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Porter's five forces model for Indian Telecom industry


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Porter's 5 forces model.Explained taken example from indian Telecom Industry. Analysis also included.

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Porter's five forces model for Indian Telecom industry

  2. 2. Agenda •Porter’s 5 Force model •Analysis into Telecom Industry •5 forces discussed •Conclusion
  3. 3. Porter’s Five Forces
  4. 4. Analysis • Market Share  More than 15 players in the market  Airtel, Vodafone, Idea and RCOM itself captures more than 70%
  5. 5. Facts • India's telecommunication network is the second largest in the world based on the total number of telephone users . • Revenue: USD 33,350 million • Contribution : 3% to India’s GDP • Projected : Mobile sector in India to contribute USD 400 Billion to GDP by 2020
  6. 6. Competitors Analysis • Market Structure • Average revenue per user for big players is around Rs. 110 – Rs. 120 • Reliance has lesser ARPU because major of its subscribers are low end customers Revenue Market share Consumer Market share ARPU AIRTEL 29.1% 19.8% 114.2 Reliance 8.2 % 16.7% 45.2 IDEA 15% 12.3% 114.9 Market leader AIRTEL Market Challenger Reliance, Vodafone, BSNL Maket Follower TATA, IDEA
  7. 7. Competitors Analysis • Global Presence and Marketing Network • Existing telecom companies are coming up with continuous growth strategy due to high competition. AIRTEL Mobile and fixed wireless services (GSM) – 23 telecom circles RCOM Reliance Communications has IP-enabled connectivity infrastructure comprising over 150,000 kilometers of fiber optic cable systems in India, the US, Europe, Middle East, and the Asia Pacific region IDEA Has a customer base of over 17 million, IDEA Cellular has operations in Delhi, Maharashtra,Goa, Gujarat, Andhra Pradesh, Madhya Pradesh, Chattisgarh, Uttaranchal, Haryana, UP West, Himachal Pradesh and Kerala.
  8. 8. Competitors Analysis • Future Prospects AIRTEL Airtel plans to set up 3000 more towers to enhance their rural coverage and will now focus on rural and semi-urban areas RCOM Peak investment phase is over. RCOM continues to be free cash flow positive and this trend to continue in succeeding years. RCOM not only reliant on wireless business and also vying the massive opportunity with DTH and expansion of Enterprise/IDC IDEA Idea also plans to enter rural and neglected circles as a strategy to gain subscribers. It also plans for smaller base transmission stations that will mean lesser infrastructure requirements and expenses and independent tower operation. Along with its plan to go for a national long distance license, it will also look at international long distance in the near future.
  9. 9. Buyer Power Analysis Buyers in Telecom industry generally land in two categories:  Individual and  Enterprise Customers like IT companies, Banks etc. • Product differentiation • Airtel, Relience,Idea and all other companies have similar prices for similar products and less likely for any one to maintain product differentiation and hence buyers have the option to switch over. MRP(Rs.) DATA USAGE VALIDITY MRP(Rs.) DATA USAGE VALIDITY MRP(Rs.) DATA USAGE VALIDITY 250 1GB 30Days 255 1GB 30Days 250 1GB 30Days 450 2GB 30Days 449 2GB 30Days 450 2GB 30Days 1Rs./min 300-plan (std) 30days 1Rs./min (std) 330-plan 30days 1Rs./min (std) 330-plan 30days Airtel ----------- Prepaid Relience ----------- Prepaid Idea ----------- Prepaid
  10. 10. Buyer Power Analysis • Competition between buyer • The individual buyers don’t have any competition among themselves but enterprise customers like IT or banks do have. Enterprise customers generate major part of the revenues for any telecom companies like Relience, Airtel or Idea which means higher buyer power. But this is not significant for the one who deals with individual customers • Size and concentration of buyers relative to products • The total subscribers, including wireless and wire-line, in India reached 938.34 million in May 2014, with the monthly addition of 2.54 million subscribers. Big size and low concentration of consumption per individual gives lower leverage to buyer power. • Enterprise customers – Big size and big concentration of consumption accrues high buyer power. • Together we can say its moderate buyer power in terms of size and concentration.
  11. 11. Buyer Power Analysis • Buyers’ switching cost • Low switching cost. Low new connection cost. With Mobile Number Portability, switching has become more easier. TRAI(Telecom Regulatory Authority Of India) expected that the subscriber has to pay not more than Rs. 200. Some of the operators have estimated the charges can be as low as Rs. 20.  December,2013 109.37million  January, 2014 111.94million • Meaning Low switching cost and high buyer power. • Buyers’ information • Buyers information regarding the availability of other options has become high • Increased social networking, high advertisements through TV, hoardings, banners and word of mouth, buyers are well informed about the substitute products with better offerings urban as well as rural areas. • Means high buyer power
