130321596 telecom

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130321596 telecom

  1. 1. INDIAN TELECOM SECTOR AN INDUSTRY ANALYSIS. Tanmay Jauhary
  2. 2. TELECOM SECTOR- INTRODUCTION  Most vibrant sector with highest growth rate – more than 60 lakh customers are added every month  Plethora of services  Easier access/ availability  Drastic reduction in tariff  World class service
  3. 3. Major classes of services • Fixed Copper, Optical Fibre, Wireless • Mobile GSM and CDMA based • Narrow band Voice, Internet, Fax • Broad band High speed Internet, Video
  4. 4. MOBILE TARIFFS IN INDIA ONE OF THE LOWEST 0.23 0.22 0.19 0.17 0.16 0.11 0.11 0.11 0.09 0.05 0.05 0.04 0.03 0.02 0 0.05 0.1 0.15 0.2 0.25 Belgium Italy UK France Brazil Philippines Taiwan Argentina Malayasia HongKong Thailand Pakistan China India USD
  5. 5. KEY POLICY INITIATIVES/MILESTONES  New Economic Policy (1991)  Opening up of Telecom service sector (Mobile – metros)  National Telecom Policy 1994  Telecom, key for development  Inadequacy of public resource to meet demand  Private sector to supplement Govt.  Provide world class telecom service at affordable cost
  6. 6. TECHNOLOGY TREND  Optical fiber based wireline networks  Wireless networks GSM,CDMA based mobile  Next Generation Networks: Voice , Data, Video convergence  Telecom networks increasingly software intensive
  7. 7. issues to be addressed in the indian scenario  Unique Rural Scenario : low teledensity  Need for Spectrum re-farming & re-allocation  Lack of Content in Local Languages  Network Security
  8. 8.  Mobile. 2699.270 M  Fixed.1229.987 M  Total. 3929.257 M  Population 6563.69 M  Teledensity. 60.02 220.743 837.195 1744.815 1090.504 35.997 Telephone connecTions inmillions- 2008 Africa America Asia Europe Oceania
  9. 9. MARKET STRUCTURE  Divided into 23 circles  4 metros  19 circles Further divided into A, B and C category.  Division based on economic parameters and revenue potential Each circle has a licenses, which are a saleable. North Eastern States METRO Circles Gujarat Rajasthan Maharashtra Orissa Andhra Pradesh Karnataka Tamil Nadu Kerala Madhya Pradesh Uttar Pradesh E Bihar West Bengal Punjab Himachal Pradesh Haryana Jammu & Kashmir Uttar Pradesh W CHENNAI MUMBAI DELHI KOLKATA C Circles B Circles A Circles Source :COAI
  10. 10. CURRENT INDUSTRY STRUCTURE FDI in telecom recently revised to 74%. Government gets 15% of revenues from Unified Licensing Ministry of Communication & Information Technology Regulator Licensor Judiciary Telecom Regulatory Authority of India Telecom Dispute Settlement Appellate Tribunal Dept of Telecom Unified License Operators Fixed Line Operators GSM 900 & 1800 Wireless Operators National Long Distance Operators International Long Distance Operators CDMA 1800Mhz
  11. 11. TELECOM REGULATORY AUTHORITY OF INDIA •Setup in 1997 •Protection of Consumer Interest •Nurture Conditions for Growth of Telecom in India •Major Activities Reduced levies on Operators. Reduced upper limit in tariff (Local, STD & ISD) and other Inter-operators tariffs. Directives on number of network access service providers. Policy guidelines on new services like 3G, Wi- MAX, Internet Telephony, Radio Paging, VSAT, etc. Regular monitoring of Quality of Service
  12. 12. MAJOR PLAYERS OF INDIAN TELECOM INDUSTRY  The Top five companies, on the basis of ‘Market Share’ as on 31st January, 2009 are: 1. Bharti Airtel Ltd. 2. Reliance Communications Ltd. 3. Vodafone Essar Ltd. 4. BSNL 5. Idea Cellular + Spice •Bottom five companies, on the basis of ‘Market Share’ as on 31st January, 2009 are: 1. Aircel Cellular Ltd. + Dishnet 2. Mahanagar Telephone Nigam Ltd. (MTNL) 3. BPL Mobile Communications Ltd. 4. HFCL Infotel Ltd. 5. Shyam Telecom Ltd.
