Strategic Management Airtel and Idea


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Strategic Management Airtel and Idea

  1. 1. Telecommunication Industry The era of telecommunication in India started from the year of 1851 with the initiativefrom Government of India near the city of Calcutta now known as Kolkata. However the rapidgrowth in telecom industry came into picture after the year of 2002-03 onwards as the morenumber of service providers came into existence. Since 2002-03 there is rapid change in thetechnology and increase in numbers of subscribers in the Indian telecom industry till now. Thefollowing are the milestones in the Indian telecom industry.  1851 First operational land lines were laid by the government near Calcutta.  1881 Telephone services introduced in India.  1883 Merger with postal system.  1923 Formation of Indian radio Telegraph Company.  1932 Merger of ETC and IRT into Indian Radio and Cable Communication Company.  1947 Nationalization of all foreign telecommunication companies to form the posts, telephone and telegraph, a monopoly run by the Governments ministry of communications.  1985 Department of telecommunication established an exclusive provider of domestic  Long-distance services that would be its own regulator.  1986 Conversion of dot into two wholly government – owned companies the VSNL for International telecommunication and MTNL for services in metropolitan areas.  1997 Telecom regulatory authority created.Indian Telecom Industry Features  Building a modern and efficient infrastructure ensuring greater competitive environment  Strengthening research and development for manufacturing, value added services.  Efficient and transparent spectrum management  To accelerate broadband penetration  Universal service to all uncovered areas including rural areas.  Enabling Indian telecom companies to become global players.Global Business School | Strategic Management | 1
  2. 2. Major Players in Telecom Industry Rank Operator Market Share % 1 Bharti Airtel 24.5% 2 Vodafone 19.8% 3 Idea Cellular 15.6% 4 Reliance Communications 14.6% 5 BSNL + MTNL 7.9% 6 TATA 6.9% 7 Aircel 5.5% 8 Uninor 3.6% 9 Others 1.6% Total 100%Global Business School | Strategic Management | 2
  3. 3. Market Growth Indian telecom industry is characterized by a large subscriber base, substantialTeledensity but low revenues per user (ARPU) Wireless Subscribers (Million) CAGR +34.5% 1000 900 800 700 600 500 934 400 852 300 636 200 427 287 100 0 2008 2009 2010 2011 2012 (Source: Indian Telecom Market Overview Report Nov 2012 – Zinnov) Wireline Subscribers (Millions) CAGR -4% 45 40 35 30 25 20 39 38 36 34 15 31 10 5 0 2008 2009 2010 2011 2012 (Source: Indian Telecom Market Overview Report Nov 2012 – Zinnov)Global Business School | Strategic Management | 3
  4. 4. Revenue of Telecom Industry (USD Billion) CAGR +4.88 % 45 40 35 30 25 20 37.4 38.4 32 31.7 33.8 15 10 5 0 2008 2009 2010 2011 2012 (Source: Indian Telecom Market Overview Report Nov 2012 – Zinnov) Teledensity in India CAGR +12.8 % 90.00% 80.00% 70.00% 60.00% 50.00% 40.00% 79.60% 73.90% 30.00% 56.60% 20.00% 39.90% 28.30% 10.00% 0.00% 2008 2009 2010 2011 2012 (Source: Indian Telecom Market Overview Report Nov 2012 – Zinnov)Global Business School | Strategic Management | 4
  5. 5. Average Revenue Per User (USD) CAGR -23.5 % 7 6 5 4 3 5.9 2 3.8 2.6 1 2.1 1.9 0 2008 2009 2010 2011 2012 (Source: Indian Telecom Market Overview Report Nov 2012 – Zinnov) Global Comparison of ARPU (USD) 50 45 40 35 30 25 46.5 20 15 32 10 5 8.3 1.9 0 US UK China India (Source: Indian Telecom Market Overview Report Nov 2012 – Zinnov)  More than 3-fold increase in subscribers since 2008  High Tele-density of 79.6% in 2012  64.4% of the current subscribers are urban  Indian Telecom ARPU is the lowest amongst the lowest in the world.Global Business School | Strategic Management | 5
  6. 6. ARPU Spending on Voice (USD Bn) 2.5 2 1.5 1 2.04 1.5 1.44 1.27 0.5 0 2009 2010 2011 2012 (Source: Indian Telecom Market Overview Report Nov 2012 – Zinnov) Average Spending on MVAS (Mobile Value Added Service) in USD Bn 0.6 0.5 0.4 0.3 0.48 0.2 0.39 0.31 0.34 0.1 0 2009 2010 2011 2012 (Source: Indian Telecom Market Overview Report Nov 2012 – Zinnov) Declining voice Carriers increasingly Growing smartphone revenue straining focusing on adding adaption & increasing ARPU, However per value added services mobile penetration user spending on to thier portfolio to further pushing MVAS MVAS increasing supplement revenuesGlobal Business School | Strategic Management | 6
  7. 7. Indian MVAS (Mobile Value Added Service) Market Size (USD Bn) 8 7 6 5 4 6.8 3 5.1 2 4.3 3.1 1 1.9 0 2009 2010 2011 2012 2013 (E) (Source: Indian Telecom Market Overview Report Nov 2012 – Zinnov) Revenue Share of MVAS Categories Mobile App 10% Education 7% CRBT 32% Games 8% Health 7% News SMS Based 14% 17% Governance 5% (Source: Indian Telecom Market Overview Report Nov 2012 – Zinnov)Global Business School | Strategic Management | 7
  8. 8. Telecom companies are also aggressively focusing on the fast growing data center marketin India Data Center Market (USD bn) 7 6 5 4 3 5.8 2 4 1 2.6 1.7 0 2010 2011 2012 2013 (E) (Source: Indian Telecom Market Overview Report Nov 2012 – Zinnov) Competitors Cost Components Cost Share Tata Communications Power 38% Ctrls Maintenance 21% NetMagic Bandwidth 12% Reliance IDC Equipment 12% Airtel Facility 10% Wipro Manpower 7% Sify TOTAL 100 Cost Components Manpower 7% Facility 10% Power Equipment 38% 12% Bandwidth 12% Maintaince 21%Global Business School | Strategic Management | 8
  9. 9. Telecom Value Chain Subscription Telecom Network Network Content & Devices Subscribers Infrastructure Equipment Operator Portals Resellers GTL - Nokia- Bharti Airtel Company Facebook Infrastructure Siemens Vodafone Outlet Rediff Indus Towers Huawei Reliance Dealers Tata Quippo Ericsson Idea Blackberry App storesCore IT Requirements of Telecom Industry Network Enterprise Partner Customer Management Management Management Management •Fault Management • Finance & •Partner Network •Service Activation •Config. Accounting Management •Revenue and Management •HR Billing •Account •Sales & Operation •Supply Chain Management Management Planning Management •Customer Analytics •Performance •Facility •Contacts Management Management •Revenue Fraud Centers/Call •Security •DBMS3 Management CentersGlobal Business School | Strategic Management | 9
  10. 10. PEST Analysis Political Factors Economical Factors Socio – Cultural Technological Factors Factors Consumer Money Supply Lifestyle Changes Total Government Protection Law GDP Trends Career Spending For Research Government Interest Rates Expectation & Development Policy Inflation Rates Consumer Focus of Technological Antitrust Imports Activism Efforts Regulations Price Control Growth Rate Of New Products Protection Laws Population Internet Availability Special Incentives Stability Of GovernmentGlobal Business School | Strategic Management | 10
  11. 11. Economical Trends Following are the Economical trends have huge impact on telecommunication Industry  Money Supply  GDP trends  Interest Rates  Inflation Rates  Imports  Price controlMoney Supply (Investment from MNC’s to Indian Telecommunication Industry) The Russian government has picked up equity amounting to US$ 670 million-US$ 700million in Sistema Shyam TeleServices Ltd (SSTL), a joint venture between Russia-basedtelecom Sistema and Shyam Group in India. Sistema holds 56.68 percent stake in Sistema ShyamTeleservice Ltd. Russian Government holds 17.14 percent stake in SSTL. Norway-based telecom operator Telenor has bought a 60 per cent stake in UnitechWireless for US$ 1.23 billion. Japanese telecom major NTT DoCoMo acquired a 27.31 per cent equity capital of TataTeleservices for about US$ 2.6 billion in November 2008. Bahrains Batelco has signed a deal to buy 49 per cent in Chennai-based S-Tel, a GSMservice provider, for US$ 225 million. BSNL, Indias leading telecom company in revenue terms, will put in about US$ 1.16billion in its WiMax project. After the cancellation of license of Uninor, It‘s partner Telenor has signed a partnershipagreement with an Lakshdeep Investment & Finance which will contribute 26% in the entity andwill allow Telenor to participate in the forth coming mobile license auction.Global Business School | Strategic Management | 11
