Strategic Audit of Vodafone

TERM PAPER OF STRATEGIC MANAGEMENT STRATEGIC AUDIT VODAFONE

SUBMITTED TO:Mr. Amit Kumar Lal

SUBMITTED BY:ARUN KUMAR GULERIA Section T1801 Roll No. RT1801A02 Program Code: 194 Reg. No. 10807166

LOVELY PROFESSIONAL UNIVERSITY LOVELY INSTITUTE OF MANAGEMENT (LIM) 1 © ARUN GULERIA | [email protected]

ACKNOWLEDGEMENT In order to make my project I acknowledge a special thanks to all those people without whose supports it would not be possible for me to complete for me to complete my report.

First of all I really thankful to Lovely Professional University and I express my sincere thanks to my project guide Mr. Amit Kumar Lal who had guide to me throughout my project.

Also I would like to express my inner feeling for all the people for co-operating and helping me throughout the project.

Last but not the least I am thankful to my parents and friends who have provided me with their constant support throughout this project.

Arun Guleria

2 © ARUN GULERIA | [email protected]

INDEX S.No. 1. 2. 3. 4. 5. 6. 7. 8. 9.

Particular Executive Summary Industry Profile Mission & Vision Board Of Directors Organisation Structure Organization Analysis Industry Environment Competitor Analysis Environment Analysis  

10. 11. 12. 13. 14.

15.

19 21

Internal Environment External Environment

India’s GSM Subscriber Base Scales Case Against Vodafone Vodafone Unveils New Internet Service 16.7 Pc Increase In Operating Profit Vodafone Rings In Eco-Friendly Mobile Base Station Vodafone Rings 100 MN Subscribers In India

Corporate Strategic Alternatives Business Strategic Alternatives Functional Strategic Alternatives

Recommended Strategy Conclusion Bibliography

28 28 29 29 30 30

32 32 33

33 34 35

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22 23 24 32 28

32

Strategic Alternatives   

16. 17. 18.

4 5 8 8 9 10 14 17 19

SWOT Analysis Financial Analysis Products & Services Offered By Vodafone Acquisitions By Vodafone Articles / News Of Vodafone      

Page No.

EXECUTIVE SUMMARY This project is based on “Strategic Audit” as the telecom sector is growing at a very good pace. The telecom company which I have selected for my project is VODAFONE. The reason behind selecting Vodafone is its various schemes in product & service category & also its future strategic where the company is coming out with lots of new & affordable schemes for its customers. Vodafone is a UK based company & has various branches all over the world. The company was started in the mid 70’s & since then it has never looked back. They have various strategic for various countries customers depending on the status of the customers. Vodafone has various product categories ranging from chargers, internet, mobile phones, headsets & headphones & many more. In the service category it has internet services which include broadband internet & PC internet services. Apart from the products & services normally offered they also came out with some interesting & unique product like the i phone. This was one of the biggest events in the history of Indian telecom industry. The phones were available at around Rs. 32000-36000 which has a unique feature called as 3G system. Vodafone also came out with cell phones for the poor which were a part of their social responsibility toward the poor class people of the society. The phones were available in the range of 1000 Rs -1500 Rs which was one of the successful strategies of Vodafone. According to the 2002-2008 data VODAFONE captures the market with 17.56 % & is at the 3rd position just after Bharti with 24.69% & Reliance with 17.68%. Vodafone also came out with one of best& most attractive advertisement which no one has ever seen before called as “VODAFONE ZOO-ZOO’S”. This advertisement was a part of VODAFONE’S marketing strategy to boost its sales during the IPL 2 season. This was one of the master moves by VODAFONE to introduce ZOO-ZOO during the IPL 2 season which was a “SUPER-HIT”. VODAFONE is planning to come with its own accessories stores which would be a one-time shop for its customers wherein the customers will get all the products under one roof. Vodafone’s future plan is to become no.1 telecom company by the year 2010-2011 which does not seems to be very difficult keeping in mind the progress it has made in the last 5 years. Vodafone is the largest player in the European mobile telephony market through its newly acquired assets and organizational expertise. Vodafone has a high gross margin and profit margin when compared to its competitors, making more money per customer than its competitors, with more customers than its competitors. Across the board, profit margins are decreasing at an increasing rate. In a fast cycle market such as the mobile phone industry it is important to stay ahead of the curve and constantly improve and search for better ways to accomplish the same goal at a low cost. Vodafone is also the official sponsor of the England Cricket Team for the Npower test series . It has also shaken hands with the most popular football tournament UEFA CHAMPIONS LEAGUE football which is a part of the promotional strategy of Vodafone 4 © ARUN GULERIA | [email protected]

INDUSTRY PROFILE Today the Indian telecommunications network with over 375 Million subscribers is second largest network in the world after China. India is also the fastest growing telecom market in the world with an addition of 9- 10 million monthly subscribers. The Department of Telecommunications has been able to provide state of the art world-class infrastructure at globally competitive tariffs and reduce the digital divide by extending connectivity to the unconnected areas. India has emerged as a major base for the telecom industry worldwide. Thus Indian telecom sector has come a long way in achieving its dream of providing affordable and effective communication facilities to Indian citizens. As a result common man today has access to this most needed facility. The reform measures coupled with the proactive policies of the Department of Telecommunications have resulted in an unprecedented growth of the telecom sector. According to TRAI, by the end of February, the total number of subscribers had reached 413 million. Of this, 91% were mobile phone subscribers. The rising number of subscribers has pushed the tele-density to 35.62% showing a stupendous annual growth of about 50%, one of the highest in any sector of the Indian Economy. Also industry estimates show that telecom industry in India will witness a compound annual growth rate (CAGR) of 26% to reach 3, 44,921 crore by 2012. It is set to generate employment opportunities for close to 10 million. India’s telecom sector has shown massive upsurge in the recent years in all respects of industrial growth. From the status of state monopoly with very limited growth, it has grown in to the level of an industry. Telephone, whether fixed landline or mobile, is an essential necessity for the people of India. This changing phase was possible with the economic development that followed the process of structuring the economy in the capitalistic pattern. Removal of restrictions on foreign capital investment and industrial de-licensing resulted in fast growth of this sector.

At present the country’s telecom industry has achieved a growth rate of 14 per cent. Till 2000, though cellular phone companies were present, fixed landlines were popular in most parts of the country, with government of India setting up the Telecom Regulatory Authority of India, and measures to allow new players country, the featured products in the segment came in to prominence. 5 © ARUN GULERIA | [email protected]

Indian Telecom sector, like any other industrial sector in the country, has gone through many phases of growth and diversification. Starting from telegraphic and telephonic systems in the 19th century, the field of telephonic communication has now expanded to make use of advanced technologies like GSM, CDMA and WLL to the great 3G Technology in mobile phones. Day by day, both the Public Players and the Private Players are putting in their resources and efforts to improve the telecommunication technology so as to give the maximum to their customers. The huge potential offered by the untapped rural market will help push growth for telecom operators in the years to come. At present, rural India accounts for just 27% of the country’s cellular base, though it constitutes 70% of the population.

