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Competitor profiling and Analysis of Hutch

Competitor profiling and Analysis of Hutch
Competitior Profiling and analysis of indian telecom Service providers
Marketing Stratergy, SWOT, Porters five forces, Telecom Value chain,

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Project Hutchison Essar Project Hutchison Essar Presentation Transcript

  • Competitor profiling and analysis By Ramakrushna Panigrahi Indian Centre for Telecom & Management Date: 29th November, 2006 http://www.linkedin.com/pub/dir/ramakrushna/panigrahi
  • THE FUTURE IS HERE REPUBLIC OF NORWAY COUNTRY SUBSCRIBERS IRELAND HK (+ Macau) 2.08 SWEDEN India 20.35 UK DENMARK Israel 2.62 AUSTRIA ITALY Thailand 0.74 ISRAEL Ghana & Srilanka 0.66 TOTAL 26.47 INDIA HONG KONG All Figures in Million MACAU THAILAND GHANA VIETNAM SRILANKA REST 23% INDONESIA INDIA 77% AUSTRALIA HTIL TOTAL SUBSCRIBERS : 26.5 mn HTIL’s 3m new additions in 3rd Quarter, 2.8m came from India Best performing market remains India, followed by Israel
  • VP Management Services Corporate Asim Ghosh CFO VP MD Hutchison Essar Corporate Finance Senior Management Director Operations Team (Delhi/ Punjab/ Haryana) CEO Director Technical Chennai/ Tamilnadu Corporate Director Operations (Karnataka/ Kerala/ AP) CEO UP (E) & (W) Head Legal Dir Operations (Gujarat/ Counsel Rajasthan/ ah & Goa) Corporate CEO Kolkata & ROB Director operations Mumbai Director HR Corporate Director IT * Corporate Sandip Das Chief Marketing Deputy MD Officer Corporate Director Business Development Corporate Sr. VP Service Delivery Corporate * Jointly report to MD Hutchison Essar Senior Management Team View slide
  • 30 27.6 25 24.6 Indian 22.7 20.9 19.4 Economy 20 15 13.32 14 12.5 11.76 12.22 10 19.35 8.5 8.4 7.2 7.5 6.1 5.8 4 5.5 5 4.4 3.3 3.6 3.4 0 2000 2001 2002 2003 2004 2005 2006 GDP GROWTH PER CAPITA GDP(in Rs '000) INFLATION(as %age of WPI) GDP(in Rs billion 000') Service Industry 53.8% % 27.6% 4 3 Telecom spending as % of GDP 2.5 3.2 3 2.1 Agriculture 2 1.8 18.6% 1.7 1.7 1.8 1.8 1.6 2 1.3 1.3 1 Area 3,166829 km2 1 Population 109 cr. 1 7th largest country 0 1/6th of world population e nd ia es a am an in a ia e g ia or re ag on es In d s a p in iw ap Ch etn lay Ko ail er on K Ta ilip ng Th av Ma ng Vi Ind Si Ph Ho View slide
  • Economic indicators TOTAL PER CAPITA ## (refer definitions *) RS Billion Us $ Billion $ PPP Terms Rs US $ $ PPP Terms Economic GDP 27,600 599 3,036 25,356 550 2,789 6.18 Indicators National income 22,520 489 2,477 20,696 449 2,276 6.41 Net NDI* 25,971 563 2,856 23,860 518 2,624 6.55 Private income 25,296 549 2,782 23,240 504 2,556 6.73 Personal income 24,219 525 2,664 22,250 483 2,447 6.59 Personal DI** 23,585 512 2,594 21.667 470 2,383 6.57 DS of HS*** 5,799 126 638 5,328 116 586 9.77 ## ANNUALIZED GROWTH RATE (1994-2004) * / ** /*** Refer Backup Slides Source: Capitaline Basic Sector Wise actual Inflow of FDI in Others Telephone Cellular Mobile Telecom Sector 3% Service Telephone (August '91 to March '2004) 4% Service 26% ( Rs in Million) Holding Companies 48% Cable TV Manufacturing Network+Intern Year Wise actual Inflow of FDI in & Consultancy et 16% 2% Telecom Sector (August '91 to March '2004) ( Rs in Million) YEAR 1996 1997 1998 1999 2000 2001 2002 2003 2004 Total FDI 7648 12451 17756 2126 2885 39709 10815 3014 874 99509 INFLOW
  • Telecom Subscribers - Country wise December 2005 China 800 743 Industry Expected to overtake US by 2008 Overview 600 mn. subscribers USA India - Aug 2006 400 360 165 mn. subs METRO Japan Rus Ind A CIRCLE Germany 200 153 130 134 125 B CIRCLE C CIRCLE 0 Source: International Telecommunications Union (ITU), Penetration Circle Wise Know the other and know yourself: Triumph without peril. Know Nature and know the Situation: Triumph completely. Sun Tzu (~360 B.C.) * Based on excerpts from Worldwide Wireless Data Trends 2006 - a mid year update. Datacomm research