  12. 12. India’s GDP Telecommunication is an enabler of business, an increase in the number of people usingphones results in an increase in GDP. The Gross Domestic Product (GDP) in India expanded to5.5 percent in the second quarter of 2012 and Telecommunication industry has contributed 13.6% to the total GDP.India’s Interest Rate Rising interest rates have had an adverse effect on telecommunication industry stockprices. Interest rates rise, the cost of borrowing money rises affecting the telecommunicationIndustries profit after tax (PAT). The Interest rate for the year 2012 has remained at 8%.Global Business School | Strategic Management | 12
  13. 13. Imports Mobile phones shipment to India during the first half of 2012 crossed 10 crore units,registering a growth of 16.6% over the same period over the previous years, according to CyberMedia Research (CMR). High number of mobile phones will result in high number ofconsumption of mobile simcards which will again result in increase revenue and growth for theIndustry.India Stock Market (Sensex) Stocks in India had a positive performance during the last year. India Stock Market(Sensex) rallied 900 points or 4.61 percent during the last one year.Global Business School | Strategic Management | 13
  14. 14. Price war in Telecommunication Industry As competition has mounted, the companies share prices have taken a hit, with marketleaders Bharti Airtel sliding -31.91 percent, Idea Cellular falling -11.57 percent and RelianceCommunications tumbling -28.86 percent in the past one year.Bharti AirtelGlobal Business School | Strategic Management | 14
  15. 15. Idea CellularReliance CommunicationGlobal Business School | Strategic Management | 15
  16. 16. Technological Factors Following are the Technological factor trends that have huge impact ontelecommunication Industry  Total Government spending for Research & Development  Focus of Technological efforts  New Products  Internet availabilityTotal Government spending for Research & Development Clearing the differences in sec 10AA of the SEZ Act and the union minister‘s reiterationon the significance of SEZs will help the Indian telecommunications industry to take forward itsSEZ plans throughout the country.The enhanced deduction from 150-200% is also a positive stepon R&D investment to boost the R&D segment in the country. The estimated budget for telecomfor the year 2009-10 was Rs 16,731 crore, and the revised one was Rs 16,099 crore, for the year2010.Focus of Technological efforts Most Indian service Providers are focusing on 4G technologies to enhance data Rate as100 Mbs for single users which eventually helping TRAI to generate more revenue .New Products Smart Phones (Android OS 4.0, iPhone, Windows) Galaxy Tabs , HSDPA Modem, Blackberry Application are helping service providers to attract more subscribers eventually increase inmarket share.Internet Availability BSNL, RCOM, Airtel are providing DSL services to rural and urban areas in India. Theseservices include IPTV, high-definition TV, 3-D TV, video-on-demand, bandwidth-on-demandand videoconferencing. The service was built on Gigabit passive optical network (GPON)technology by using Optical N/W.Global Business School | Strategic Management | 16
  17. 17. Political Factors Following Political Factors have huge impact on telecommunication Industry  Consumer Protection Law  Government Policy  Antitrust Regulations  Protection Laws  Special Incentives  Stability of governmentConsumer Protection Law On September 2009, The Supreme Court stated that Telecommunication complaint‘scannot be filed in Consumer Courts, as there is a special provision in Indian Telegraph Act,Clause 7B. Hence all the Telephone complaints are considered into arbitration rather thanConsumer Courts with the help of Consumer Protection Act. The customer faced many difficulties by this law as the arbitration was handled by theDepartment of Telecom, which was difficult to approach and follow the rules by the customers.According to the Department of Telecommunication for the past one year there were nocomplaints by the customers. On February 2012, The Supreme Court re-established the Consumer Protection Courtwhere in The Consumer Protection Act was an additional facility not an alternative one, whereinthe consumer can approach the Consumer Court. All the Telecom players are licenses not the Telecom Authorities, Hence the Arbitrationis optional for the consumers.Global Business School | Strategic Management | 17
  18. 18. Antitrust Regulations Is an attempt to shift focus from curbing monopolies to promoting competition. Antitrustlaws are helping in Strategic policing on anti-competition market practices and trends in Indiantelecommunication industry.2G spectrum scam by Telecommunication ministry 2G licenses issued to private telecom players at throwaway prices in 2008. Spectrumscam has cost the government Rs. 1.76 lakh crore.Government Stability and Incentives Indian Governments stability from last 10 yrs has really helped telecommunicationindustry to grow with rapid pace . TRAI had asked the stakeholders to give inputs on variousaspects including barriers in the growth of telecom equipment manufacturing in India; incentiveschemes which can enhance design and development of telecom products; factors affecting thecompetitiveness of Indian manufacturers; and methods to boost research and development toincrease telecom related intellectual property from India.Global Business School | Strategic Management | 18
  19. 19. Socio - Cultural Trends:  Lifestyle Changes  Career expectation  Consumer activism  Growth rate of population  Lifestyle ChangesLifestyle Changes Fast-changing lifestyles are forcing telecom companies to enlarge the breadth and depthof their services. Value-added services, such as music downloads, video-on-demand and onlinegames are gaining currently in India.Career Expectation It is predicted that Employment growth in the various occupations in thetelecommunications industry is expected to increase by 7% every year. Indian engineers witnessa huge demand in the International Telecommunication Industry, as they are considered to beicons of high-tech executives, telecomm technicians, installers, mechanical engineers, telecommmarketers and desktop support people in Telecomm companies all around the world.Consumer activism According to telecom consultant and consumer activist S N Aggarwal, in June, callsrelated to telecom hassles touched a high of 39%. The National Consumer Helpline received1,136 calls with telecom woes, out of a total of 2,914 in June.Growth rate of population Indian business model of being profitable despite having the lowest tariff in the worlddue to large Telecom density. The big driving factor for the confidence in the growth in telecomsector is the youth population in India. With around 40% youth population for whomcommunication needs are as essential as food and water, this is a huge potential market.Global Business School | Strategic Management | 19
  20. 20. Porter’s Five Force Analysis Threat to New Entrants Declining ARPU Access to Optical Fiber Network Regulatory Charges Threat of New Entrants FDI Spectrum Cost Investment Cost Restriction of operators in a regionBargaining power of Rivalry among Existing PlayersSuppliers Excessive Competition Threat from Substitutes FDI Price War Gmail/yahoo mail Mobile handset Market Share of Competitors Skype Suppliers MNP Facebook Different types of Exit Barriers Crowd Call products Presence of Competitors Way2sms Spectrum Cost Bargaining power of Buyers Customer‘s switching costs Buyer‘s ability to backward intergradations Buyer‘s Information Product differention Competition between Buyers Threat of New Entrants Global Business School | Strategic Management | 20