MOBILE SUBSCRIBER BASE IN INDIA Operator

Mar ‘10

HFCL Infotel MTS India Loop Mobile Spice MTNL Aircel Tata Teleservices Idea BSNL Vodafone Reliance Bharti Airtel Total

Apr ‘10

Change

3,85,596 7,68,640 22,04,676 41,71,587 45,29,557 1,95,85,299 3,57,27,203 4,00,02,654 5,31,74,300 7,15,41,888 7,48,36,610 9,6735,306

3,88,285 5,99,801 21,64,211 41,33,342 44,82,512 1,84,78,325 3,51,21,964 3,88,89,457 5,21,44,234 6,87,68,988 7,26,66,192 9,39,23,248

-2,689 1,68,839 40,465 38,245 47,045 11,06,974 6,05,239 11,13,197 10,30,066 27,72,890 21,70,418 28,12,058

40,36,63,316

39,17,60,569

1,19,02,747

MOBILE SUBSCRIBER GROWTH RATE

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GSM SUBSCRIBER IN INDIA

GSM SUBSCRIBER GROWTH

CDMA SUBSCRIBER BASE IN INDIA

CDMA SUBSCRIBER GROWTH

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MISSION & VISION Mission Driving in a wireless world. Vodafone is primarily a user of technology rather than a developer of it, and this fact is reflected in the emphasis of our work programme on enabling new applications of mobile communications, using new technology for new services, research for improving operational efficiency and quality of our networks, and providing technology vision and leadership that can contribute directly to business decisions Vision To enrich our customer's lives through the unique power of mobile communication Our Vision is to be the world’s mobile communication leader – enriching customers’ lives, helping individuals, businesses and communities be more connected in a mobile world

Board of Directors: 1. Sir John Bond (Chairman) 2. Vittorio Colao (CEO) 3. John Buchanan (Deputy Chairman) 4. Andy Halford (CFO) 5. John Buchanan 6. Andy Halford 7. Michel Combes 8. Alan Jebson 9. Samuel Jonah 10. Nick Land 11. Anne Lauvergeon 12. Simon Murray 13. Steve Pusey 14. Luc Vandevelde 15. Tony Watson 16. Philip Yea

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ORGANISATION STRUCTURE

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ORGANIZATION ANALYSIS

Vodafone Group plc is a British multinational mobile network operator headquartered in Newbury, England. Vodafone is the world's largest mobile telecommunication network company, based on revenue, and has a market value of about £71.2 billion (November 2009). It currently has operations in 31 countries and partner networks in a further 40 countries. Based on subscribers, it is the world's second largest mobile phone operator behind China Mobile, with over 427 million subscribers in 31 markets across 5 continents as of 2009. In the UK, its home ground, Vodafone has badly underperformed in the last few years due to brisk change in administration. It has slipped from first to third largest telecom operator generating a revenue of £4.9 billion from its 18.7 million customers in 2008-09, As of March 31, 2009, the company employs more than 79,000 people worldwide. The name Vodafone comes from voice data fone, chosen by the company to "reflect the provision of voice and data services over mobile phones". Vodafone owns 45% of Verizon Wireless, the largest wireless telecommunications network in the United States, based on number of subscribers. It is listed on the London Stock Exchange, where it is a constituent of the FTSE 100 index. Previously Vodafone was listed on New York Stock Exchange, but later it indented to transfer the listing of its American Depositary Receipts, each representing ten ordinary shares of its company, from NYSE to NASDAQ. However, it would keep listing its debt securities on NYSE.

Vodafone’s original logo used until the introduction of the speech mark logo in 1998. 10 © ARUN GULERIA | [email protected]

Growth of Hutchison Essar (1992-2005) In 1992 Hutchison Whampoa and its Indian business partner established a company that in 1994 was awarded a licence to provide mobile telecommunications services in Mumbai (formerly Bombay) and launched commercial service as Hutchison Max in November 1995. Analjit Singh of Max still holds 12% in company. In Delhi, UP (E), Rajasthan and Haryana, ESSAR was the major partner. But later Hutch took the majority Stake. By the time of Hutchison Telecom's Initial Public Offering in 2004, Hutchison Whampoa had acquired interests in six mobile telecommunications operators providing service in 13 of India's 23 licence areas and following the completion of the acquisition of BPL that number increased to 16. In a country growing as fast as India, a strategic and well managed business plan is critical to success. Initially, the company grew its business in the largest wireless markets in India — in cities like Mumbai, Delhi and Kolkata. In these densely populated urban areas it was able to establish a robust network, well known brand and large distribution network -all vital to longterm success in India. Then it also targeted business users and high-end post-paid customers which helped Hutchison Essar to consistently generate a higher Average Revenue Per User ("ARPU") than its competitors. By adopting this focused growth plan, it was able to establish leading positions in India's largest markets providing the resources to expand its footprint nationwide. In February 2007, Hutchison Telecom announced that it had entered into a binding agreement with a subsidiary of Vodafone Group Plc to sell its 67% direct and indirect equity and loan interests in Hutchison Essar Limited for a total cash consideration (before costs, expenses and interests) of approximately US$11.1 billion or HK$87 billion. 1992: Hutchison Whampoa and Max Group established Hutchison Max 2000: Acquisition of Delhi operations Entered Calcutta and Gujarat markets through ESSAR acquisition 2001: Won auction for licences to operate GSM services in Karnataka, Andhra Pradesh and Chennai 2003: Acquired AirCel Digilink (ADIL — ESSAR Subsidiary) which operated in Rajastan, Uttar Pradesh East and Haryana telecom circles and renamed it under Hutch brand 2004: Launched in three additional telecom circles of India namely 'Punjab', 'Uttar Pradesh West' and 'West Bengal' 2005: Acquired BPL (Except Mumbai)- 3 Circles, another mobile service provider in India 2008: Vodafone acquired the Licence in remaining 7 circles and has started its pending operations in Madhya Pradesh/Chhattisgarh with its headquarters at Malviya Nagar, Bhopal as well as in Orissa, Assam, North East and Bihar 2008: Vodafone launched the Apple iPhone 3G to be used on its 17 circle 2.75G network. 11 © ARUN GULERIA | [email protected]

A recurrent theme is that its message Hello stands out visibly though it uses only white letters on red background. Another recent successful ad campaign in 2003 featured a pug named Cheeka following a boy around in unlikely places, with the tagline, Wherever you go, our network follows. The simple yet powerful advertisement campaigns won it many admirers. 2009: Vodafone launched Recharge Online 2009: Vodafone Essar - 1st Indian Telecom operator to receive the Payment Card Industry Security Standard (PCI DSS) certification for its Mumbai operations and launches unlimited SMS offer in Mumbai.

2010: Vodafone emerged as the most admired marketer in India. 2010: Vodafone crossed 100 million subscribers in India.