  • Indian Service industry (FY 2005-06) Revenue growth 19.5 20 Industry 15 CAGR -22% 15 Overview 30% $ Billion 11 10 10 9 Continued …… 36% 10% 5 11% 0 2002 2003 2004 2005 2006 TOTAL REVENUE : Rs 67,523 Crores India could potentially be a USD 40 bn - USD 45 bn telecom market by FY 2010… Indian Brand Equity Foundation Regulatory % age of revenue Subscriber growth charges 180 164 Service tax, GST 10% + GST CAGR -40% 120 License Fee 5 – 10% 98 76 67% Spectrum Charge 2 ~ 6%* 60 53 44 29% USO Included in license fees 43% Total Regul.. charges 17%~26% + GST 20% 0 *Backbone spectrum charges extra GST– 2002 2003 2004 2005 Aug-06 Goods & Service Tax Source: TRAI Teledensity 14.8 (Aug 2006) Source: www.voicendata.com Telecom regulatory Authority of India (TRAI) Year indicates financial year ending March
  • Falling tariffs have led to exponential subscriber growth Industry Overview Continued …… ARPU(Rs Per Month during Quarter ended June 30,2006) CIRCLE POST- PRE- BLEND PAID PAID ARPU Reasons for Falling tariffs Circle A 660 275 343 Unified Access Services Licensing Regime (which led to the growth of Circle B 511 286 319 CDMA operators), Circle C 580 328 374 Calling party pays Metro 758 287 406 A lower access deficit charge from 30% to 5% of revenue All India 643 286 352 Replacement of high fixed entry fee with revenue-sharing fee Priv SPs 686 273 345 Further reductions in revenue sharing in 2001 and 2003. BSNL/MTNL 544 324 370 Massclusivity, one for all services.
  • Industry Overview Continued …… Average quarterly decline of 3.1% in ARPU in the past three years. Despite the decline,quarterly revenues have risen by an average of 15% during the period. Telecom sector targets announced by Government of India 250 million subscribers by 2007 Clearly, subscriber 500 million subscribers by 2010 growth MOU have more 20 million broadband subscribers by 2010 than compensated for the Mobile access to all villages with population more than 5,000 by 2006 decline in ARPU. Mobile access to all villages with population of more than 1,000 by 2007
  • 40000000 37422006 35000000 Sector Overview – 30000000 Fixed line 25000000 20000000 15000000 10000000 5000000 4316109 3877608 1591071 355652 188756 270832 0 Herfindahl- BSNL TATA MTNL BHARTI RELIANCE HFCL SHYAM Hirschman Index or HHI A commonly accepted Subscriber Growth - Mobile vs Fixed measure of market HHI FIXED = 6230 140 concentration. 123 Mn. subscribers < 1,000 competitive; 105 1,000-1,800 moderately concentrated; 1,800 or >highly 70 52 42 43 concentrated marketplace Fixed Mobile 38 35 41 41 HHI = s1^2 + s2^2 + s3^2 + Crossover achieved in 7 13 34 ... + sn^2 (where sn is the market share of the ith 2004 0 firm). 2002 2003 2004 2005 2006 Fixed (mn. subs) Mobile (mn. subs)
  • Sector Overview – SHYAM 29661 Wireless HFCL 62004 BPL 1045301 SPICE 2196965 MTNL 2437922 AIRCEL 3804225 TATA 8435405 IDEA 10363546 HUTCH 20357200 BSNL 23532080 RCVL 25979332 BHARTI 27061349 0 5000000 10000000 15000000 20000000 25000000 30000000 HHI wireless 1635.42
  • Sector Overview – Wireless Continued ……. Geographical distribution of India wireless subscribers, July 2006 India wireless market shares, July 2006
  • Pre-reform Partial Deregulation Further Deregulation Take-off Reform thrust on independent Pre-1994 1994-1999 1999 - 2002 2002 onwards regulation,competition  4 private fixed  Calling Party  MTNL -  Licenses converted to & investment service providers Pays Mumbai and revenue sharing facilitation with less than 1% Delhi; DTS  Private sector share  CDMA launch elsewhere market share less than 5% in revenue  3-6 operators in  2 GSM mobile terms each circle  No mobile players in each service  Competition in NLD and  Intra-circle circle ILD merger guidelines  NLD - DoT  13 players start per/ BSNL ILD  4 mobile operators /  Unified Licensing mobile service circle - VSNL  FDI - 74% 2005 Principles of network  FDI - 49 % regulation always said that National Telecom New Telecom Unified Licensing once level playing field is Policy, 1994 Policy, 1999 Regime established in a network, the regulator should allow Upto 1995- market forces and 1994 1997 1998 1999 2000 2001 2002 2003 2004 1994 1996 competition to take over. TRAI has moved to “competition regulation” from “cost-plus protections”. Pradeep Baijal (Former Chairman TRAI)