  21. 21. FDI At present 74% to 100% FDI is permitted for various telecom services. 100% FDI ispermitted in the area of telecom equipments manufacturing and provision of IT enabled services.This has made telecom one of the major sectors attracting FDI in flows in India. The mainObjective of the TRAI to have so much FDI is to encourage competition in the telecom sectortogether with better quality and affordable prices in order to meet the objectives of New TelecomPolicy, 1999.Investment Cost The cost of active equipment is estimated to be 40 percent of the telecom operators totalcapex, while the balance is accounted for by passive infrastructure. (For example, Bharti hasinvested close to Rs. 230 billion to create the cellular infrastructure with 45,000 towers acrossthe country). Typically, a ground based tower costs Rs. 25-30 lakh. A roof-based tower can bebuilt for Rs.13-14 lakh. Additionally, cost of maintaining one tower is estimated at Rs. 60,000-65,000 per month. However, if a telecom service provider decides to rent the passive networkfrom a tower company than the telecom service provider in that case would need to pay monthlyrent of Rs. 40,000 per tower for passive network and operating expenses close to Rs. 40,000-45,000 for active network. Furthermore, tower sharing among telecom service providers is just25% as compared to 90% in the west and some operators are not even willing to share towers.However, with the recent announcement made by BSNL about leasing its towers which will helpboth the older and newer players to penetrate into new markets. Tower sharing makes thetelecom industry moderately attractive for the new players and investors. Threat to New EntrantsGlobal Business School | Strategic Management | 21
  22. 22. Declining ARPU (Average Revenue per User) The market is attracting new class of consumers which are mostly rural and their ARPUis well below Rs 250/- (probably Rs 150 – 175/-). So, managing bottom-lines at such low levelsof revenue per user will prove to be a challenge for new entrantsAccess to Optical Fiber Network The largest optical fiber has been built by the incumbent operator BSNL who is also thelong distance operator. The private sector players such as Bharti and Reliance have alsoconstructed optical fiber cable network connecting mainly cities and towns but their presence isvery limited in the rural areas and difficult terrains. Hence it is fairly difficult for new entrants tolay down optical fiber connecting remote places as well.Regulatory Charges The regulatory charges in the telecom sector have a complicated structure becausemultiple levies impede the smooth implementation of telecom projects in India. Given thecontinuously-declining ARPUs, and the extremely-low tariffs, sustaining the current growth ratesof the industry requires urgent attention towards rationalizing the convoluted tax structure in thesector. TRAI has recommended to the DoT committee to phase out the multiple levies in thissector with a single levy in a phased manner. Further with regard to license fees, which currentlystand at 6%-10% of total revenue, TRAI has suggested that it be reduced at a uniform rate of 6%across all licenses.Spectrum CostGlobal Business School | Strategic Management | 22
  23. 23. Indias highest decision-making body (The Cabinet) fixed the base price for a 5megahertz (MHz) chunk of radio waves in the 1,800 MHz frequency band at a staggering Rs14,000 crore. The 1,800 MHz frequency is used by operators who use GSM technology, whichincludes most incumbents and a few new players. Players like Sistema, who operate on thecompeting CDMA platform, will have to pay even higher to get in: Rs 18,200 crore for 5 MHz inthe 800 MHz band. There is absolutely no rationale to fix the base prices of the auction at suchastronomical levels even if the payout is staggered over 12 years. Federation of Indian Chambersof Commerce and Industry (FICCI) has criticized the reserve price set by the cabinet for 2Gauction saying it will result in high tariff. The industry body called it anti-consumer.Restriction of operators in a particular region The Government has a policy of awarding licenses to only 3-4 operators to carry outbusiness in a particular circle or region which also acts as a deterrent for a new company whichis trying to enter the industry. Threat of New EntrantsGlobal Business School | Strategic Management | 23
  24. 24. Threat of New Entrants is low in the Telecom Industry, If any company wants to enterthe Telecom Industry they need to have high amount of capital, and then the companies have topay the Spectrum cost in order to carry out their operations. Later only 3-4 operators are allowedto operate in a circle. With Declining ARPU and Regulatory charges adding more worries to thenew entrants to enter the industry, Threat of New Entrant in Telecommunication sectorremains low. High LowGlobal Business School | Strategic Management | 24
  25. 25. Rivalry among Existing PlayersExcessive Competition Another major concern that has come to the forefront in the recent past has beenheightened competitive intensity in the industry that has correspondingly fuelled the price warbetween industry players. The Indian wireless market is one of the world‘s most competitivemarkets, with 12 operators across 23 wireless ‗circles‘ and 6 to 8 competing operators in eachcircle Eventually, the competition in the industry is expected to intensify further with the entry ofnew players, both domestic as well as foreign players. With the competitive intensity of theindustry already at such high levels new operators might find it difficult to gather significantshare in Indian telecom market. While the new players may benefit from a faster network rolloutthrough tower sharing, they will face challenges in terms of high subscriber acquisition costs andlower ARPU customers. List of Players in the Industry Rank Operator Market Share % 1 Bharti Airtel 24.5% 2 Vodafone 19.8% 3 Idea Cellular 15.6% 4 Reliance Communications 14.6% 5 BSNL + MTNL 7.9% 6 TATA 6.9% 7 Aircel 5.5% 8 Uninor 3.6% 9 Others 1.6% Total 100%Global Business School | Strategic Management 25
  26. 26. (source: bric-spotlight-report-india-telecom-november- 2011) The high growth rates encouraged the government to allow even more service providersto enter the industry. In 2008, the Indian government awarded licenses to several newcompanies, opening up an opportunity for global companies to gain a foothold in the market.Telenor of Norway, Sistema of Russia, and Etisalat of the UAE quickly acquired majoritycontrol of new license holders and launched services. To grab market share, the new entrantslaunched their services at attractive price points. When the more established players respondedwith price cuts of their own, it blew up into a full-fledged price war. The growth in subscriberadditions slowed, the profit margins of even the most established companies in the industrydeclined and losses piled up for the new companies. Stock prices of telecom companies, whichwere investor favorites for several years, started to underperform. In 2010, the government invited applications from existing service providers for licensingadditional telecom spectrum for providing high-end 3G services. In a deviation from its earlierpractice of fixed pricing for airwave spectrum, the government decided to give out the newlicenses on the basis of a competitive auction. The prices quoted by the bidders were severaltimes higher than the fixed price granted previously by the government for older licenses,including just a year before in 2009.Global Business School | Strategic Management 26
  27. 27. Price War The ever-increasing competitive intensity in the sector, with licenses and spectrum inseveral circles allotted to newer operators, is also a concern and could lead to unrealistic pricinglevels to grab subscribers. The pricing strategy of per second billing already has taken the pricewar between telecom operators to the next level. The intensifying price war could put significantdownward pressure on the industry revenue growth. Further, the ongoing price war and theconcomitant decline in telecom traffic could raise the entry barrier for new companies. Minimum Full Talktime offered by the Companies Tariffs (Minimum Full Talktime) Aircel 200 Vodafone 250 Relaince 150 Tata Docomo 200 Airtel 250 IDEA 200 BSNL 220 (source: Business School | Strategic Management 27
