. We served an aggregate of 133,708,496customers as of April 30, 2010, in India; of who 130,616,487 subscribe toour GSM services and 3,092,009 use our Telemedia Services either forvoice and/or broadband access delivered through DSL. We are the largestwireless service provider in the country, based on the number of customersas of April 30, 2010. We offer an integrated suite of telecom solutions to ourenterprise customers, in addition to providing long distance connectivity
  • 22. both nationally and internationally. We also offer DTH and IPTV Services.All these services are rendered under a unified brand “Airtel”.The company also deploys, owns and manages passive infrastructurepertaining to telecom operations under its subsidiary Bharti Infratel Limited.Bharti Infratel owns 42% of Indus Towers Limited. Bharti Infratel and IndusTowers are the two top providers of passive infrastructure services in India.Partners Mobile Services Nokia Siemens, Ericsson, HuaweiNetworkEquipment Telemedia & Long Nokia Siemens, Juniper, Cisco, Distance Services Alcatel Lucent, ECI, TellabsInformation Technology IBM IBM Daksh, Hinduja TMT,Call Centre Operations Teleperformance, Mphasis, Firstsource & AegisEquity Partner {Strategic} Singtel
  • 23. SUNIL MITTAL….. SWOT AnalysisStrengths • Strong mobile growth(around 10%) , with latest technology being offered at faster pace • An attractive business environment witnessed by number of foreign players entering Indian market • A vast untapped rural population which needs telecom services at their fingertipsWeaknesses
  • 24. • Wireless business segment is growing faster than wire line and more demand is coming for pre-paid services • The falling SIM card, lower tariff plan led to lower APRU • Delayed implementation of key policies because of dispute among TRAI, telecom ministryOpportunities • All of the providers are keen to provide more content which provides great opportunity for content providers • Regulator has recommended that foreign player can participate without any local partner • The government will cut the license fee by 33% for those operators which has over 95% residential coverageThreats • 3 G spectrum charges are more and which will have negative impact on demand for licenses • Due to price war , APRU is falling and further deterioration will lead to significant decline in top line growth
  • 25. • Capacity constraint may hamper the expected growth in Mobile segment • MNP will become reality in 2010, it will add further pressure to operator to retain the Existing customer CONCLUSIONIn our opinion, instead of taking a short-term view of paying capacity, thetelecom companies should focus on a long-term game. There is one wordthat telecom companies are hearing a lot these days-“Volumes”. They needvolumes to sustain the network and the large employee base they haveenrolled. In this regard, companies like Reliance and Tata’s have beenaggressive over the final rollout of connections to PCO owners. Reliance is
  • 26. giving upto 30% commission on each call. How they market and distributethese connections is a tough battle indeed. If and when the carrier accesscodes are introduced, there could be a tough fight among these outlets, asfar as prices are concerned. Yet, prices can go down further by almost 40%of the present structure. Part of the price cuts could be because of taxexemptions, if and when these companies can lobby for the same. Theother part could be earning through volumes.New players like Virgin Mobile, which already has an international presencein close to 17 countries are entering India. It is doing so in collaborationwith Tata Teleservices. The target market for Virgin Mobile is the youth,which in India is around 54% of its population.There are challenges like porting time, allocation of capital and operationalporting costs among participants and other interconnect issues. Yet, theatmosphere around the MNP issue looks positive and will be set once thecommittee submits its final report on the same.The telecom sector is attracting significant domestic and global investment.The capital investment made by the telecom service industry during 2006-07 was around $8.5 billion, out of which $550 million was foreign directinvestment. The margins and profits of almost all the telecom companies
  • 27. have been increasing. In fact there are cases where a significant portion of profit of internationaltelecom companies has been from their operations in India.India is well prepared for the introduction of NGN (Next-Generation Networking). Being alate starter in the telecom scenario, India has the advantage of using the latest technology and so it is in a better position when compared to manyother countries as far as introduction of NGN is concerned. Besides, the TRAI has identified introduction of NGN as a priority area. It has been notedthat mobile telephony is growing at an annual rate of over 90 percent. Besides the basic telephone service, there is a huge potential for different ValueAdded Services (VAS). In fact, the real potential for telecom service growth is still lying untapped. BIBLIOGRAPHY • www.trai.gov.in • www.scribd.com • www.dot.gov.in • Google search engine
  • 28. • PriceWaterHOuse Coopers• Motilal Oswal Securities Ltd.