  • TRAI’s TRAI’s Recommendations Recommendations 2006 Number portability Convergence 2005 Unified Licensing Quality of Service regulation Rural Telephony 2004 Intra-circle merger guidelines Internet / broadband penetration 2003 Calling Party Pays Regime Unified Access Licensing Reference Interconnect Order 2002 ILD opened to competition Internet Telephony allowed. Independent regulation Reduction in License fees has been a critical factor Mature regulatory regime and an enabling in growth policy framework already in place
  • Recent domestic & cross-border M&A Industry Trends > Consolidation > Increasing Foreign Investment > Tariff Innovation > Progressive regulation > Growth driven by mobile/ penetration still low > Heavy Infrastructure Investment
  • NI SI TELECOM EV NO VALUE CHAIN SP 3PAP ASP OEM 2 CP MVNO OEM 1 CA EU
  • Supplier concentration Proprietary learning curve ENTRANTS POTENTIAL Importance of volume to Economies of scale PORTER’S supplier Capital requirements Differentiation of inputs Brand identity FIVE FORCES Switching costs of firms Switching costs DETERMINING Threat of forward Expected retaliation SEGMENT integration Proprietary products STRUCTURAL ATTRACTIVENESS INDUSTRY COMPETITORS SUPPLIER BUYERS Switching costs of Bargaining leverage SUBSTITUTES adopters Buyer volume Buyer propensity to Buyer information substitute Brand identity Relative price Price sensitivity performance of substi- Product differentiation tutes Substitutes available “The Elephant is on the dance floor… …and the Band is playing a Mobile Tune… …Get on that dance floor with the Indian Elephant”!!! NEIL GALLOWAY Head of Asian Telecom ABN AMRO BANK, December 2003
  • Wireless Industry 5-Force Analysis MARKET ENTRY ENTRY Network Operator Hard Infrastructure Provider Difficult Device Manufacturer Difficult Application Provider Easy Content Provider Easy SUPPLIER POWER POWER COMPETITION RIVALRY BUYERS POWER Network Operator Many Network Operator Intense Network Operator Strong Infrastructure Provider Intense Infrastructure Provider Intense Infrastructure Provider Weak Device Manufacturer Intense Device Manufacturer Intense Device Manufacturer Strong Application Provider Weak Application Provider Weak Application Provider Strong Content Provider Strong Content Provider Strong Content Provider Strong SUBSTITUTES NUMBER Voice n data N/W Many Network Components Few Cell Phones Many Applicaion & Content Few
  • 6,837 12,000 11,663 7,000 6,000 10,000 8,003 5,000 4,365 8,000 4,000 5,003 2,701 56.6% 6,000 45.7% 3,000 4,000 2,000 61.6% 60% Revenue Trends of 1,000 2,000 Service Providers 0 0 2003-04 2004-05 2005-06 2003-04 2004-05 2005-06 3,000 2,966 40,000 39,500 2,262 39,000 2,500 38,000 2,000 1,663 37,000 36,090 31.1% 36,000 1,500 33,918 9.5% 35,000 1,000 34,000 36% 33,000 6.5% 500 32,000 0 31,000 2003-04 2004-05 2005-06 2003-04 2004-05 2005-06 3,000 11,288 2,575 12,000 2,500 10,000 2,000 1,347 8,000 91.2% 5,387 1,500 698 6,000 109.6% 1,000 4,000 2,707 93% 500 99% 2,000 0 0 2003-04 2004-05 2005-06 2003-04 2004-05 2005-06
  • Reach of Mobile Service Providers Company Cumulative No of retailers as No of cities/town Techno.. Circle Investment of Mar 2006 Mar 06 (Rs crore) Mar 06 Mar07* Marketing Bharti 15,923 400,000 4,000 5,200 GSM 23 Hutch NA NA NA NA GSM 16 Reliance 14,799 255,000+ 3,824 5,200 GSM,CDMA 23 BSNL NA NA 5,000 7,000 GSM,CDMA 21 Idea 7,700 125,000 1,944 3,888 GSM 11 Tata Tele 10,000+ NA 2,500 4,000 GSM 20 NA stands for not available *forecast V&D Estimates CyberMedia Research CATEGORY SPENDS 2004 CATEGORY SPENDS 2005 Financial Financial 15% 15% Media & Media & Ent 15% Ent 15% AUTO 15% AUTO 15% FMCG's FMCG's Telecom 15% Telecom 15% 35% 35% Source: Ogilvy
  • Subscriber growth comparison: Operator wise
  • Subscriber growth comparison: Operator wise Continued….