  28. 28. Market Share of Competitors The Indian telecom Market for the month of July 2012 ended with a subscriber base of913.49 million. The overall mobile telecom density stood at 75.21% (Urban – 157.11%, Rural –39.54%). The Urban to Rural Ratio was 63.37% to 36.63%. Active mobile subscriber base inJune 2012 was 695.82 million which increased to over 698.08 million active subscribers in July2012. Hence, India‘s wireless telecom market has shown a positive growth. In July 2012, about 4.98 million subscribers submitted Mobile Number Portability(MNP) requests which are about 0.55% of the total mobile subscriber base in India. (source –  Bharti Airtel has strengthened its leadership position with 24.5% market share in India.  Idea has largest proportion of active mobile users at 92.80% followed by Bharti Airtel (90.46%) and Vodafone (89.16%)  Top 5 players in Indian wireless telecom industry accounts for 82.3% market share in terms of active subscriber base.  Reliance subscriber base experienced 13.25% decline as the company disconnects 20.48 million inactive customers from its network.Global Business School | Strategic Management 28
  29. 29. MNP (Mobile Number Portability) From the above chart its clear that Idea is the leader in terms of MNP with 36,01,099,closely followed by Airtel with 34,56,655 with third place going to Vodafone with 26,80,438.Global Business School | Strategic Management 29
  30. 30. According to TRAI; Uninor, Airtel, Idea and Vodafone were the biggest subscriber loser forthe month of August 2012. Uninor lost 23,83,031 Airtel 19,02,683 Idea 16,46,783 Vodafone 15,59,538 The decline in the user base of the country is due to large scaledisconnections of non active subscribers by many operators.(Source - Business School | Strategic Management 30
  31. 31. Exit Barriers Telecom is a capital intensive sector with sunk costs. The production of an additionalminute of wireless call costs virtually nothing, most of the cost being upfront investment inexpensive equipment deployment. But in India exiting the Telecom industry is quite easy there are no restrictions in India asper the Indian Telecom regulator (TRAI) but the entry fees paid by them will not be refundable.Operators intending to exit the business can surrender their license giving at least 60 days notice.TRAI directs licenses to maintain the Quality of Service (QOS) even during the period whennotice for surrender of license is pending.  Spectrum/Infrastructure can be traded/sold to other players in the industry.  Compensation is also paid, if the Regulator or the Government is responsible for the failure.  Improved labor and Forex laws help the companies to release the employees easilyGlobal Business School | Strategic Management 31
  32. 32. Presence of Competitors in each Region With 3-4 players operating in same region, cut throat competition can be seen seenamong the competitors. 3G Network Map of India (Source: Business School | Strategic Management 32
  33. 33. Rivalry among existing players In the traditional economic model, Competition drives profit to zero, but players in thetelecom industry strive for competitive advantage. The number of business units operating withina particular industry indicates the rivalry among them. If the number of business operatingcompanies in a particular industry is small it means that the rivalry among them will also be low.But in case of Telecom industry with 10-12 players operating in the industry the rivalry is veryhigh. Each operator is trying to grab the maximum market share with unrealistic pricing to grabthe customers and they even try to woo the customers of other operators into their network withMobile Number Portability. Hence Rivalry among Existing players is very high intelecommunication industry. High LowGlobal Business School | Strategic Management 33
  34. 34. Bargaining power of BuyersCustomer Switching Costs The cost of new connection is very low, or one can say new connections are available forfree. Moreover, with the introduction of mobile number portability switching has become all themore easier. Some operators have estimated the charges can be as low as Rs. 20. The TRAIstatistics for May 2010 shows subscriber switching capacity of 20% with a yearly growth rate of12.75%. This factor gives new entrant and investors a reason to entry this industry.Buyers ability to backward intergradations Not much intermediaries between the producer and the consumers. High Investmentrequired for backward integration which is less likely to occur. Hence no backwardintegration in this case.Global Business School | Strategic Management 34
  35. 35. Information to Buyers’ With large scale print and video advertising, and Big celebrities like Anushka Sharma(Reliance), Abhishek Bachan (IDEA), Ranbir Kapoor (Tata Docomo), A.R Rahman (Airtel)buyers are well informed about the latest updates of the products with better offerings inUrban as well as in Rural areas. The official websites of the players in the industry also play amajor role in keeping the buyers informed.Global Business School | Strategic Management 35
  36. 36. Product differentiation Airtel, Reliance, Idea and all other companies have similar prices for similarproducts and less likely for anyone to maintain product differentiation and hence buyershave the option to switch over. 1GB Data Packs of various Companies TATA Docomo BSNL Aircel IDEA Vodafone Relaince Airtel 0 50 100 150 200 250 300 TATA Airtel Relaince Vodafone IDEA Aircel BSNL Docomo 1GB Data MRP 250 255 241 250 198 250 255 (source: Competition between buyers The individual buyers dont have any competition among themselves but BigOrganizations like IT or banks do have. Enterprise customers generate major part of therevenues for any telecom companies like Reliance, Airtel or Idea which means higher buyerpower. But this is not significant for those who deal with individual customersGlobal Business School | Strategic Management 36
  37. 37. Bargaining Power of Buyers The power of buyers is the impact which customers have on any industry. In case ofTelecom industry Bargaining Power of Customers is high with low switching cost customers canswitch from one operator to another. Also there is a little product differentiation betweenoperators, If one operator introduces a new scheme then within few days the same kind ofscheme is offered by rival operator. With companies providing information to buyer throughadvertising and keeping them up to date. Bargaining Power of Buyers is high inTelecommunication Industry. High LowGlobal Business School | Strategic Management 37
  38. 38. Bargaining Power of SuppliersFDI For manufacture of Telecom Equipments - FDI up to 100% is allowed through automaticentry route. Attracting more foreign investments and providing excellent opportunities fordomestic as well as foreigners in manufacturing sector. No industrial license is required for setting up manufacturing units for telecom equipments.The last few years saw many renowned telecom companies setting up their manufacturing basein India.  Nokia and Nokia Siemens Networks have set up their manufacturing plant in Chennai.  Ericsson has set up GSM radio Base Station Manufacturing facility in Jaipur.  Motorola, Foxconn has set up large manufacturing plants in Chennai. Elcoteq has set up handset manufacturing facilities in Bangalore.  LG Electronics has set up plant of manufacturing GSM mobile phones near Pune.  Ericsson has launched their R&D Centre in Chennai. Flextronics has set up an SEZ in Chennai.  A large number of companies like Alcatel, Cisco have shown interest in setting up their R&D centers in India.Global Business School | Strategic Management 38
  39. 39. As far as telecom industry is concerned, its‘ a service based industry which is intangible,Therefore the role of suppliers will be very minimum. Some of the suppliers are  Mobile Handset Suppliers: There are many handset suppliers in the market, some of them are Nokia, Samsung, Sony, Spice, Micromax, Karbonn etc. Company Market Share Nokia 38.2% Samsung 25.3% Micromax 6.3% Blackberry 4.7% Karbonn 4.3% HTC 3.0% Spice 2.5% LG 2.5% Hwawei 2.4% G‘Five 2.1% Others 8.7% Market Share of Mobile handset Companies in India 45 38.2 40 35 30 25.3 25 20 15 8.7 10 6.3 4.7 4.3 3 2.5 2.5 2.4 2.1 5 0 Market Share of Mobile Handset Companies in IndiaGlobal Business School | Strategic Management 39