  12. 12. Suppliers Power Analysis • Suppliers for the Telecom Operators • There is a price war happening between the different mobile operators, so even the suppliers are chosen carefully so that they do not drag down the profitability of the company .So the suppliers have less bargaining power in this industry. 1. Mobile Tower Companies 2. SIM cards 3. Mobile phone handsets
  13. 13. Suppliers Power Analysis List of Mobile Operator and their Tower Services. • Less Bargaining power because of more number of suppliers. • Sim Card Manufacturers • Sim card for the mobile operators are mostly produced in India and some are imported. • The mobile operators doesn’t always procure the sim card from a single supplier to avoid any delays. • The Bargaining power of suppliers is less. Operator Tower Service Bharti BIL/ITL Reliance RITL Vodafone ITL BSNL MTNL, BSNL and Others Idea ITL Tata Viom
  14. 14. Suppliers Power Analysis • Mobile Phone handsets • Two types of mobile phones are genereally used. (CDMA & GSM). • The leading CDMA phone manufacturers are Samsung, Blackberry, ZTE, Motorola , Spice e.t.c Top leading Mobile phone manufacturer(GSM & CDMA) in India by Q4 2014. • Bargaining power of suppliers are less. Company Share Samsung 17.2% Micromax 15% Nokia 10%
  15. 15. Threat of Substitutes • Buyer Propensity to Substitute • Internet subscriber base increasing in India by 18.06% , compared to 10.60% for GSM/CDMA services. • Representations from the industry and from within the DoT to open up Net telephony. • Dot also contemplating allowing operators without a unified access license, which includes broadband and Internet companies such as Google and Skype to offer telephony services for international calling and PC-to-PC domestic calls. • Relative Prices • Internet Telephony eating into the revenue of GSM/CDMA telephony. • Flat/ fixed rate revenues from internet services - cannibalization of revenues from GSM/CDMA services. • Performance of Substitute • Voice quality is an issue with internet telephony. • Internet voice services also currently limited due to regulatory road blocks.
  16. 16. Threat Of Entry • Capital Requirements • Cost of maintaining one tower (active + passive) is estimated at Rs. 60,000-65,000 per month. • If tower is rented then monthly rent of Rs. 40,000-45,000 for active network. • The monthly outflow of a TSP would be close to Rs. 80,000- 85,000 per tower per month. • Bharti has invested close to Rs. 230 billion to create the cellular infrastructure with 45,000 towers across the country. • Access To Optical Fibre Network • The largest optical fibre has been built by the incumbent operator BSNL who is also the long distance operator. • The private sector players such as Bharti and Reliance have also constructed optical fibre cable network connecting mainly cities and towns but their presence is very limited in the rural areas. • It is fairly difficult and cost- ineffective for new entrants to lay down optical fibre connecting remote places as well.
  17. 17. Threat Of Entry • Government And Legal Barriers • Private operators will have to enter into an arrangement with fixed-service providers within a circle for traffic between long- distance and short-distance charging centres. • Seven years time frame set for rollout of network, spread over four phases. Any shortfall in network coverage would result in encashment and forfeiture of bank guarantee of that phase. • Private operators allowed to set up landing facilities that access submarine cables and use excess bandwidth available. • 100% Foreign Direct Investment (FDI) is allowed through automatic route for manufacturing of telecom equipments.
  18. 18. Conclusion • Taken as Booming sectors • The tide has turned for the telecom sector in India, as growth and profitability has accelerated in recent times. Tower companies are reaping benefits of a turnaround in the sector as operators have started investing in networks to boost data penetration. • However it is in the country’s booming mobile segment in which the major battles are being fought. Three major private players – Bharti, Reliance and Vodafone - with a formidable 54% share of the market between them, lead a large field of mobile operators. State-owned enterprises –BSNL and MTNL – have also been making their presence felt with a combined market share of 12%. • Consumers are getting addicted to connectivity and speed.
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