  • Sound Management & Good Poor customer care as it is understanding Of the consumer outsourced market Poor Corporate player, seen SWOT Analysis: Strong marketing arm: 900 more as a consumer segment Bharti Airtel showrooms & 4000 multi-brand player outlet Enterprise solution arm focusing on business users Financially stable. Cash profit this year Rs 4,095 Cr up 46% Vision last year By 2010 Airtel will be the most admired brand in India: Loved by more customers Targeted by top talent Benchmarked by more business Spectrum constraint: With GOING GLOBAL: Venturing growing base, the pressure to attractive overseas market serve on limited spectrum will affect QoS Decreasing ARPU trend in industry
  • Sunil B Mittal CMD President JMD Director Finance & Head Corp Comm Bharti Airtel Senior President’s office Business Integration Management Team Strategy & Monitoring Corp Dir Bus Director IT & Delivery Innovation Joint President JMD & CFO Broadband & telephone Director Networks Services CTO Director marketing Corp Dir Chair Office Joint President Enterprise & Communication services Corp Dir All & CSR Director CSD Corp Dir Alliance CEO & Dir Ex Director Corp Dir HR Corporate Director HR Carriers Corp Dir Gen Counsel & Company Director Legal & Joint President Secy Regulatory Mobility Chief of Compliance & IA Director Supply Chain Ex Director Ex Director Ex Director Ex Director (North) (South) (West) (East) Bharti Airtel Senior Management Team
  • Established brand name Disadvantage of being an Large cash reserves helps in INCUMBANT operator funding cellular investment SWOT Analysis: Long and Constrained Decision BSNL SAVES INTERCONNECT making process: Political CHARGES Optical fiber backbone, Considerations which can carry inter & intra circle Subscriber growth is slowing traffic down Large fixed line subscriber base Disadvantage of possessing a Legacy system Image of a state owned operator LARGE FIXED LINE SUBSCRIBER Network capacity constraint which BASE : Can be tapped for second can hamper growth phone/multiple phone Possible clash interests :use of Strong presence in B and C circle GSM & CDMA services which market promising high Threat from private players growth potential. Deregulation of the sector and Fixed mobile convergence will exposed to heavy competition change BSNL fortune
  • Faster implementation of projects Global Roaming remains a Integrated operator: Fixed challenge for CDMA operators SWOT Analysis: /LD/CDMA No financial support following the Reliance Aggressive roll out to capture ownership settlement market share and create an Yet to be profitable entry barrier Offering VAS to it's customer's High patent fees paid to almost free of cost or with nominal Qualcomm charges. Higher handset subsidy. RCOM is the fastest growing wireless company in Asia by EBITDA and EPS PCOs a high ARPU, high entry Handset subsidies a major profit barrier business drag Planned GSM expansion will Second hand handset market in pay off CDMA Aggressive capex allocation for a large GSM expansion plan CDMA technology risks Possible clash interests :use of GSM & CDMA services
  • Subscriber growth peaking up Don't have PAN INDIA month by month presence, only strong in Maharashtra circle Now have a Stable ownership. SWOT Analysis: IDEA Strong local branding Targeting to women segment offering differentiated services Attractive Indian market with Rule of Three is true for any monthly addition of over 5 million industry. subscribers Intense Competition from 3 major private operator Bharti, HUTCH Can improve on market share till and Reliance the penetration reaches 40% i.e. up to 2011
  • Strong brand name Don't have PAN INDIA presence, only strong in SWOT Analysis: Under the able leadership of Maharashtra circle TATA indicom visionary Ratan TATA Strong financial capability of the group to plough in money into telecom Can improve on market share till Rule of Three is true for any the penetration reaches 40% i.e. industry. up to 2011 Intense Competition from BSNL Attractive Indian market with and Reliance in CDMA platform monthly addition of over 5 million subscribers Decreasing ARPU Vision We will strive to be the preferred partner to our customers by providing appropriate and cost-effective communication solutions.
  • BIBLIOGRAPHY www.auspi.com www.coai.com www.worldfactbooks.com www.wikipaedia.org www.voicendata.com www.trai.gov.in www.ibef.org Reliance infocomm’s strategy and impact on the Indian mobile telecommunication scenario MEDIA@LSE – paper by Sangeetha Verghese A Value Chain Perspective on the Economic Drivers of Competition in the Wireless Telecommunications Industry By Scott C. Constance & Jeffrey R. Gower Macquarie:India Telecom Sector Report_Initiating Coverage_29Aug06
  • Thank you !