  40. 40. Revenue generated by various Companies through operations in India Company Revenue in Revenue in Change in % Change in 2010-11 2011-12 Revenue Revenue Nokia 12929 11925 -1004 -8.41% Samsung 5720 7891 2171 27.5% Micrmax 2289 1978 -311 -15.72% Blackberry 1950 1460 -490 -33.56% Karbonn 1004 1327 323 24.34% HTC 450 923 473 51.24% Spice 920 790 -130 -16.45% LG 1834 780 -1054 -135.12% Hwawei 626 750 124 16.53% G’Five 1326 670 -656 -97.91% Graphical Representation of the above data 2500 2000 1500 1000 Axis Title 500 0 -500 -1000 -1500 Samsun Microm Blackber Nokia Karbonn HTC Spice LG Hwawei G Five g ax ry -1004 2171 -311 -490 323 473 -130 -1054 124 -656( (source - Business School | Strategic Management 40
  41. 41.  Optic fiber and Aluminum - other Suppliers in the industry are Optic fiber and Aluminum. Companies producing different types of Telecom products (source:  Software Companies - Software assistance, where players can have edge over others. The major software providers are TCS, Infosys, Wipro and Satyam. Big players like Reliance and Tata have their own software solution department.Global Business School | Strategic Management 41
  42. 42. Spectrum Cost In order to opearate or provide services in any of the circles in the country, a serviceprovider has to have a licence which is provided by the Department of Telecommunication(DoT) at the time of auction. Although the reserve price for auction is already has been set by the Cabinet before theauction takes place. The DoT(Licence Provider) or the Supplier in our case has ―No or littlepower‖. Reasons being:  Players in the market won‘t bid if the reserve price set is too high. In case of 2012 2G auction the reserve price which was set by the Cabinet was at staggering 14000Cr, which was too high according to the experts in the market. The reserve price of 2G was 4 times higher than the 2010 3G reserve price.  High Spectrum cost will attract less numbers of bidders. No of Companies participated in 2G auction 2012 were:- 1. Airtel 2. Idea 3. Vodafone 4. Videocon 5. Telewings Communication2008 (2G Spectrum Auction) If the Telecom Minister is corrupt like A. Raja who dished out specctrum in 2008auction, when he provided the licenses for a mere 1,659 crore when the price proposed to thetelecom companies was a minimum of Rs 3,622.2 crore for every unit of 2G Spectrum. This willweaken the supplier power because of the corrupt officals.Global Business School | Strategic Management 42
  43. 43. 2010 (3G Specturm Auction) In 2010, 3G auction Government kept a reserve price of 3500 for four 3G licenses andexpected to generate 25000 crore from the auction. The 3G licence‘s were auctioned in a highly competitative bidding. The Governmentearned a revenue of whooping Rs 67,719 crore from the auction.Reasons for such unexpected revenue?  Low reserve price.  More number of players participated in the auction 1. Airtel 2. Aircel 3. Idea 4. Reliance 5. S Tel 6. Tata 7. Vodafone Apart from the above state owned BSNL and MTNL were also awarded licence, althoughthey did not participated in the auction. Both these state-owned operators were given a head startby the government in the 3G space by allotting the required 3G spectrum, on the condition thateach would pay an amount which would be equivalent to the highest bid in the respective serviceareas as and when the 3G auctions took place. BSNL paid the Indian government Rs10,187crores for spectrum in all 20 circles it operates in. State-owned MTNL provides 3G services inthe other 2 circles - Delhi and Mumbai. The auction took place over 34 days and consisted of 183 rounds of bidding. The mostexpensive telecom circle was Delhi at a price of Rs3316.94 crore per operator. The five mostexpensive circles were Delhi, Mumbai, Karnataka, Tamil Nadu and Andhra Pradesh. Theyaccounted for 65.56% of the total bids.Global Business School | Strategic Management 43
  44. 44. Table Showing Circles’ won by various companies during 2010 3G Spectrum (source - Business School | Strategic Management 44
  45. 45. 2012 (2G Specturm Auction) The auction took place for just 2 days and consisted 14 rounds. The bids received wereworth Rs 9,407 crore far lower than the target of 28,000 crore. Out of 144 circles of spectrum onoffer, 101 got bids. Delhi, Mumbai, Karnataka and Rajasthan circles did not receive any bids.Players which participated in the auction were Airtel,Idea,Vodafone,Videocon and TeleswingsCommunication Table Showing Circles’ won by various companies during 2012 2G Spectrum (source - Business School | Strategic Management 45
  46. 46. Overall, from the above we can conclude that Although spectrum cost is decided by theCabinet/TRAI the bidding which takes place at the time of auction lies in the interest of themarket players. If there, are more number of competitiors and the bidding is likely to becompetitive. The exixting market players are more likely to be aggressive and more focusedabout their bids. Therefore, Spectrum cost will provide a little or No Bargaining to suppliers as its fullydriven by the bidders in the auction.Global Business School | Strategic Management 46
  47. 47. Model showing how Low Cost Spectrum can provide High Bargaining power to Suppliers Low Spectrum Cost Attracts more number of Players Aggresive bidding by Fight for circles Players Between Players High Revenue Higher Bargaining through Spectrum power of SuppliersGlobal Business School | Strategic Management 47
  48. 48. Bargaining Power of Suppliers Similar to buyer power, Suppliers also exert pressure on companies. The main rawmaterials for the telecom industry are the telecom equipments, telecom tools, telecommunicationproducts, circuit breaker, electric cables etc. With thousands of companies producing these kindsof products within India and Mobile Handsets companies having No or little impact on Telecomplayers. Spectrum Cost is the only thing that the companies need to worry about, keepingBargaining Power of Suppliers at low. High LowGlobal Business School | Strategic Management 48
  49. 49. Threat of SubsitutesGlobal Business School | Strategic Management 49
  50. 50. Threat from subsitutes is relatively very low as they don‘t provide the mobility as the cellphones or telecom providers do. Above are the few examples.Yahoomail: Yahoo mail offers free email with unlimited mail & photo storage, includes spam &virus protection, chat & free text sms from your inboxGmail: 10+ GB of storage, less spam, and mobile access. Gmail is email thats intuitive,efficient, and useful. And maybe even fun.Facebook: Facebook is a social utility that connects people with friends and others who work,study and live around them. People use Facebook to keep up with friends and relatives.Way2sms: Indias First web to mobile Free SMS site, wherein messages can be send to anynetwork free of cost.Crowd Call: Crowd Call is basically a new and secured concept for conferencing yourfriends or business clients right from your smart phone. With Crowd Call you get 10free calls/day to call over 40 countries worldwide. There is no time limit for any call 1call can be as long as you want and the person you are going to call does not need tohave any app installed in his phone, he just needs to have a valid phone number andhe can be invited into conference. The only thing you need is an iPhone or Androiddevice installed with the Crowd Call app and rest part is covered by crowd call itself,the other party do not need to have any app installed but just a regular number andthey receive your call right by your own number. You get 10 free calls per day whichyou can use to call over 40 countries, on iPhone at a time you can select 2 person tocall together and after the call is connected you can again minimize the call and callanother two persons and merge call together for free 5person conference call .Global Business School | Strategic Management 50
  51. 51. Threat of Subsitutes Threat from subsitutes is relatively very low as they don‘t provide the mobility as the cellphones or telecom providers do. For instance if a person who wants to speak to any person wouldmake use of cell phone rather than logging into his skype account and making call from there.Therefore Threat of Subsitutes in telecom industry is very low. High LowGlobal Business School | Strategic Management 51