  13. 13. MARKET SHARE OF TELECOM COMPANIES AS ON JANUARY, 2009
  14. 14. PORTER FIVE FORCES MODEL
  15. 15. THREAT OF SUBSTITUTES- LOW  Some Substitutes: VOIP (Skype, Messenger etc.) Online Chat Email Satellite phones  None of the above a major threat in current scenario, but a potential threat for near future.
  16. 16. THREAT OF NEW ENTRANTS- LOW  Declining Average Revenue Per User.  Infrastructure tenancy costs.  Brand pull exists to some extent for brands like Airtel / Idea/ Vodafone.  Extremely high infrastructure setup costs  Spectrum License cost- Lotteries, auctions.  Incumbent Advantages: Established brand image, Reliability of network
  17. 17. POWER OF SUPPLIER- LOW  Large number of suppliers.  Shared tower infrastructure.  Limited pool of skilled managers and engineers especially those well versed in the latest technologies.  Medium cost of switching since changing their hardware would lead to additional cost in modifying the architecture.  Overall influence on the industry - medium
  18. 18. BARGAINING POWER OF CUSTOMER- HIGH  Lack of differentiation among the service provider  Cut throat competition  Customer is price sensitive  Low switching costs  Number portability to have negative impact
  19. 19. RIVALRY AMONG COMPETITORS- HIGH  High Exit Barriers  High Fixed Cost  6-7 players in each region  3 out of 4 BIG, present in each region  Very less time to gain advantage by an innovation (Eg. Caller tunes, life time card)  Price wars
  20. 20. BHARTI AIRTEL- THE MARKET LEADER
  21. 21.  Largest Telecom Player in India - ~80Mn, 22.6%  Strategic Alliance with other stakeholders in Bharti Airtel include Sony-Ericsson, Nokia - and Sing Tel  Pan India Presence  Strong Financials  Outsourcing of Core Systems  Lack of emerging market investment opportunity STRENGTHS WEAKNESS SWOT
  22. 22. SWOT • Bharti Infratel – Cutting Down cost in Rural area • Match Box Strategy – Scale of Penetration • Current Tele-Density – 30.6 is still low among developing countries • Low Broadband Penetration, Rural Telephony  India centric – Major revenues from India  Falling ARPU  Intense Competition & Shortage of Bandwidth OPPORTUNITIES THREATS
  23. 23. AIRTEL – STRATEGY MANTRA : Focus on Core Competencies and Outsource the rest!
  24. 24. STRATEGY • Airtel partnered with leading players in telecommunication players across the globe. • It has managed to work with the best of domain specialists globally and emerge as a world class entity. • Partnerships include operational contracts with vendors and strategic investors ranging from private equity investors to global telecom giants.
  25. 25. STRATEGIC PARTNERSHIPS/ SHAREHOLDERS – TECHNOLOGY AND CAPITAL  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.  Vodafone was a strategic investor in Airtel.  Temasek – the Singapore based investor holds a considerable stake in it.  Was also affiliated with Singapore Telecom.
  26. 26. OUTSOURCING DEALS IN 2004  Ericsson was given the mandate to provide, manage and maintain the equipment as well as provide quality assurance in Airtel  IBM was given the mandate to handle the back office requirements of Airtel’s presence in India
  27. 27. OPERATIONAL STRATEGIES. • Higher emphasis on ARPU/min – stark contrast with other operators who concentrate on ARPU only. • Aim to become a one stop shop for all telecommunication services under the Bharti umbrella. • Exploring opportunities in international markets. • Hived off tower infrastructure into a separate entity.

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