SUBSCRIBER BASE: The Vodafone subscriber base according to COAI - Cellular Operator Association of India as of March 2010 was:  Delhi 3,216,769  Mumbai 3,451,567  Chennai 2,174,589  Kolkata 2,974,177  Maharashtra & Goa - 2,610,389  Gujarat 6,010,594  Andhra Pradesh 2,601,458  Karnataka 2,850,346  Tamil Nadu 3,180,820  Kerala 3,001,133  Orissa 520,772  Punjab 3,645,501  Haryana 1,282,208  Himachal Pradesh – 1,21,452  Uttar Pradesh (West) - 2,858,429  Uttar Pradesh (East) - 3,508,355  Rajasthan 3,934,598  West Bengal & Andaman and Nicobar - 4,825,310 The total is 5,27,68,467 or 24.93% of the total 25,23,55,939 GSM mobile connections in India till March 2010. 12 © ARUN GULERIA | [email protected]

TARIFF PLAN FOR EXISITING USERS Tariff Plan

1p Plan

MRP Applicability

Rs 43 Existing customers

Initial Talktime Tariff Validity Local Calls Vodafone-to-Vodafone calls

Vodafone - Other Mobile Vodafone - Landline STD Vodafone-to-Vodafone Vodafone - Other Mobile Vodafone - Landline SMS (160 characters) Local Mobiles

Night Calling Plan Rs 44 Existing customers

All@50p Plan

Ticket Plan

Travel Plan

Rs 61 Existing customers

Rs 129 Existing customers requiring Roaming benefits

Rs 30 1 year

Rs 36 1 year

Rs 40 1 year

Rs 74 Existing customers requiring Roaming benefits 0 1 year

1p/sec

50p/min

1p/sec

50p/min

1p/sec 1p/sec

50p/min (between 11pm 7am, calls at 20p/min) 50p/min Re 1/min

50p/min 50p/min

1p/sec 1p/sec

50p/min 50p/min

1p/sec 1p/sec 1p/sec

Re 1/min Re 1/min Re 1/min

50p/min 50p/min 50p/min

1p/sec 1p/sec 1p/sec

50p/min 50p/min 50p/min

100 free daily (First Local SMSes will be charged at Re1/sms, Post 100 free SMS, charges at Re1/sms

10p

100 free daily (First Local SMSes will be charged at Re1/sms, Post 100 free SMS, charges at Re1/sms

50p

National

Rs 1.5

50 p

50 p

International

Rs 5

Rs 5

Rs 5

100 free daily (First two Local SMSes will be charged at Re 1/sms) 100 free daily (First two National SMSes will be charged at Rs1.50/sms) Rs 5

Rs 50 1 year

50 p

Rs 5

Roaming rates (for Rs 77 and Rs 129 Recharge rates applicable only on Vodafone networks ) All Incoming calls

Rs 1.5/min

Outgoing (Local and STD calls)

Rs 1.5/min

All Incoming SMS Outgoing (Local and national SMS) Outgoing (International)

Free Rs 1.5/sms

ISD (Rs / min) USA & Canada; SE Asia; Landline numbers in Australia, New Zealand, UK, Germany & France (excluding premium destinations) SAARC: China, Russia, Egypt, South Africa, Kenya, Nigeria, Japan, South Korea, Mobile numbers in Australia, UK, Germany & France (excluding premium destinations) Premium Destinations Satellite Calls Bonus Cards applicable

Rs 1.5/min Rs 1.5/min Free Rs 1.5/sms Rs 3.45/sms

Rs 1.5/min

1.5p/sec

70p/min

Rs 1.5/min

1.5p/sec

70p/min

Free Rs 1.5/sms

Free Rs 1.50/sms

Free Rs 1.50/sms

Rs 3.45/sms

Rs 3.45/sms

Rs 3.45/min

Rs 6.4

Rs 6.4

Rs 6.4

Rs 6.4

Rs 6.4

Rs 10

Rs 10

Rs 10

Rs 10

Rs 10

Rs 100 Rs 500 STD mins, Night Speak Bonus card applicable

Rs 100 Rs 500 STD mins, Night Speak Bonus card applicable

Rs 100 Rs 500 STD mins, Night Speak Bonus card applicable

Rs 100 Rs 500 STD mins, Night Speak Bonus card applicable

Rs 100 Rs 500 STD mins, Night Speak Bonus card applicable

Rs 3.45/sms

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INDUSTRY ENVIRONMENT Use Porter’s Five Forces Model to determine the attractiveness of the mobile telephony industry. Based on your analysis, is the industry attractive or unattractive?

1. Threat of New Entrants - Low While evidence suggests companies often find it difficult to identify new competitors that is not the case in the mobile phone industry. Because the mobile phone operators must compete for spectrum licenses, they can easily identify their competitors in the individual markets. The threat of new entrants bringing additional production capacity should be downplayed in this industry, because technology should assumed to be similar and thus new entrants do not necessarily bring additional production capacity, nor does their entry hold consumer cost down. The fixed-line operators do however present a risk to mobile phone operators, because they will certainly provide extra production capacity and lower the consumer costs as a result of this competition.

2. Barriers to Entry - High A. Economies of Scale - Moderate The mobile phone companies were expanding internationally at a fast pace, but the potential benefits of economies of scale in R&D and network exploitation remained unclear. Mobile phone manufacturers did enjoy great economies of scale in production, marketing and R&D, which allowed the three major producers to dominate the industry and sustain a competitive advantage. Strategic alliances with these producers would allow the major mobile phone operators to share in these economies, to lower costs for both companies and to minimize the threat of new entrants.

B. Product Differentiation - Low There was no evidence that mobile phone operators achieved product differentiation. In fact, mobile phone manufacturing brands were more important to consumers than those of the mobile phone operators. As a result, mobile phone operator product differentiation could only be successful if in conjunction with the major phone manufacturer brands. The multimedia content of mobile phone operators could prove to be a successful strategy for product differentiation in the future.

C. Capital Requirements - High Compared to capital requirements of the telecommunications industry as a whole, the mobile phone industry capital requirements were low. However, within the mobile phone industry, capital requirements present a significant barrier to entry. Because spectrum licenses went up for auction, only the most financially fit and liquid mobile phone operators could acquire these essential components of their business strategy. One method of negating these stiff capital requirements within the mobile phone industry was to acquire or form alliances with existing operators in other countries. These arrangements took shape through the use of roaming agreements, allowing one operator’s customers to use their allies’ network when their own was unavailable.

D. Switching Costs - Low Because product differentiation is low between the mobile phone operators, switching costs are bound to be low. If multimedia content becomes a major opportunity for product differentiation as is expected, this could raise the switching costs for customers. 14 © ARUN GULERIA | [email protected]

Switching costs could also be higher if mobile phone operators and manufacturers decided to create and operate equipment that was not compatible across mobile phone operators. This seems unlikely, as it would also reduce the ability of mobile phone operators to put in place roaming agreements with their allies.

E. Access to Distribution Channels - Low European regulations governed distribution channels through the use of spectrum licenses. This policy of auctioning licenses to mobile phone operators should be considered a strong barrier to new entrants.

F. Cost Disadvantages Independent of Scale - Low There are no cost advantages that the mobile phone operators have established that new entrants can not duplicate.

G. Government Policy - Low Government controls the entry into the mobile phone industry through their spectrum licenses. Deregulation would pose a significant threat to existing mobile phone operators, but does not seem to have been on the horizon.