  52. 52. Bharti Airtel Bharti Airtel Limited, commonly known as Airtel, is an Indian telecommunicationsServices Company headquartered at New Delhi, India. It operates in 20 countries across SouthAsia, Africa and the Channel Islands. Airtel has GSM network in all countries in which itoperates, providing 2G, 3G and 4G services depending upon the country of operation. Airtel isthe worlds fourth largest mobile telecommunications company with over 261 million subscribersacross 20 countries as of August 2012. It is the largest cellular service provider in India, with183.61 million subscribers as of November 2012. Airtel is the third largest in-country mobileoperator by subscriber base, behind China Mobile and China Unicom. Airtel is the largest provider of mobile telephony and second largest provider of fixedtelephony in India, and is also a provider of broadband and subscription television services. Itoffers its telecom services under the Airtel brand, and is headed by Sunil Bharti Mittal. BhartiAirtel is the first Indian telecom service provider to achieve Cisco Gold Certification. It also actsas a carrier for national and international long distance communication services. The companyhas a submarine cable landing station at Chennai, which connects the submarine cableconnecting Chennai and Singapore. Airtel is credited with pioneering the business strategy of outsourcing all of its businessoperations except marketing, sales and finance and building the minutes factory model of lowcost and high volumes. The strategy has since been copied by several operators. Its network—base stations, microwave links, etc.—is maintained by Ericsson, Nokia SiemensNetwork and Huawei, and business support is provided by IBM, and transmission towers aremaintained by another company (Bharti Infratel Ltd. in India). Ericsson agreed for the first timeGlobal Business School | Strategic Management 52
  53. 53. to be paid by the minute for installation and maintenance of their equipment rather than beingpaid up front, which allowed Airtel to provide low call rates of 1/minute (US$0.02/minute). During the last financial year (2009–10), Bharti negotiated for its strategicpartner Alcatel-Lucent to manage the network infrastructure for the tele-media business. On 31May 2012, Bharti Airtel awarded the three-year contract to Alcatel-Lucent for setting upan Internet Protocol access network (mobile backhaul) across the country. This would helpconsumers‘ access internet at faster speed and high quality internet browsing on mobile handsets.HISTORY Sunil Mittal founded the Bharti Group. In 1983, Mittal was in an agreement withGermanys Siemens to manufacture push-button telephone models for the Indian market. In1986, Mittal incorporated Bharti Telecom Limited (BTL), and his company became the first inIndia to offer push-button telephones, establishing the basis of Bharti Enterprises. By the early1990s, Sunil Mittal had also launched the countrys first fax machines and its first cordlesstelephones. In 1992, Mittal won a bid to build a cellular phone network in Delhi. In 1995, Mittalincorporated the cellular operations as Bharti Tele-Ventures and launched service in Delhi. In1996, cellular service was extended to Himachal Pradesh. In 1999, Bharti Enterprises acquiredcontrol of JT Holdings, and extended cellular operations to Karnataka and Andhra Pradesh. In2000, Bharti acquired control of Skycell Communications, in Chennai. In 2001, the company acquired control of Spice Cell in Calcutta. Bharti Enterprises wentpublic in 2002, and the company was listed on Bombay Stock Exchange and National StockExchange of India. In 2003, the cellular phone operations were rebranded under the single Airtelbrand. In 2004, Bharti acquired control of Hexacom and entered Rajasthan. In 2005, Bhartiextended its network to Andaman and Nicobar. This expansion allowed it to offer voice servicesall across India. In 2009, Airtel launched its first international mobile network in Sri Lanka. In2010, Airtel acquired the African operations of the Kuwait based Zain Telecom.In March 2012,Airtel launched a mobile operation in Rwanda. Today, Airtel is the largest cellular serviceprovider in India and the third largest in the world.Global Business School | Strategic Management 53
  54. 54. Corporate structure Airtels initial corporate structure concentrated on the hierarchy of the operations insidethe company as a whole. The structure depicted the corresponding operation/region of differentin-charges and it didnt hold anyone responsible for each of its services. So, the company found itbetter to restructure its corporate hierarchy. The transformed organizational structure has twodistinct Customer Business Units (CBU) with clear focus on B2C (Business to Customer)and B2B (Business to Business) segments. Bharti Airtels B2C business unit willcomprehensively service the retail consumers, homes and small offices, by combining theerstwhile business units - Mobile, Telemedia, Digital TV, and other emerging businesses (likeM-commerce, M-health, M-advertising etc.). The B2C organization will consist of ConsumerBusiness and Market Operations. The organization has changed the style of the company as thecompany do not have any brand logo till the time.Mobile Services Airtel operates in all telecom circles of India. Its network is present in 5,121 censustowns and 457,053 non-census towns and villages, covering approximately 86.6% of thecountry‘s population as of September 2012.Airtel is the 6th most valued brand according to an annual survey conducted by BrandFinance and The Economic Times in 2010.3G On 18 May 2010, the 3G spectrum auction was completed and Airtel paid the Indiangovernment 122.95 billion (US$2.24 billion) for spectrum in 13 circles, the most amountspent by an operator in that auction. Airtel won 3G licences in 13 telecom circles of India:Delhi, Mumbai, Andhra Pradesh, Karnataka, Tamil Nadu, Uttar Pradesh (East), Rajasthan, WestBengal, Himachal Pradesh, Bihar, Assam, North East, and Jammu & Kashmir.Airtel alsooperates 3G services in Maharashtra & Goa and Kolkata circles through an agreementwith Vodafone and in Gujarat through an agreement with Idea. This gives Airtel a 3G presencein 15 out of 22 circles in India.Global Business School | Strategic Management 54
  55. 55. On 20 September 2010, Bharti Airtel said that it had given contracts to EricssonIndia, Nokia Siemens Networks (NSN) and Huawei Technologies to set up infrastructure forproviding 3G services in the country. These vendors would plan, design, deploy and maintain3G–HSPA (third generation, high speed packet access) networks in 13 telecom circles where thecompany had won 3G licences. While Airtel awarded network contracts for seven 3G circles toEricsson India, NSN would manage networks in three circles. Chinese telecom equipmentvendor Huawei Technologies was introduced as the third partner for three circles. Airtel 3G services are available in 200 cities through its network and in 500 citiesthrough intra-circle roaming arrangements with other operators. Airtel had about 5.4 million 3Gcustomers of which 4 million are 3G data customers as of September 2012.4G On 19 May 2010, the broadband wireless access (BWA) or 4G spectrum auction in Indiaended. Airtel paid 33.1436 billion for spectrum in 4circles: Maharashtra, Karnataka, Punjab and Kolkata. The company was allocated 20 MHz ofBWA spectrum in 2.3 GHz frequency band. Airtels TD-LTE network is built and operatedby ZTE in Kolkata, Huawei in Karnataka, Ericsson in Punjab and Nokia SiemensNetworks in Maharashtra. On 10 April 2012, Airtel launched 4G services using TD-LTE technology in Kolkata, becoming the first company in India to offer 4G services. On 24May 2012, Airtel announced an agreement to acquire a 49% stake in Qualcomm Asia Pacific(India). Qualcomm holds 4G spectrum and licenses in Delhi, Haryana, Kerala and Mumbai. Asper the agreement, by the end of 2014, Airtel will assume full ownership and financialresponsibility for 4G operations in these 4 circles.Airtel had 3180 4G subscribers as of May 2012Global Business School | Strategic Management 55
