Porter's 5 Forces Model for Airtel

Porter’s Five Forces Impact on

Mobile Telephony

Landline & EPABX

VPNs

VAS Closed Circuit Lines DTH

Telemedia

MMM 2013-16, Sem V. Group 4

Wi-Fi

Data

Internet Leased Lines

Broadband

Telecommunication Market in India • The 2nd largest telecommunication market in the world, and the fastest growing • 974 million mobile connections in mid-2015 • 19% CAGR over FY07–15

MMM 2013-16, Sem V. Group 4

• Tele-density up from 18.3 in 2007 to 79.67 in 2015 • Total mobile services market revenue in India is expected to touch US$ 37 billion in 2017 • 5.2% CAGR between 2014 and 2017 Sources: TRAI, IBEF, GSMA, IDC

Five Forces - Mobile Telephony Buyer Power • • • •

MMM 2013-16, Sem V. Group 4

• • • •





Supplier Power Large number of buyers Not too much information • Large number of SIM and handset providers Low ability to backward integrate • No link between handset and cellular service Threat of Competitors Low bargaining leverage • SIMs mainly produced in India • ~3 operators per circle, more in largeSIM value circles per operator • Multiple providers • Number Threat of Substitutes Cost of voicePortability telephony relative their spends • to High tower supply compared to demand • Low product differentiation Lack of differentiation among• Service Providers Little or no forward integration • Landline • Threat Lower end customers for Reliance, giving them Gtalk, Yahoo Messenger Concentration primeEntrants buyers relative to products • VOIP – Skype, ofof New ARPUcost compared to others Low lower switching • paid Network Equipment - Huge Demand and Few • Huge License Fees to be upfront • High diversity of Rivals Suppliers, but increasingly • Low Buyer Inclination commoditised to substitute • High gestation period • Voice Quality an issue • Spectrum Availability • Also limited due to regulation • Regulatory Issues • Rapidly changing technology • Brand Identity & Brand Switching cost







MMM 2013-16, Sem V. Group 4

PESTEL - Mobile Telephony • Arrangement with fixed service providers for traffic between long distance and short distance charging centres a must • One time Entry fee of Rs.25 mn plus Bank Guarantee of Rs.200 mn • Seven years time frame for rollout, spread over 4 phases • Shortfall in network coverage could result in forfeiture of BG • Operators allowed to set up landing facilities that access submarine cables and use excess bandwidth • No industrial license required for setting up manufacturing units for telecom equipment • 100% Direct FDI allowed • TRAI’s controversial spectrum recommendations • Changing Government Policies Sources: TRAI, MIB documents, slideshare

DTH Market in India More than 800 channels available in India TV penetration still at just 56% 97% of TV HHs are single TV homes Predominantly a cable TV market • 67% of TV HHs have cable • DTH penetration ~30% • Customers flirt between these Modes of Signal • DTH growing at 15% p.a. • DD Freedish a game changer

MMM 2013-16, Sem V. Group 4

• • • •

Sources: TRAI, MIB, BARC India

Five Forces - DTH Buyer Power





Fragmented market across the country Supplier Power Easy to switch between operators and alternate Modes • India the 2nd largest DTH market in of Signal (Cable, IPTV); nearly zero cost toAsia switch • ‘Trial packs’ increase flirtation • Easy availability of CPEs Threat of Competitors • Highly price sensitive • Good Ku Band availability • 7 players, including DD FreeDish • Content available in abundance • Price Cuts and Free trial packsThreat a burden of on Substitutes revenues and top lines • Cable TV still a predominantly strong Threat of New Entrants presence in India • IPTV services growing slowly but steadily • High Subscriber Acquisition Cost (SAC) • Ease of switching • Market is already crowded • Improved quality by cable operators • High Entry Cost • Difficult to obtain license for media service • •



MMM 2013-16, Sem V. Group 4





MMM 2013-16, Sem V. Group 4

PESTEL - DTH • Operators to set up earth stations in India within 12 months of getting a license • DTH licenses in India cost $2.14 million and will be valid for 10 yrs • Necessary to have Indian management control and CEO • Foreign equity capped at 49%, FDI capped at 20% • Broadcasters not allowed to offer exclusive content to a specific player • Broadcasters stake in DTH venture and vice versa capped at 20% • Rule of ‘must carry’ for all DTH operators • Weather plays a strong role in DTH service quality Sources: Int’t Journal of Mktg, ‘Behind a Billion Screens’ – Nalin Mehta, BARC India

Thank you