3. Expected Retaliation - High Mobile phone operators have a major stake in the industry through the purchase of licenses and investment in fixed assets with few, if any, alternative uses. These mobile phone operators also have substantial resources. New entrants pose a threat in the sense that industry growth is fast and seemingly unconstrained, except for the role of licenses. Vodafone should expect retaliation by its competitors if they acquire Mannesmann, a point where they will have significantly less financial slack than their competitors. 4. Bargaining Power of Suppliers - High Mobile phone manufacturers are the primary supplier to the mobile phone operator market. These manufacturers were dominated by Ericsson, Nokia, and Motorola with 61 percent of the market. Because the mobile phone manufacturing brands were more important to consumers than the mobile phone operators themselves, bargaining power of suppliers was high. Industry firms are not a significant customer for the supplier group because the suppliers operate in far more international locations and markets than the mobile phone operators. Suppliers’ goods are critical to buyers' marketplace success. Mobile phone manufacturers could integrate forward into the industry. These suppliers were credible, having substantial resource and provide a highly differentiated product. 5. Bargaining Power of Buyers - High There was very little differentiation among mobile phone operators, and the switching costs are low. Accordingly, the industry firms battle for higher quality, greater levels of service, and lower prices than their competitors, and the consumers benefit. Mobile phone customers purchase the entire portion of the mobile phone operator's industry output. The sales of the mobile phone service account for the entire amount of the seller's annual revenues. The mobile phone customers could switch to another mobile phone operator 15 © ARUN GULERIA | [email protected]

at little, if any, cost. The mobile phone industry's products are undifferentiated and standardized. The buyers do not pose a credible threat of backward integration because of the high capital requirements. 6. Threat of Substitute Products - Low Substitute products for the mobile phone industry could be considered fixed-line phone products if convergence is not considered to exist. This substitute product’s price is not lower, and its quality and performance capabilities are negligible compared to mobile phone products. Switching costs are low but the advantage goes to the mobile phone industry because there is a greater chance of switching to mobile phones from fixed-line phones than the other way around. 7. Intensity of Rivalry among Competitors - High (a) Numerous or Equally Balanced Competitors - High There are many equally balanced competitors in the mobile phone industry, and industries with these characteristics tend to have strong rivalries. (b) Slow Industry Growth - Low Because the mobile phone market is undoubtedly growing, there is little pressure to take customers from competitors.

(c) High Fixed Costs or High Storage Costs - High Mobile phone operators have high fixed costs due to spectrum licensing and the establishment of wireless network points of access. As a result, these mobile phone companies try to maximize their productive capacity, which leads to excess capacity and intense rivalry.

(d) Lack of Differentiation or Low Switching Costs - High Because buyers in the mobile phone industry believe mobile phone service is a commodity, rivalry within the mobile phone industry is high. Switching costs for mobile phone consumers are also low, so competitors can easily attract buyers through pricing and service offerings.

(e) High Strategic Stakes - High Nearly all operators in the mobile phone industry considered it their primary market, so competitive rivalry is intense. Europe is a dense market; high strategic stakes also exist because of this geographic location. These competitors want as much of the markets as then can get.

(f) High Exit Barriers - Low Specialized assets such as spectrum licenses maintain a high resale value. Fixed costs of exit, strategic interrelationships, emotional barriers, government and social restrictions are all negligible.

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COMPETITOR ANALYSIS Cellular Service Providers: As on Apr 2007 India has 167 million mobile phone subscribers. Out of this 125 million are GSM users and 41 million CDMA users. BSNL, Bharti Airtel, Hutch, Idea, Aircel, Spice and MTNL are the main GSM providers in India. Reliance Communications and Tata Indicom are the main CDMA providers in India. Bharti Airtel Airtel is providing cellular services in Delhi, Mumbai, Kolkata, Chennai, Andhra Pradesh, Gujarat, Haryana, Himachal Pradesh, Jammu and Kashmir, Karnataka, Kerala, Madhya Pradesh, Maharashtra, Goa, Orissa, Punjab, Rajasthan, Tamil Nadu, UP and West Bengal. Airtel is the No.1 cellular service provider in India using GSM technology. Airtel has 23% market share in India with a total subscriber base of 38 million. Reliance Communications Reliance has both CDMA and GSM networks and total subscriber base of 29 million or 17% market share. It has GSM network in Assam, Bihar, Himachal Pradesh, Kolkata, North East, Madhya Pradesh, Orissa and West Bengal. Reliance has CDMA networks in other states and cities. Bharat Sanchar Nigam Limited (BSNL) BSNL is a state owned telecom company which has GSM presence in almost every cities and towns. BSNL has 27 million subscribers with a market share of 16%. Vodafone Vodafone is another emerging GSM provider in India with coverage in Kerala, Mumbai, Delhi, Kolkata, Chennai, Gujarat, Andhra Pradesh, Karnataka and Punjab with a total subscriber base of 27 million. Tata Indicom Tata Indicom is a main CDMA provider in India with 16 million subscribers all over India. Tata Indicom has presence in almost every state and cities in India. During Vodafone competitor analysis, I determined what would drive Vodafone's competitors, as shown by their future objectives, what their competitor's are doing and can do, as evidenced by their current strategies, what the competitor's believe about the industry, as shown by their assumptions, and what the capabilities of competitors are, as shown by their strengths and weaknesses.

1. Future objectives Vodafone, unlike its competitors, focused exclusively on the mobile telephony market. Vodafone believed that fixed-line operations would be a distraction from being a pure wireless operator. This exclusive focus allowed Vodafone to offer sale and rental of mobile phone handsets, transmission of both mobile voice and data, and support a wide range of products and a variety of payment systems. Vodafone, unlike its competitors, had a focus strategy. 17 © ARUN GULERIA | [email protected]

Internet would all move to wireless because of its convenience, and placed additional rational for their exclusive focus on wireless because its return on investment was higher than operating fixed-line networks. Vodafone will continue to operate as a pure wireless company in the future. Vodafone has an aggressive mobile telephony strategy as evidenced by being the first digital service provider for mobile telephony. Additionally, they were heavily investing in international expansion through acquisitions and alliances. Through their continued focus on wireless, Vodafone wanted to be the technological leader of the industry through the development of the first digital mobile wireless network in Europe and the development of new methods to send voice and data over the network. These examples show that Vodafone was not afraid of risk.

2. Current Strategy Vodafone faced its competitors through the use of a focused strategy. This strategy allowed Vodafone to produce services that service the entire mobile telephony segment. Vodafone’s strategy actively targeted all mobile telephone users in and around their market areas. Their strategy of producing services to the entire telephony segment had been maintained and updated with the changing technology in the mobile world. In order to maintain a sustainable competitive advantage Vodafone would have to continuously update their services with the ever changing technology that exists in the mobile market. The mobile market had many different competitors each with their own competitive advantages, and specialties and each within their own market. In order to break out of their current market and expand into new markets they would have to take on the big fish in the smaller ponds, and constantly provide better service through improved technology and higher quality. The costs of imitation to these new technologies by the smaller companies will make it hard for them to imitate the service structure that Vodafone provides. The high quality of service will make it non-substitutable and become the new standard of what mobile customers expect from their service providers. Vodafone’s competitive strategy worked in their competitive structure but will need to be constantly updated to stay at the front of the technology curve and not fall behind to its competitors, who would also be attempting to constantly improve on their current services and technologies. Vodafone's exclusive mobile focus should be extended into a first-mover strategy.

