The Indian telecom industry is a saturated red ocean with intense price competition and declining average revenue per user. To transition to a blue ocean, operators should eliminate variety in pricing plans, roaming charges and unnecessary value-added services. They should raise network quality, broadband services, and new offerings like mobile commerce and entertainment. New areas of focus could include private networks, healthcare apps, and a telco app store to create new demand and move to an uncontested market space.

1. Blue Ocean Strategy –
Indian Telecom Industry
Author : Dipankar Mishra

2. Blue Ocean Strategy – Indian Telecom Industry
1. Industry Background
Indian telecommunication market is one of the largest in the world, with the number of
telecom subscribers second only to China's. In terms of infrastructure, India's telecommunication
network is the third largest in the world on the basis of its customer base and it has one of the
lowest tariffs in the world enabled by the hyper-competition in its market. The major sectors of
the India telecommunication industry are telephony, internet and broadcasting. Indian telecom
industry underwent a high pace of market liberalization and growth since 1990s and now has
become the world's most competitive and one of the fastest growing telecom markets. India has
the world's second-largest mobile phone user base with over 929.37 million users as of May
2012. It has the world's third-largest Internet user-base with over 121 million as of December
2011.
There are around 15 operators competing in the market for the telecom space in India. As
per the latest annual report from Telecom Regulatory Authority of India (TRAI), the total
revenue in the telecom service sector was INR 1,71,719 crore for the 2010-11 , growth of about
8.7% from the previous year. The capital employed in the sector increased from INR 2,86,837
crore in 2009-10 to INR 3,37,683 crore in 2010-11 i.e. an increase of 17.73 % indicating a
healthy growth of investment in the sector.
2. Why is it a Red Ocean?
Characteristics:
Market Saturation: The market is saturated with urban tele-density (number of telephones per
100 persons) reaching 167% and overall national average is 76%. Further increase of the
customer base seems difficult in the coming years. (Figure 1)
Price War: The industry is one of the most competitive and has the lowest tariff rates than
anywhere in the world. The call rates dropped from INR 16.80 in 1995 to INR 0.30 in 2012.
Operators have been announcing new promotional schemes including reduction in tariffs for
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3. Blue Ocean Strategy – Indian Telecom Industry
voice call, slashing roaming charges and many more such lucrative offers. Due to the fierce price
war the profit margin and return of capital has been declining over the years (Figure 2).
Declining Revenue: Average revenue per user (ARPU) has been falling year on year and most
of the major players have been losing between 10 to 20% in ARPU and going to decline further.
This trend is having negative impact on the bottom-line of all the players. The EPS for almost all
telecom companies are going down and a result share prices is in a declining path.
The tariff war and the trend in declining revenue per user is not a sustainable model going
forward as bottom line growth is seems muted in the coming years.
There are three types of players in Indian telecom services:
 State owned companies (BSNL and MTNL)
 Private Indian owned companies (Reliance Infocomm, Tata Teleservices,)
 Foreign invested companies (Vodafone, Bharti Tele-Ventures, Idea Cellular, Uninor etc)
Foreign direct investment is increasing and new players are entering the market every year.
Figure 1: Tele-Density on India; source: DOT Annual Report
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4. Blue Ocean Strategy – Indian Telecom Industry
Figure 2- Return on Capital Figure 3 – Market Share of Indian Telecom Operators
As-is strategy canvas of the Indian Telecom Industry
Factors Considered (based on offerings from operators and general understanding of industry):
1. Price – Due to competitive nature the price is very low
2. Traditional mobile services – Talk, SMS, MMS, Ringtones etc. .Rated High as these are
standard offerings by the operators.
3. Network Quality and coverage – The mobile infrastructure in India is still not up to the
mark and the Quality of service is effected (rated low based on TRAI report)
4. Internet and broadband services – Most of the major players are offering this service but
the quality and reach is not high. Hence a rating of average is given for this.
