Telecom Sector


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Telecom Sector

  1. 1. INDIAN TELECOM SECTOR an industry analysis.<br /><ul><li>Tanmay Jauhary</li></li></ul><li>Telecom Sector- introduction<br />Most vibrant sector with highest growth rate – more than 60 lakh customers are added every month<br />Plethora of services<br />Easier access/ availability<br />Drastic reduction in tariff<br />World class service<br />
  2. 2. Major classes of Services<br /><ul><li>Fixed Copper, Optical Fibre, Wireless
  3. 3. Mobile GSM and CDMA based
  4. 4. Narrow band Voice, Internet, Fax
  5. 5. Broad bandHigh speed Internet, Video</li></li></ul><li>Mobile Tariffs in India one of the Lowest<br />USD<br />
  6. 6. Key Policy Initiatives/milestones<br />New Economic Policy (1991)<br />Opening up of Telecom service sector (Mobile –metros)<br />National Telecom Policy 1994<br />Telecom, key for development<br />Inadequacy of public resource to meet demand <br />Private sector to supplement Govt.<br />Provide world class telecom service at affordable cost<br />
  7. 7. Technology Trend<br />Optical fiber based wirelinenetworks<br />Wireless networks GSM,CDMA based mobile<br />Next Generation Networks: Voice , Data, Video convergence<br />Telecom networks increasingly software intensive<br />
  8. 8. Issues to be addressed in the Indian Scenario <br /><ul><li>Unique Rural Scenario : low teledensity
  9. 9. Need for Spectrum re-farming & re-allocation
  10. 10. Lack of Content in Local Languages
  11. 11. Network Security</li></li></ul><li>Mobile. 2699.270 M <br />Fixed.1229.987 M <br />Total. 3929.257 M<br />Population 6563.69 M <br /> Teledensity. 60.02<br />
  12. 12. Market Structure<br />Jammu & Kashmir<br />Himachal Pradesh<br />Punjab<br />Uttar Pradesh W<br />Haryana<br />DELHI<br />Rajasthan<br />Uttar Pradesh E<br />Bihar<br />West Bengal<br />Madhya Pradesh<br />Gujarat<br />KOLKATA<br />Orissa<br />Maharashtra<br />MUMBAI<br />Andhra Pradesh<br />Karnataka<br />METRO Circles<br />CHENNAI<br />A Circles<br />Tamil Nadu<br />B Circles<br />Kerala<br />C Circles<br />Divided into 23 circles<br />4 metros <br />19 circles<br />Further divided into A, B and C category.<br /> Division based on economic parameters and revenue potential<br />Each circle has a licenses, which are a saleable.<br />North Eastern States<br />Source :COAI<br />
  13. 13. Current Industry Structure<br />Ministry of Communication & Information Technology<br />Licensor<br />Unified License Operators <br />Dept of Telecom<br />Fixed Line Operators <br />Regulator<br />Telecom Regulatory Authority of India<br />National Long Distance Operators<br />CDMA<br />1800Mhz<br />International Long Distance Operators<br />Judiciary<br />Telecom Dispute Settlement Appellate Tribunal<br />Wireless Operators<br />GSM <br />900 & 1800<br />FDI in telecom recently revised to 74%.<br />Government gets 15% of revenues from Unified Licensing<br />
  14. 14. Telecom Regulatory Authority of India<br /><ul><li>Setup in 1997
  15. 15. Protection of Consumer Interest
  16. 16. Nurture Conditions for Growth of Telecom in India
  17. 17. Major Activities
  18. 18. Reduced levies on Operators.
  19. 19. Reduced upper limit in tariff (Local, STD & ISD) and other Inter-operators tariffs.
  20. 20. Directives on number of network access service providers.
  21. 21. Policy guidelines on new services like 3G, Wi-MAX, Internet Telephony, Radio Paging, VSAT, etc.