  56. 56. WiFi Airtel has plans to launch WiFi services in India. It intends to start offering WiFi servicesin Delhi NCR, Mumbai and Bangalore in initial phase. All plans will be on secure wirelessbroadband internet with unlimited usage and will be session or time based. Users can use theservice by finding a hotspot, selecting airtel WiFi Zone, activating the voucher and then login tostart browsing. Airtel intends to partner with establishments to setup hotspots which will betermed WiFi Hangout for an establishment owner and WiFi Partner for the cafe and restaurantowners. Airtel WiFi Partners can offer services at zero investments and can earn commission onevery WiFi session sold.Network Experience Centre Airtel has a Network Experience Centre (NEC) which observes end to end customerexperience, in near real time, along with the standard network elements on Airtels operations.The NEC is located in in Manesar, Haryana and went live on 31 October 2012. It is the first suchfacility in India and will be able to monitor Airtels network performance across mobile, fixedline, broadband, DTH, M-Commerce, enterprise services, International Cable Systems andinternet peering points from a single location. It will monitor all Airtel and partner NOCs. In caseof an emergency, the NEC will enable the operator to prioritize actions to restore normalcy andreduce resolution time. The NEC houses a video wall with 3600 square feet of solid state LEDscreen to monitor Airtels telecom network. The clear span of the roof is 49 m x 18 m and thebeams, which are fireproof and about 8 feet deep, have been specially designed to hold thestructure without columns. The NEC was designed specifically to be used as a command centerin case of national emergencies and natural catastrophes. The facility is earthquake proof andalso provides for a single control of command and a fully redundant technology layout.iPhone The iPhone 3G was rolled out in India in 2008 by Airtel. However, high prices andcontract bonds discouraged consumers and it was not as successful as the iPhone is in othermarkets of the world. Airtel introduced the iPhone 4 on 27 May 2011 and the iPhone 5 on 2November 2012.Global Business School | Strategic Management 56
  57. 57. Telemedia Under the Telemedia segment, Airtel provides broadband internet access through DSL,internet leased lines as well as MPLS (multiprotocol label switching) solutions, as wellas IPTV and fixed line telephone services. Until 18 September 2004, Bharti provided fixed linetelephony and broadband services under the Touchtel brand. Bharti now provides all telecomservices including fixed line services under a common brand airtel. As of September 2012, Airtelprovides Telemedia services to 3.3 million customers in 87 cities, of which 1.4 million havesubscribed to broadband/internet services. Airtel Broadband provides broadband and IPTV services. Airtel provides both capped aswell as unlimited download plans. However, Airtels unlimited plans are subject to free usagepolicy (FUP), which reduces speed after the customer crosses a certain data usage limit. In someplans, Airtel provides only 256kbit/s beyond FUP, which is lower than the TRAI specified limitof half the subscribers original speed. The maximum speed available for home users is 16Mbit/s. In May 2012, Airtel Broadband and some other Indian ISPs temporarily blocked filesharing websites such as, etc. with out giving anylegal information to the customers. The block was due to a Madras High Court issued ‗John Doe‘order taken by Chennai-based Copyright Lab. In response to a petition filed by Vinay B, aresident of Shimoga, Karnataka, the District Consumer Disputes Redressal Forum ordered Airtelto pay 20,000 to the petitioner for "deficiency in internet service" thereby causing mental agonyto the complainant. ―By misinterpreting the Madras High Court order, Airtel blocked entirewebsites. It is needless to say that the company‘s actions amount to deficiency in service as wellas unfair trade practice,‖ said the forumGlobal Business School | Strategic Management 57
  58. 58. Chairman’s speech of Bharti Airtel At the industry level, telecom is in the midst of a tectonic shift. Data is clearly the futureof mobile telecom and Airtel is gearing itself up for this. New generation mobile technologieswith much faster data capabilities are steadily taking root, opening up mind-bogglingpossibilities in new service areas like healthcare, banking, commerce and education. During the year, Bharti Airtel led from the front as it systematically rolled out 3Gnetwork, across India, making Airtel the most robust network in the country. Airtel also launched 3G networks in seven African markets. Airtel Launch of 4G servicesin April 2012 marked another watershed for the Indian telecom industry. This is the firsttechnology platform that India has launched simultaneously with its global release, helping movethe Indian telecom industry to a global standard. “Airtel Money” was a distinctive service Launch for them during the year in India andeight other African markets. Besides being the first of its kind, M-commerce service offered by an operator in India, itis also India‘s first mobile- based service to offer instant money transfer. Cancellation of several 2G licenses allotted to other telecom operators by the HonbleSupreme Court was one such significant event. The issue of pricing of 2G spectrum in India ishowever still hanging fire. Airtel reconnecting with its prime target audience - the youth - with a path breakingbrand campaign in India – ―Har Friend Zaroori Hai‖. The campaign had a universal appeal andresonated deeply among the target segment. The other major youth related theme that Airtel developed across all our operations wasthat of sports. While it introduced ―Formula One‖ in the Indian sub-continent, in Africa, Airtelconnected with youth through Airtels Rising Stars program for football enthusiasts.Global Business School | Strategic Management 58
  59. 59. VISION By 2015 Airtel will be the most loved brand, enriching the lives of millions. Enriching lives means putting the customer at the heart of everything we do. We willmeet their needs based on our deep understanding of their ambitions, wherever they are. Byhaving this focus we will enrich our own lives and those of our other key stakeholders. Only thenwill we be thought of as exciting, innovation, on their side and a truly world class company.MISSION Recruit & Maintain Caliber Working Staff Provides Customer Specific Software Solution Continues Improvement in Software Quality Not remain as Only Software Solution Provider, but be as Continues Service Provider To empower stakeholders in services and inventories to deal with associatedQUALITY POLICY We will deliver error free service to our customer by doing our jobs right and first timeevery time.Global Business School | Strategic Management 59
  60. 60. PORTER 5 Forces Model Analysis Porter 5 Forces Model Bargaining Power of Buyers (High) • Low switching costs for buyers • Huge competition between the existing players in the market. Bargaining Power of Suppliers (Low) • Large pool of suppliers in the market • Have access to other countries supply Industry Rivalry (High) • Players like Vodafone are big competitor • Existing Players are also eating up the market share Threats of new Entrants (Low) • Not easy to match Airtel‘s distribution network and marketing know how Threat of Substitutes (Low) • Threat is less as substitutes have less mobility High LowGlobal Business School | Strategic Management 60
  61. 61. ISSUE PRIORITY MATRIX BHARTI AIRTEL Probable Impact on Corporation HIGH MEDIUM LOW Antitrust New Products Price control HIGH Regulations Focus of Government Special Incentives MEDIUM Technological Policy (b) efforts Government Protection Laws Protection Laws LOW Policy (a) (a) (b)Global Business School | Strategic Management 61