5. Pay for what you use – While most of the operators offer full talk time, but most of time
operators add value added services like ringtone, daily astrology reports etc without
customer consent. TRAI report also shows that there is deterioration on QoS in metering
and billing credibility. The rating has been given Low.
6. Roaming Charges – Roaming charges in India are quire erratic and just moving even
within a state attracts roaming charges although the operator does not incur in cost.
7. Variety in Usage plans – Every operator has multiple usage plans for both post pad and
pre-paid services. Hence the rating of very high is given for this.
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5. Blue Ocean Strategy – Indian Telecom Industry
8. Traditional Value added services- Standard value added services like call forwarding,
itemized billing, caller ringtones, music downloads are now a standard in the Indian
telecom industry. However there is lot of scope for adding more features and hence the
rating given is average
9. M Commerce – Though most of the providers offer this services , the penetration is still
low because of security and customer awareness issue.
10. Video Calls – New 3G players are only offering his service but the pricing is very high.
So this parameter has been ranked low.
11. Entertainment (music download, IPTV) - Penetration is quite low and most of the
subscribers do not see much value in the in this offering. The main reason behind is the
higher pricing and content not meeting expectations. Hence is parameter is ranked low.
12. Customer Services – Normally the high customer base is managed by comparatively
lower customer support executives; the QoS in this parameter is low.
1= V Low
Red Ocean Strategy Canvas 2= Low
3=Average
6 4=High
5=V high
5
4
3
2
1
0
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6. Blue Ocean Strategy – Indian Telecom Industry
3. Creating a Blue Ocean
Using the four action framework -Eliminate, Reduce, Raise and create following a following
ERRC grid.
Eliminate Raise
 Variety of usage plans  Network Quality and Coverage
 Charges for Value added services  Internet and Broadband services
like Call forwarding, Ringtones,  Pay for what you use
itemized billing etc.  Entertainment (Music , IPTV)
 Roaming Charges  M Commerce
 Video Calls
Reduce Create
 Traditional Value added services  Private Networks
(via SMS)  Wireless Health Care applications
 Telco App Store
Eliminate:
1. The variety in usage plan can be completely eliminated and instead “pay for what you use
“can be increased.
2. Customers do not consider some of the services which provider terms as value added ,
hence they should be eliminated
3. Most of the developed nations do not have roaming charges and India too can replicate
that. If the subscriber is in a different mobile circle then a onetime nominal charge can be
applied.
4. Video Calls requires high bandwidth usage and the locations where Indian subscribers
use their mobile (on the go) is not suitable for Video chats. This segment can move to the
internet service provides
Reduce:
1. Traditional Value Added Services: Some of the so called value added services by Telco’s
are actually SMS based and not really value added. Most of these services are push based
which subscribers do not always want. Hence reducing this offering.
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7. Blue Ocean Strategy – Indian Telecom Industry
Raise:
1. Network Quality and service – This is one area where most of the telco operators in India
are not up to mark. Even major players like Bharti and Vodafone have signal, call
disruption issues. Improving in this category will give higher customer satisfaction and
customer retention.
2. Internet and Broadband services – The broadband services offered by telcos are not up to
expectation as the speed is quite low and pricing on the higher bandwidth segment is
comparatively high. Improvement is this offering can bring in new customers who are on
the move and requires internet connections on the move.
3. Pay for what you use – New customer acquisition specially the mobile internet users is
possible if this pricing policy is adapted.
4. Entertainment – The entertainment offering is mostly restricted to music downloads and
mobile TV in a low scale. This segment can be expanded with online gaming, books
improved mobile TV and affordable prices, etc.
5. M Commerce – M commerce (like Banking transaction, utility bill payment etc) have a
big way to go as this offerings are at nascent stage. This will surely increase the revenue
to telcos and acquire new customers.
Create:
1. Private Networks – Small and medium enterprises who cannot invest to have dedicated
networks can buy this offering from telcos.
2. Wireless Heath Care applications – Personal aps such as patient monitoring systems,
alerts, medicine refilling prescription etc can bring in new user base especially in the
rural areas where mobile penetration is still low.