3. Capabilities Vodafone's strength is its new operating structure. Because Vodafone was a new company, their cost structure was much lower than the incumbents. The incumbents did however enjoy a billing relationship with the customer already in place. Vodafone could also focus sharply on its primary market, mobile telephony, while all of its competitors would have to focus on their fixed-line operations as well. Despite the fact that the European Union was consolidating into a single market, Vodafone did not have high market shares in EU countries, suffering the effects of Orange, an innovative new entrant quickly gaining market share. Vodafone was growing quickly however, allowing their strengths in technology and acquisitions and mergers to maintain its nearly 65 percent growth. 18 © ARUN GULERIA | [email protected]

ENVIRONMENT ANALYSIS INTERNAL ENVIRONMENT Vodafone’s strongest resources were their intangibles such as human resources, innovation, and knowledge which put them a step ahead of their competitors. By definition these resources are more costly and hard to imitate. These resources are rooted deep in the company’s history by staying focused in mobile markets and not diversifying into other technology categories that would loose the company’s primary focus and drive through its core competencies. As the company grew to be the largest in the industry, they remained focused on the leading edge of mobile technology. 1. Tangible Resources - Strong (a) Financial Resources - Strong Vodafone had been operating on a net profit year to year of several hundreds of millions of pounds, allowing for plenty of acquisitions and money to be spent on research and development. Vodafone had the expertise to reorganize these assets to earn above average returns. Each year, investors were willing to lend more credit or equity. By 2000, Vodafone was the largest telecom in Europe, twice the size of its nearest competitor, Deutsche Telekom. Activity ratios indicate that Vodafone is more efficient than its competition at collecting on its receivables and making its inventory work, adjusted for economies of scale. (b) Organizational Resources - Strong Vodafone's formal reporting structure and formal planning, controlling, and coordinating systems are strong, as evidenced by their low cost base, high innovation, and numerous successful acquisitions and mergers. (c) Physical Resources - Strong Vodafone operated a significant amount of mobile telephony network base stations and owned the spectrum licenses to many mobile telephony markets. (d) Technological Resources - Strong Vodafone developed a next generation wireless standard, UMTS, that allows for voice and data on the same wireless network. 2. Intangible Resources - Strong (a) Human Resources - Strong Managerial goals seemed to be aligned with company goals. Managerial experience is great and led to numerous successful acquisitions and mergers. Detailed and experienced knowledge of the market and technology that is involved in the mobile markets. Vodafone has applied this knowledge to the many markets it has entered and has proven successful. (b) Innovation Resources - Strong Vodafone has focused exclusively on mobile telephony and has strengthened their role in the market by offering a next generation network, UMTS, which they developed themselves. (c) Reputational Resources - Weak 19 © ARUN GULERIA | [email protected]

Vodafone, like all other mobile telephony operators, suffers from low differentiation. This leads to an imperceptible difference in product quality, durability, and reliability. 4. Capabilities Vodafone's capabilities are their ability for management to complete successful acquisitions and their research and development to enable innovative technology. Vodafone's management has the ability to acquire and merge with other companies while maintaining an effective, low cost, organizational structure. Through their research and development, Vodafone is able to maintain technological leadership in mobile telephony systems. 5. Core Competencies Vodafone's capabilities in management and research and development should also be considered their core competencies because these abilities give them a source of competitive advantage over its rivals. Acquiring and merging with companies has allowed Vodafone to grow their customer base internationally. By investing in research and development, next generation platforms for mobile telephony for both voice and data allow Vodafone to maintain a competitive advantage. Does Vodafone have a sustainable competitive advantage? (Sky Huvard) Only using valuable, rare, costly-to-imitate, and non-substitutable capabilities create sustainable competitive advantage. Vodafone had valuable, rare, costly to imitate capabilities, but these capabilities were substitutable, thus, they had a temporary competitive advantage. However, if Vodafone finds a way to successfully differentiate itself to become non-substitutable, it will have a sustained competitive advantage. This temporary competitive advantage has performance implications of average returns to above-average returns. (a) Valuable - Yes Because Vodafone sticks to what it knows best, mobile telephony, and has not ventured into fixedline telephony or providing content, they created value for their customers by being the best and most focused. (b) Rare - Yes Vodafone's ability to develop innovative technology and successfully merge are rare capabilities. However, Orange, a competitor acquired by Mannesmann also has these rare capabilities. (c) Costly to Imitate - Yes The organizational culture of Vodafone must be strong to successfully complete mergers and acquisitions, while simultaneously developing innovative technology. These capabilities have developed over time and the expertise gained will be very difficult for other firms to develop. (d) Non-substitutable - No Vodaphone's mobile telephony is substitutable, as evidenced by the high turnover throughout the industry.

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EXTERNAL ENVIRONMENT Economic - Recent Government reforms have been directed towards facilitating investment procedures, attracting more local, Arab and foreign investments and realizing higher rates of employment and economic growth by improving the investment climate. Accordingly, the number of newly-established Egyptian companies increased, along with increased net FDI. According to the data of the Central Bank of Egypt, net FDI amounted from USD 3.9 billion in FY 2004/05 to USD 6.1 billion on FY 2005/06. - Egypt represents a low cost base, especially after the local currency was floated in 2003. Egypt has a skilled and competitively cost-effective human resources pool. Technological - The Egyptian telecommunications infrastructure is engineered to provide substantial services and to absorb the rapidly growing ICT industry. With its current infrastructure, and the large number of international and regional fiber optic cables that pass through Egypt, the country has international and national links and reliable connectivity to the rest of the world. - Government sponsored human development programs supply the market with more IT professionals every year, adding to the over 27,000 professionals in IT, Communications and networks. In addition, more than 140,000 Egyptians have completed the government-sponsored IT Basic Training program, which provides training in the use of computers with the aim of making IT a part of daily life. - In line with the turn of a new decade, the Egyptian Government initiated an ambitious modernization plan where its capital of human competencies is set as a first priority and the communications and information technology stands as the key pillar. Stemming from this concept, Smart Villages Company was founded on a Public-Private-Partnership investment model, with 80% ownership to the private sector and 20% to the Ministry of Communication and Information Technology. Political legal - Egypt is currently undergoing a political and constitutional process of modernization, the most extensive in its modern history yet to be carried out. President Mubarak on Thursday 5/4/2007 issued a Republican decree putting in force the constitutional amendments after having been approved by the mass referendum. The amendments are considered valid starting from the day of announcing the outcomes. The amendments included 34 articles on citizenship, economy, political parties formation, public ethics, property, trade unions, elections, State budget, and prerogatives of the Republic's President, and others. - Reducing income, corporate taxes, and custom duties of course helps further investments. The Egyptian government has passed several laws with the aim of smoothing the way for investors in the ICT industry in Egypt. Socio-cultural - Egypt has a population of more than 71 million. About 65% of Egyptians are under the age of 25, and more than 15 million young Egyptians are currently in education (primary, Secondary and 21 © ARUN GULERIA | [email protected]

technical). Meanwhile, over 265,000 university students graduate each year, as do more than 1.06 million high-school students. More than 16,000 Egyptians graduate each year from technical universities, more than a third of whom speak two or more languages.

