Porter analysis of Indian Telecom Industry

INDIAN TELECOM INDUSTRY OVERVIEW 

315 mn mobile subscribers by September 08



39 mn fixed line subscribers by September 08



Crossed 25% teledensity mark in March 08



10.42 mn subscribers added in month of October 08

 There are 6-7 telcos operating in each of 23 license areas.



Airtel, Reliance, Vodafone & BSNL, who are “the Big 4” have 74% market share 

Growth is expected to continue and even accelerate, reaching a projected 496 mn mobile subs by 2010

Fixed vs. Mobile

No of new subscribers

 Threat from New Entrants Supply Side Economies Of Scale • declining ARPU • Infrastructure tenancy costs • Other FC like BPO

Demand Side Benefits • Brand pull exists to some extent for brands like airtel /idea/

vodafone

 Threat from New Entrants (Cont.) Customer Switching Costs • Cost of new connection low • Proposed number portability

Capital Requirement •

Extremely high infrastructure setup costs

•

Spectrum License cost

 Threat from New Entrants (Cont.) Incumbent Advantages 

Established brand image



Reliability of network

Uneven access to Distribution Channels 

Not a factor

 Threat from New Entrants (Cont.) Restrictive Govt Policy 

Spectrum and license allocation



3G and Number portability policy still unclear.



74% FDI cap.



Minimum requirement of number of towers.

Power of the buyer Lack of differentiation among the service provider



Cut throat competition



Customer is price sensitive



Low switching costs



Number portability to have negative impact



Supplier Bargaining Power 

Large number of suppliers.

Physi Physica call Infra Infra

Suppli Supplier  er 

Network Infrastructure

-Ericsson



Shared tower infrastructure.



Limited pool of skilled managers and engineers

-Siemens Networks -Cisco

especially those well versed in the latest

-Huawei

technologies.



Medium cost of switching since changing their hardware would lead to additional cost in modifying the architecture.

Information Technology

-IBM

Passive Infrastructure

-Bharti Infratel

Call Center  Outsourcing

-IBM Daksh

-TCS -Indus Towers -Mphasis -Hinduja TMT



Overall influence on the industry - medium

-Aegis BPO -Nortel

Rivalry among Existing Competitors High Exit Barriers



High Fixed Cost



6-7 players in each region



3 out of 4 BIG-Four present in each region



Very less time to gain advantage by an innovation



(Eg. Caller tunes, life time card) Price wars



Market Share

Presence in States

 Threat of Substitutes 

Some Substitutes: 

VOIP (Skype, Messenger etc.)



Online Chat



Email



Satellite phones



None of the above a major threat in current scenario.



Price-Performance trade-off very high.



Issues of mobility and penetration with the substitutes.