3. Telco App stores – Telcos can generate revenue by providing new apps (like secure
mobile payment apps, gaming, entertainment, news etc.
The creation of these services does not require high investments from Telecom operators and
existing bandwidth can be utilized.
To-be Strategy
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8. Blue Ocean Strategy – Indian Telecom Industry
1= V Low
Blue Ocean Strategy Canvas 2= Low
3=Average
6 4=High
5=V high
5
4
3
2
1
0
Red Ocean Blue Ocean
4. Blue Ocean – Create New Service lines
The next wave of subscriptions will come from semi-urban and rural areas. The penetration
of mobile phones in urban areas is already more than 150% and in rural areas it is ~ 38% (Figure
1) As the 3G spectrum is becoming operational , focus must be given on the Non-Voice offerings
in the urban sector and extend the basic services in the rural sector to capture the market. The
strategy should to align to the above goals.
The top five to six products such as game based applications, music download continue to form
close to 90% of VAS (Value Added Services) revenues, and have become easily replicable. The
other types of services such as governance, education, and commerce constitute only 10-15% of
VAS revenues, leaving large scope for growth.
In the rural segment services such as
 Selling and procurement information and support for farm commodities
 Educating farming community on best practices
 Delivery of healthcare and education to remote village via the mobile broadband network
 Regional language content, and news
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9. Blue Ocean Strategy – Indian Telecom Industry
 Access to government services on Mobile-Based Service (MBS) platform individually or
on CSC (Common Service Centre) model
In the urban segment services such as
 Mobile banking and commerce
 Tele-education
 Tele-medicine
 Location information, Area maps etc.
 Home based services such as home security monitoring and personal emergency services
 Easy access to services such as government services, utilities etc can be potential
successes.
The ERRC Grid will look like this
Eliminate Raise
 Variety of usage plans  Network Quality and Coverage
 Charges for Value added  Internet and Broadband services
services like Call forwarding,  Pay for what you use
Ringtones, itemized billing etc.  Entertainment (Music , IPTV)
 Roaming Charges  M Commerce
 Video Calls
Reduce Create
 Traditional Value added services  Private Networks
(via SMS)  Wireless Health Care applications
 Telco App Store
 Non Voice Services
o Real Time Agriculture
information
o Banking Services (Remittance,
Micro Payments)
o M-Governance
o M-Education
o Vernacular Content
o Location Information and area
maps
 Home Based Services
o Home Security Monitoring
o Personal Emergency
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10. Blue Ocean Strategy – Indian Telecom Industry
The Extended Strategy Canvas will look as below
1= V Low
Blue Ocean Strategy Canvas 2= Low
3=Average
6 4=High
5=V high
5
4
3
2
1
0
Red Ocean Blue Ocean
5. Conclusion
By using the framework we can conclude that “Blue Ocean” strategy can be applied to the Indian
Telecom industry. The factors which come out are network quality and coverage, quality of
customer service, Pay for what you use and better and more meaningful Value added services.
.This new market strategy will help Indian Telecom operators to enhance their competitiveness
in the existing market and capture new customers from the rural and semi-urban segment. Finally
the implementation of India’s telecom industry has posed unique challenges for mobile
operators. Although the market is competitive but there is lot more is possible to do enhance
customer experience. Non Voice services are a great opportunity to rescue the industry from the
declining ARPU.
However, stakeholders across the value chain will have to work collaboratively to overcome
barriers and create a business ecosystem that generates fair rewards for all the players.
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11. Blue Ocean Strategy – Indian Telecom Industry
References:
1. http://www.Wikipedia.org
2. http://online.wsj.com/article/SB10001424052702303567704577518252781590644.html?
mod=googlenews_wsj
3. http://www.economist.com/node/18836120
4. Department of Telecommunications (Annual Report)
5. http://www.trai.gov.in/WriteReadData/PressRealease/Document/quarterly%20press%20r
elease.pdf
6. http://www.trai.gov.in/WriteReadData/UserFiles/Documents/AnuualReports/ar_10_11.pd
f
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