SWOT Analysis Provide a summary SWOT analysis and a statement of problems facing the company. What are your recommended solutions to these problems? Be sure to explain how the solutions should be implemented. (Sky Huvard, Lindsay Zolad)  Strengths  Experience and knowledge in the mobile phone business.  Multi-market and multi-structure outlook on the mobile consumers and the many markets in which they are present.  Strong ability to manage change and acquisition.  Research and development.  Immense market power, twice as big as nearest competitor.  Weaknesses  Managerial resources thin due to rapid growth and numerous acquisitions.  Low market power in Europe.  Opportunities  Restructuring and smaller acquisitions than Mannesmann.  Acquisition of Mannesmann to dominate many markets with economies of scale.  Threats  Undervaluing them by overvaluing Mannesmann.  Management can be overly focused on acquisitions.  Low differentiation.  Problems and Solutions Vodafone as with all its competitors has a severe lack of differentiation. By adopting a greater focus on the customer and maintaining technological leadership, Vodafone can differentiate itself. By maintaining a strong organizational structure through continual restructuring, Vodafone can bolster its weak managerial resources. The expansion of markets will soon be the only way for Vodafone to continue its growth after penetrating European Union markets. The continuation of their acquisition strategy and strong managerial leadership will enable sustained growth into new markets.

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FINANCIAL ANALYSIS 1. Profitability Ratios Vodafone's operating margin was 1.2 percent higher than the competitor average in 2000. From 1996-1999, Vodafone’s gross, operating and net margins exceeded those of its primary competitors, British Telecom, Deutsche Telekom, France Telecom, and Telefonica. Vodafone's return on assets and return on equity have surpassed competitors.

2. Liquidity Ratios Vodafone was less liquid than its competitors, on average and individually between 1996 2000 because they maintained lower inventory levels as a percentage of working capital. Vodafone is cash and receivables poor relative to its short term obligations, but those obligations are miniscule compared to their total portfolio. Vodafone has traditionally operated with low liquidity and less inventory than its competitors, and has maintained above average profitability.

3. Leverage Ratios In 2000, Vodafone was more aggressive than most in assuming debt to fuel growth. Between 1997 and 1999, debt ratios were above industry averages. Vodafone is in a position to leverage itself for further growth. Acquisitions and their subsequent returns have given them massive retained earnings and very little debt.

4. Activity Ratios Industry turnover was second best in the industry. For Vodafone to maintain above-average leverage ratios, it had to be significantly more efficient than its competitors economies of scale. Average collection period and accounts receivable turnover was second best in the industry. Total asset turnover was twice that of the industry average, and best in the industry.

5. Key Growth Rates Vodafone maintained operating profits in 2000 while its competitors averaged a loss. Vodafone exhibits high rates of investment through its growing sales and debt. Vodafone has experienced tremendous growth due to superior management, operational competence, and low overhead.

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PRODUCTS & SERVICES OFFERED BY VODAFONE: PRODUCTS CATEGORY: 1. Connectivity:

Get a great signal at home - without leaning out of the window - thanks to the Vodafone access gateway. The gateway simply plugs into your broadband line, boosting your 3g signal right through your home. It's also small, so you'll hardly notice it's there. Want to share your signal with friends and family?

2. Headsets & headphones:

Get a great signal at home - without leaning out of the window - thanks to the vodafone access gateway. The gateway simply plugs into your broadband line, boosting your 3g signal right through your home. It's also small, so you'll hardly notice it's there. Want to share your signal with friends and family? 24 © ARUN GULERIA | [email protected]

3. Flex arm cradle:

Talk in your car - while your hands stay firmly on the wheel. The vodafone car cradle is designed for any handset. Just attach the suction cap to your windscreen, or clip the cradle to your air - vent. No mess. No tools. No hassle. Once the cradles attached, twist the bendy arm for the perfect position. It's as easy as that. Simple and safe, the must-have accessory is, at just rs.567, very affordable too.

SERVICES: Vodafone’s new telecoms management service - simplifying the management of fixed and mobile telecoms services.

INTERNET: - MOBILE BROADBAND: MOBILE BROADBAND VIA YOUR PHONE Feel the freedom. Use the internet your way – with full access to voip services like SKYPE™, and peer to peer services like file sharing. With mobile broadband via your phone, you get a whopping 5 gb each month. Simply use your phone as normal – and if you have a 3g phone, connect it to your laptop to turn your phone into a broadband modem. Add mobile broadband via your phone – for rs. 1440 a month

- HOMEBROADBAND: Vodafone home broadband gives you high-speed internet access and inclusive anytime landline calls for just 812 rs a month. With no hidden catches, our customers say its better value than their previous home broadband package. 25 © ARUN GULERIA | [email protected]

ACQUISITIONS (a) Mannesmann, 1999-2000 Vodafone was in negotiations with Mannesmann during the end of the case. On February 4th 2000 Vodafone had officially acquired Mannesmann and Chris Gent, CEO, continued to dominate the mobile telephony industry and make alliances.

(b) China Mobile, 2000-2002 On November 3rd 2000, Vodafone acquired newly issued shares of China Mobile representing approximately 2.18% for a cash consideration of 2.5 billion. On February 27th 2001, the Vodafone and China Mobile entered into a strategic alliance for mobile services, technology, operations and management. On June 18th 2002, the Vodafone Group invested a further $750 million in China Mobile and obtained the right to appoint a non executive director to the China Mobile board. Vodafone’s stake in China Mobile increased to approximately 3.27% as a result of this transaction. (d) Vodafone Spain, 2001-2003 On May 2nd 2001, the Vodafone announced that it had agreed to acquire BT’s 17.8% shareholdings in Vodafone Spain for a cash consideration of 1.1 billion pounds, increasing its ownership interest in Vodafone Spain to approximately 91.6%. The acquisition was completed on June 29th 2001. On April 2nd 2002, Vodafone acquired a further 2.2% interest in Vodafone Spain for 400 million pounds, following the exercise of a put option held by Torreal, S.A., increasing the Group’s interest to 93.8%. On January 21st 2003, the Vodafone Group announced that it had acquired the remaining 6.2% interest in Vodafone Spain for approximately 1.4 billion pounds. The transaction completed on January 27th 2003, at which time Vodafone Spain became a wholly owned subsidiary of the Group. (e) Vodafone Japan and Japan Telecom, 2004-2005 March 31st 2004, Vodafone held a 66.7% stake in Vodafone Holdings K.K., and a 39.67% stake in Vodafone Japan. In addition, Vodafone Holdings K.K. held 45.08% of the issued share capital in Vodafone Japan, making the Vodafone Group’s effective interest in Vodafone Japan 69.7%. In the first half of the financial year ending March 31st 2005, the Group increased its effective shareholding in Vodafone K.K. to 98.2% and its stake in Vodafone Holdings K.K. to 96.1% for a total consideration of 2.4 billion pounds. On October 1st 2004 the merger of Vodafone K.K. and Vodafone Holdings K.K. was completed, resulting in the Group holding a 97.7% stake in the merged company, Vodafone K.K.