  22. 22. Regular monitoring of Quality of Service parameters</li></li></ul><li>Major players of Indian telecom industry<br />The Top five companies, on the basis of ‘Market Share’ as on 31st January, 2009 are:<br />1. BhartiAirtel Ltd.<br />2. Reliance Communications Ltd.<br />3. Vodafone Essar Ltd.<br />4. BSNL<br />5. Idea Cellular + Spice<br /><ul><li>Bottom five companies, on the basis of ‘Market Share’ as on 31st January, 2009 are:</li></ul>1. Aircel Cellular Ltd. + Dishnet<br />2. Mahanagar Telephone Nigam Ltd. (MTNL)<br />3. BPL Mobile Communications Ltd.<br />4. HFCL Infotel Ltd.<br />5. Shyam Telecom Ltd.<br />
  23. 23. Market share of telecom companies as on January, 2009 <br />
  24. 24. Porter five forces model<br />
  25. 25. Threat of substitutes- LOW<br />Some Substitutes:<br />VOIP (Skype, Messenger etc.)<br />Online Chat <br />Email<br />Satellite phones<br />None of the above a major threat in current scenario, but a potential threat for near future.<br />
  26. 26. Threat of new entrants- LOW<br />Declining Average Revenue Per User.<br />Infrastructure tenancy costs.<br />Brand pull exists to some extent for brands like Airtel / Idea/ Vodafone.<br />Extremely high infrastructure setup costs<br />Spectrum License cost- Lotteries, auctions.<br />Incumbent Advantages: Established brand image, Reliability of network<br />
  27. 27. Power of supplier- LOW<br /><ul><li>Large number of suppliers.
  28. 28. Shared tower infrastructure.
  29. 29. Limited pool of skilled managers and engineers especially those well versed in the latest technologies.
  30. 30. Medium cost of switching since changing their hardware would lead to additional cost in modifying the architecture.
  31. 31. Overall influence on the industry - medium</li></li></ul><li>Bargaining power of customer- HIGH<br /><ul><li>Lack of differentiation among the service provider
  32. 32. Cut throat competition
  33. 33. Customer is price sensitive
  34. 34. Low switching costs
  35. 35. Number portability to have negative impact</li></li></ul><li>Rivalry among competitors- HIGH<br /><ul><li>High Exit Barriers
  36. 36. High Fixed Cost
  37. 37. 6-7 players in each region
  38. 38. 3 out of 4 BIG, present in each region
  39. 39. Very less time to gain advantage by an innovation (Eg. Caller tunes, life time card)
  40. 40. Price wars</li></li></ul><li>BhartiAirtel- The Market Leader<br />
  41. 41. SWOT<br />STRENGTHS<br />WEAKNESS<br />Largest Telecom Player in India - ~80Mn, 22.6%<br />Strategic Alliance with other stakeholders in BhartiAirtel include Sony-Ericsson, Nokia - and Sing Tel<br />Pan India Presence<br />Strong Financials<br />Outsourcing of Core Systems<br />Lack of emerging market investment opportunity<br />
  42. 42. SWOT<br />OPPORTUNITIES<br />THREATS<br /><ul><li>BhartiInfratel – Cutting Down cost in Rural area
  43. 43. Match Box Strategy – Scale of Penetration
  44. 44. Current Tele-Density – 30.6 is still low among developing countries
  45. 45. Low Broadband Penetration, Rural Telephony </li></ul>India centric – Major revenues from India<br />Falling ARPU <br />Intense Competition & Shortage of Bandwidth <br />
  46. 46. Airtel – Strategy<br />MANTRA : Focus on Core Competencies and Outsource the rest!<br />
  47. 47. Strategy<br /><ul><li>Airtelpartnered with leading players in telecommunication players across the globe.
  48. 48. It has managed to work with the best of domain specialists globally and emerge as a world class entity.
  49. 49. Partnerships include operational contracts with vendors and strategic investors ranging from private equity investors to global telecom giants.</li></li></ul><li>Strategic partnerships/ Shareholders – Technology and Capital<br />Warburg Pincus – a celebrated PE investor held a stake for a substantial period of time and was instrumental in providing Airtel support in its early stages.<br />Vodafone was a strategic investor in Airtel.<br />Temasek – the Singapore based investor holds a considerable stake in it.<br />Was also affiliated with Singapore Telecom.<br />
  50. 50. Outsourcing deals in 2004<br />Ericsson was given the mandate to provide, manage and maintain the equipment as well as provide quality assurance in Airtel<br />IBM was given the mandate to handle the back office requirements of Airtel’s presence in India<br />
  51. 51. Operational Strategies.<br /><ul><li>Higher emphasis on ARPU/min – stark contrast with other operators who concentrate on ARPU only.
  52. 52. Aim to become a one stop shop for all telecommunication services under the Bharti umbrella.
  53. 53. Exploring opportunities in international markets.
  54. 54. Hived off tower infrastructure into a separate entity.</li></li></ul><li>Thank You !<br />