  62. 62. Antitrust Regulations (High High) Bharti Airtel are in trouble ahead with Telecom Commission recommending that theywould have to give up the entire 900Mhz band of Spectrum(being used for 2G services, whichgives wider coverage) they hold when their licenses come up for renewal in 2014. In order tocontinue operations, Bharti would have to compete with other players in fresh auction for thisband of spectrum. Bharti Airtel & Vodafone hold over ¾ of the superior 900 Mhz spectrum.New Products (High Medium) Airtel began taking preorders for Apple‘s much awaited iPhone 5S ahead of its retaildebut on November 2nd 2012. iPhone supports Nano Simcard which will be available in all AirtelStores with effect from 2nd November 2012. Bharti will provide attractive tariff schemes and freeminutes for the iPhone. It will be a unique advantage to customer who opt to buy the gadget fromthem, as Ebay & are selling the iPhone in black market for 58000/- for 16GB and1,06,000/- for 64GB where as Airtel will be providing the same Phone for 45000/- 16GB and59,500/- for 64GB. Airtel has also come out with five monthly plans at discounted rates for itspost-paid customers buying iPhone 5.Price control (High low) Bharti Airtel will bid for 5 Circles, Bharti will not bid for circles where they are alreadyin comfortable position and will be instead planning to fill in gaps in their coverage. Airteldeposited 102.75 crore in advance for the 2G auction indicating to bid in a maximum of 5circles.Focus of Technological Efforts (Medium High) Airtel which had bagged the 4G spectrum in four telecom circles in Kolkata,Maharashtra, Punjab and Karnataka has launched its 4G services in Kolkata and Bangalore andenjoys the monopoly in this market. Other players are yet to launch 4G services in the market.4G has 4 times more speed than 3G.Global Business School | Strategic Management 62
  63. 63. Government Policy (b) (Medium Medium) Government has constituted a six member group to consider various issues arising out ofban on bulk Short Messages Service (SMS) and Multimedia Message Service (MMS) becausethe Government has received representation from association of the deaf and others opposing theciting difficulties faced by them while communicating. If the TRAI lifts the ban on 100 SMS perday then there will reduction in the revenue of the Airtel, as earlier Bharti used to charge0.50ps/per SMS after 100 SMS/per day.Special Incentives (Medium Low) Telecom regulator TRAI approved a hike in processing fee for all mobile rechargecoupons priced above Rs 20/- but has left it unchanged for the vouchers below that. TheAuthority has decided to increase the ceiling on Processing Fee on Top up vouchers to Rs 3/-from Rs 2/- in respect of Top-up vouchers having maximum retail price of Rs 20/- and above.The order will affect 90% of the prepaid users. Bharti telecom with its 20.67% market share willgenerate more revenue from this decision.Government Policy (a) (Low High) As a result of the high base price of spectrum for the upcoming auctions, call rates willrise by 30-40 percent. Base price of Rs 14,000 crore for 1800Mhz band and Rs 18,200 for 800Mhz based on the recommendations made by sectoral regular TRAI. This will affect the marketshare of Airtel as their tariffs are already priced high compare to its competitors and they facehuge competition in the 2G segment.Global Business School | Strategic Management 63
  64. 64. Protection Laws (a) (Low Medium) Notices are to be issued to telecom firms asking them to stop 3G roaming service outsidetheir licensed area with immediate effect as the government was losing revenue because of theiragreements. Airtel who paid 12,295 crores for spectrum in 13 circles, the largest spender in 3Gauction in 2010 is likely to be impacted more than its competitors.Protection Laws (Low Low) Airtel faces the largest number of complaints among all the operators for rejecting MNPrequests by its subscribers. It has been accused of violating and deviating from compiling withMNP regulations (denying the ID proof such as Aadhar Card and Voter ID)Global Business School | Strategic Management 64
  65. 65. EFAS of Airtel (Opportunity)Opportunity Weights Rating Weighted Score CommentsIndia’s GDP 0.02 2 0.04 More number of people will opt for mobile services if income increases.Imports 0.06 2 0.12 Increase in number of Mobile phones will lead to increase in subscribers.Technological 0.16 3 0.48 Airtel operates in eleven 3GEffort circles, with four 4G circles but still huge market to cover.New Products 0.09 3 0.27 Airtel has come up with iPhone 5S, 3G & 4G data card.Internet 0.06 3 0.18 Airtel is present in Data card asAvailability well as broadband.Lifestyle 0.10 2 0.20 Airtel keeps on coming with newChanges campaign depending on the changing lifestyle of the people. The latest campaign ―Jo Tera Ha voh Mera Hai‖Growth Rate 0.04 3 0.12 Airtel‘s market leadership willof Population provide the benchmark to capture new market.Global Business School | Strategic Management 65
  66. 66. EFAS of Airtel (Threats)Threats Weights Rating Weighted Score CommentsFDI 0.06 3 0.18 Airtel can compete with the foreign players on pricing and service basis.Price War 0.16 4 0.64 More number of players will lead to high bargaining power of the buyers.Interest Rates 0.09 4 0.36 Airtel‘s expansion/acquisition in other countries will come at a cost. If the cost of borrowing is high. This will result in reduce PAT.Consumer 0.07 1 0.7 As Airtel has the highest numberProtection of consumer complaints, Consumer Protection law may beLaw a concerned.2G Scam 0.09 2 0.18 Company name may come under scam.Total 1 3.41 Airtels EFAS GDP Imports Consumer 2% 6% Protection Law 7% 2G Scam 9% Technological Effort 16% Interest Rate 9% New Products 9% Price War 16% FDI Internet Avalability 6% 6% Growth Rate of population Lifestyle Changes 4% 10%Global Business School | Strategic Management 66
  67. 67. IFAS of Airtel (Strengths)Strengths’ Weights Rating Weighted Score CommentsMarket 0.12 4 0.48 With a market share of 24%,Leader Market leadership is Airtel‘s major strength.Strategic 0.1 3 0.30 Strategic shareholders provideStakeholders the much needed innovations and ideas to survive in the(Sony, Nokia, market.Erikson)Brand Name 0.09 3 0.27 Being the oldest player in the market for more than 15 years. Airtel is duly recognized by its Brand name.Strong 0.1 3 0.30 Changing Advertising campaignAdvertising & according to market trends and targeting the youths is the newCelebrity way Airtel has managed to holdBrand the top position in telecomAmbassador market.Wide 0.1 3 0.30 Wide customer base brings inCustomer high revenue.BaseMonopoly in 0.11 4 0.44 Presence of 4G in 2 out of 44G circles, while the other players are yet planning to enter.Presence in 0.07 3 0.21 Global business as Airtel ismore than 20 present in developing economies of the world.countriesOther Brands 0.05 2 0.10 It‘s a conglomerate withlikes Airtel TV presence in telephone devices and the has market share of 14%& Beetel in the emerging DTH industry.High ARPU 0.06 3 0.18 Airtel has a high ARPU compared to its competitors in the market.Global Business School | Strategic Management 67
  68. 68. IFAS of Airtel (Weakness)Weakness Weights Rating Weighted Score CommentsUntapped 0.15 4 0.60 Mobile penetration is only halfRural Market in India. Signaling possible opportunity for Airtel.Customer 0.05 3 0.15 Airtel has most number ofComplaints customer complaints, signaling weak customer service providedare higher by the market leader.according toTRAITotal 1 3.33 IFAS of Airtel Customer Complaints 5% Market Leader 12% Untapped Rural Market Strategic 15% Stakeholders 10% High ARPU 6% Brand Name 9% Other Brands 5% Strong Advertising Presence in more Wide 10% Monoploy than 20 Countries Customer in 4G 7% Base 11% 10%Global Business School | Strategic Management 68
  69. 69. SFAS OF AIRTEL Strategic Weights Rating Weig Duration Comments Factor hted Score S M LMarket 3 0.21  More number of people will optLeader 0.07 for mobile services if income increases.Strategic 0.09 3 0.27 Strategic shareholders provide theStakeholde much needed innovations and ideas to survive in the (Sony,Nokia,Erikson)Monopoly 0.11 3 0.33 Presence of 4G in 2 out of 4in 4G circles, while the other players are yet planning to enter.Untapped 0.15 4 0.60 Mobile penetration is only half inRural India. Signaling possible opportunity for Airtel.MarketTechnologi 0.16 3 0.48 Airtel operates in eleven 3Gcal Effort circles, with four 4G circles but still huge market to cover.New 0.09 3 0.27 Airtel has come up with iPhoneProducts 5S, 3G & 4G data card.Lifestyle 0.08 2 0.16 Airtel keeps on coming with newChanges campaign depending on the changing lifestyle of the people. The latest campaign ―Jo Tera Ha voh Mera Hai‖Price War 0.16 4 0.64 More number of players will lead to high bargaining power of the buyers.Interest 0.09 4 0.36 Airtel‘s expansion/acquisition inRates other countries will come at a cost. If the cost of borrowing is high. This will result in reduce PAT.TOTAL 1.00 3.32Global Business School | Strategic Management 69