2. Strategic Shifts Arun Sarin became Chief Executive of Vodafone and implemented a new strategy. “We believe Vodafone is uniquely positioned to succeed through our scale and scope and the customer focus of all our employees.” To achieve this success, Vodafone has focused several strategic goals, including, delighting their customer, leveraging their scale and scope, building the best global team, and expanding market boundaries. 26 © ARUN GULERIA | [email protected]

(a) Customer Needs A core strategic goal Vodafone has is delighting its customers. The Vodafone Group has 171 million proportionate customers around the world with a desire for simplicity and transparency. Vodafone aims to deliver increasing value to its customers by creating innovative services that meet different needs, supported by world class customer service. The launch of the 3G consumer service in November 2004 was a key element in pleasing their customers. This service fundamentally changes mobile communications for their customers and gives Vodafone a platform to deliver a market leading, differentiated proposition. Most importantly, it represents a significant ongoing growth opportunity for the Group through new and enhanced services, additional network capacity and innovative pricing. (b) Economies of Scale and Scope Another key goal is to deliver fully the benefits of their scale and scope. Vodafone aims to leverage scale and scope through a combination of standardizing designs and processes, reducing duplication, centralizing certain functions and sharing best practices. This will improve time to market for new products, create a consistent customer experience across networks and with a low cost position. (c) Organizational Structure Since the beginning of 2005, Vodafone has restructured the business to create a flatter organizational structure that is better positioned to respond to the rising expectations of their customers and to deliver on 3G networks. The previous regional structure has been simplified so that major countries and business areas now report directly to Arun Sarin, Chief Executive. This new structure focuses more attention on customers in Vodafone’s local markets, enhances their ability to deliver seamless services and speeds up execution. (d) Market Boundaries The proposed acquisition of TIW’s mobile interests in the Czech Republic is very much in line with Vodafone’s acquisition strategy, focusing on selected opportunities, primarily in Central and Eastern Europe. These businesses are fast growing and the Vodafone Group believes they will retain financial flexibility, allowing them the slack to act quickly and enhance shareholder wealth.

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RECENT ARTICLES / NEWS OF VODAFONE India’s GSM subscriber base scales past the 400 mn mark; Vodafone Essar notches 3mn new additions in Feb TT Correspondent | New Delhi | 19 Mar 2010 Indian mobile services continued its fast northward march in terms of subscriber base growth with GSM operators collectively managing to add over 13 million subscribers in the month of February, 2010. The month also saw the GSM subscriber base of the country scaling past the 400 million mark (results released by COAI do not take into account subscriber base of dual tech operators RCom and TTSL) with the subscriber base at 407.91 million subscribers. Vodafone Essar overtook market leader Bharti Airtel in adding the highest number of new subscribers. It added 3 million subscribers as compared to Airtel’s 2.9 million. Aircel added 1.8 million subscribers while PSU BSNL added 1.5 million. Idea Cellular added 2.25 million subscribers while new entrants Uninor and S Tel added 1.01 million and 0.21 million subscribers respectively. Circle-wise category ‘B’ circles added the highest subscribers with 5 million new subscribers.

CASE AGAINST VODAFONE, FOREST OFFICIALS SUSPENDED TT Correspondent | Bhopal | Dec 10, 2009 Seven forest officials have been suspended in connection with the case filed against Vodafone Essar South Limited for laying cables without permission in two wildlife sanctuaries in Madhya Pradesh. "Seven forest officials were suspended yesterday for negligence of duty and a case was registered against Vodafone Essar South Limited Company under Forest Conservation Act, following a probe which found that the telecom company had undertaken illegal digging and cable laying work in Ratapani and Singhori sanctuaries between August and October," officials informed on Thursday, Dec 10. A ranger was one among the seven officials suspended. The officials also said that show cause notices have been served upon R K Dixit and C S Dubey- superintendents of Ratapani and Singhori sanctuaries respectively. An NGO called Prayatna lodged a complaint with the Madhya Pradesh Forest Minister Sartaj Singh in Nov 2009 following which a probe was started.

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VODAFONE UNVEILS NEW INTERNET SERVICE London | Sep 24, 2009

Taking a cue from the growing demand for mobile access to the Internet, Vodafone unveiled its web service that integrates social networks, contacts and entertainment. The Vodafone 360 service that comes as a move to counter the competition from Apple, Google and Nokia, was announced on Thursday, Sep 24. World's leading mobile phone operator said that the service would be launched on tailormade Samsung phones and four Nokia phones in eight European countries by Christmas. The new Vodafone 360 service would use Limo, an open source operating system. The users will be able to download the service and choose a suitable data plan.

16.7 PC INCREASE IN OPERATING PROFIT: VODAFONE RRS GADT | London | March 19, 2009

Vodafone Group, the global cell phone major on Tuesday, May 19 reported 16.7 pc increases in operating profit (11.8 billion pound) for the year ended Mar 31 on higher revenues from its new leading markets, mainly India. In the financial year 2008, Vodafone's profit stood at 10.07 million pound. Company said in a statement that it witnessed 15.6 per cent jump in revenues at 41 billion pound for the year ended March 31 against 35.47 billion pound in the FY 2008. "These results demonstrate the impact of the early actions we took to address the current economic conditions and highlight the benefits of our geographic diversity. The business continues to generate cash strongly and we have made good progress in implementing the strategy announced in Nov (2008)," Vodafone Group Plc Chief Executive Vittorio Colao said. The company's revenues in India stood at 2.68 billion pound, while from the entire AsiaPacific region revenues were at 5.81 billion pound for the fiscal 2009, the statement said. "We have continued to drive penetration in India, generating strong revenue growth from our brand and commercial offers and a substantial investment in network coverage, Calao said.

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VODAFONE QATAR RINGS IN ECO-FRIENDLY MOBILE BASE STATION Alcatel-Lucent technology makes use of solar and wind energy to power station By Vineetha Menon Published January 20, 2010

Qatar's first hybrid-powered mobile base station has been launched by Vodafone Qatar, using Alcatel-Lucent technology to harness both wind and solar energy. The trial site in Qatar makes uses of an ‘energy controller' that can simultaneously draw power from both photovoltaic panels and wind turbines. This means that, based on solar intensity and wind speed, it can make the most of the two sources' fluctuating availability at every second. The station is expected to make the best of local weather conditions, while reducing costs and improving maintenance quality in remote sites. "As the first hybrid solution in Qatar to make use of wind and solar energy, this achievement increases the availability and quality of mobile services to the end customer, while reducing the impact on the environment. What's more, it is one of the most innovative and bestperforming solutions that we have tested so far in Vodafone," said Jenny Howe, CTO of Vodafone Qatar. The launch is part of Vodafone Group's efforts to deploy green energy sources to its affiliates around the world. It's not the first time a green mobile station has been deployed in the Middle East however; Turkish mobile network operator Avea announced it was using solar and wind energy to power one of its base stations in April last year. The eco-friendly solution used in Qatar was provided by Alcatel-Lucent's Alternative Energy Program, which aims to equip more than 100,000 mobile base stations with alternative energy solutions before 2012. It's expected to help reduce 7 million tonnes of CO2 emissions a year. "Alcatel-Lucent is absolutely convinced that business has a critical role to play in the transition to a low-carbon economy. And for us this means both reducing the CO2 emissions from our own operations and providing energy efficient solutions to our customers. This trial marks an important milestone for our industrial solution. It also further strengthens our relationship with Vodafone by giving us the opportunity to combat global climate change together," stated Marc Kassis, head of Alcatel-Lucent business in Qatar.

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VODAFONE RINGS 100 MN SUBSCRIBERS IN INDIA | Kolkata | April 8, 2009 Vodafone Essar, one of India's leading cellular service providers, on Thursdsay announced that it has crossed the landmark of 100 million subscribers in India. With this achievement, Vodafone Essar becomes world's 5thoperator with 100 million customers in a single country. Vodafone has also increased its market share to strengthen its position as India's second largest operator in terms of revenue. "This is a significant achievement for us and reflects the trust customers have bestowed on the company," said Marten Pieters, Managing Director and CEO, Vodafone Essar. "In the past three years, we have invested over Rs. 20,000 crores to expand our operations to service customers in India. We will utilize our global and Indian experience to deliver the best products and services to our customers." Starting with about 28 million subscribers across 16 circles in May 2007, Vodafone Essar today has 100 million customers and its footprint has extended to all the 23 circles in the country. "In addition to voice and text, Vodafone will also work on investing in platforms that will enable the delivery of internet and data services to a large part of the country. Vodafone will also continue to increase investments in new business areas like enterprise and carriers business," Pieters added. Around 60pc of the company's customer additions now come from upcountry areas. Vodafone has a distribution reach of about 1.2 million outlets.

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STRATEGIC ALTERNATIVES CORPORATE STRATEGIC ALTERNATIVES a) Growth: Concentration: Horizontal growth: to create additional revenue streams by introducing the new 3G services. Pros: - increase both market share and ARPU - boost brand image as the technology leader Cons: - risk of not generating the anticipated returns on the heavy investment

b) Stability: Pause: monitor other developments in the market and proceed accordingly. Pros: - avoid the risk of failure of the new 3G technology in the local market Cons: - miss the first mover advantage if 3G takes off

BUSINESS STRATEGIC ALTERNATIVES a.) Competitive: Differentiation: by providing superior customer experience through all touch points. Pros:  higher customer loyalty leading to higher Customer Lifetime Value (CLV) Cons:  imitation by competitors

b.) Competitive: Cost leadership: by relying on Vodafone Group economies of scale and by outsourcing strategically unimportant activities. Pros:  better control over our costs Cons:  imitation by competitors

c.) Cooperative: Strategic Alliances: with Telecom Egypt (TE) to introduce new joint services to the market. Pros:  stronger market foothold Cons:  difficulty to overcome the government mentality dominating TE management

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FUNCTIONAL STRATEGIC ALTERNATIVES a.) Marketing: product development by continuing to introduce new innovative services that will retain high value customers/attract those of competitors, and market penetration by acquiring more of the core customers and finding new ways to stimulate their ARPU. b.) Purchasing: effective coordination with Vodafone Group supply chain and partnering with major suppliers. c.) Human Resources: retain and develop talents through offering continuous development opportunities, setting fair and consistent career advancement criterion, and building strong corporate culture. d.) Sourcing: outsource activities with low contribution to our competitive advantage (e.g. IT Application Development & Maintenance). e.) Operations: go for Enterprise Resource Planning (ERP) to help better aligning the marketing, customer service, sales and finance areas, and use Point Of Sale (POS) in our stores to facilitate bill payment and recharges.

RECOMMENDED STRATEGY On the corporate level: Growth: Concentration: Horizontal growth: to create additional revenue streams by introducing the new 3G services.

On the business level: It is recommended to adopt a blended strategy of cost leadership and differentiation. This is to embrace the benefits of both strategies while securing a more sustained competitive advantage. Besides, Vodafone should capitalize on its strategic alliance with TE. On the functional level: All the aforementioned functional (marketing, purchasing human resources, sourcing and operations) strategies are to be pursued in parallel. This will support Vodafone growth strategy. Customer Relationship Management Pricing St rat egies:  Monthly Price Plans  Pay As You Do Plans  Call Charges While Going Abroad  Pay Monthly Call Charges  Business Call Charges

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CONCLUSION Vodafone with the help of its correct marketing strategy & quality products & services at an affordable price is one of the world’s leading telecom companies with the customer base of over 250 million & the future plans & policies of Vodafone will help the company to achieve its target of adding 500 million by the end of 2010. An unattractive industry has low entry barriers, suppliers and buyers with strong bargaining positions, strong competitive threats from product substitutes, and intense rivalry among competitors. The mobile telephone industry has high entry barriers and a low threat of product substitutes, but these attractive forces do not sufficiently offset the threats posed by the strong bargaining position of suppliers and buyers in combinations with the intense rivalry competitors face. Vodafone is pursuing a focused cost leadership business-level strategy through their exclusive focus on the mobile telephony industry. Because Vodafone did not have the distractions that faced their competitors (such as fixed-line telephony) they are able to save money and pass the savings to their customers or maintain a profit even when their closest competitor is only achieving average returns. Vodafone maintained a broad competitive scope and focused on cost for their competitive advantage. Vodafone was in a superior financial position compared to its competitors, with substantial assets and high operational efficiency. Vodafone is the largest player in the European mobile telephony market through its newly acquired assets and organizational expertise. Vodafone has a high gross margin and profit margin when compared to its competitors, making more money per customer than its competitors, with more customers than its competitors. Across the board, profit margins are decreasing at an increasing rate. In a fast cycle market such as the mobile phone industry it is important to stay ahead of the curve and constantly improve and search for better ways to accomplish the same goal at a low cost. By being first-mover, Vodafone can retain high price points and profit margins compared to its competitors. Over the years the Group has made excellent progress in executing against their strategic goals however Vodafone is still looking to improve and remain innovative. They have restructured the business to more closely align themselves to their strategic goals and have outstanding and passionate leaders and people in the organization to deliver them. Their commitment to deliver on their goals is supported by their values, which state that “everything they we do is driven by our passion for customers, our people, results and the world around us.”

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BIBLIOGRAPHY BOOKS 1. Pearce II, J.A., Robinson Jr., RB and Mital, A., Strategic Management: Formulation, Implementation and Control, 10th Ed., Tata McGraw-Hill, New Delhi, 2008 2. Mital, A., Cases in Strategic Management, Tata McGraw-Hill, New Delhi, 2008 3. David, F.R., Strategic Management: Concepts and Cases, Pearson Education, Ed.12th, New Delhi, 2008

INTERNET 1. “Call Alert: Vodafone Seen as a Takeover Target.” The Economic Times. May 3, 2006. http://economictimes.indiatimes.com/articleshow/1515104.cms 2. “Strategy.” Vodafone Group. May 1, 2009. http://www.vodafone.com/section_article/0,3035,Category_ID 3. “Significant Transactions for the Year Ended.” Vodafone Group. Mar 1, 2010. http://www.vodafone.com/article/0,3029,Category_ID 4. “Telecom Giants have Different Branding Strategies.” Intangible Business. Jan 25, 2009. http://www.intangiblebusiness.com/Content/1194

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