Industry Analysis :
Telecom Sector in India
GROUP 2
Overview of Telecom Industry in India
One of the fastest growing in
the world.
Driven by 3G & 4G, huge growth
is expected in 2016-2017
Smartphones will account for
two out of every three phones
by 2020.
Firms are looking to leverage
their
4G
networks
to
concentrate on the Enterprise
market.
The policy framework
is implemented by
TRAI
Telephone subscriber base
reached 970.54 M in Dec 2014
Mobile Subscriber base at
935.3 M
Urban & Rural growth rates
were pegged at 0.18% &
1.03% respectively
Current Scenario
Composition Of Telephone Subscribers
2% 1%
40%
57%
Urban Wireless
*SOURCE : IBEF, DEC 2014
Rural Wireless
Urban Wireline
Rural Wireline
Major Players
Market Share
4%
1%2%
7%
Airtel
Vodafon
e
Idea
Reliance
BSNL
Aircel
Tata
Telewing
s
Sistema
Others
23%
8%
10%
18%
12%
15%
*Figures till DEC 2014
*SOURCE : IBEF
Recent Happenings in The Telecom Industry
Auction of CDMA frequency of
800Mhz, GSM bands of 900MHz,
1,800MHz and 2,100MHz
Bids have reached upwards of
94,000 Crores, expected to
reach 1 Lakh Crore
8 companies including Reliance
Jio
Infocomm,
Reliance
Communications, Bharti Airtel,
Vodafone and Idea Cellular have
submitted bids.
From May 3, 2015 MNP
would be applicable inter
circle as well.
National Optical Fibre
Network Programme found
a mention in the Union
Budget and is to be
speeded up.
Telecom Equipment Imports
Grew 20 Percent in FY2014
PEST Analysis
POLITICAL
ECONOMIC
SOCIAL
TECHNOLOGICAL
Fast tracked
Reforms
FDI raised to 74 percent
in the telecom industry
Telecom
Sector
expected
to
create 4 Million
jobs in next fice
years
Implementation
of
4G on a high scale
DoT has agreed
for a defense band
Implementation of
full MNP
Make in India to
boost local gears
manufacturing.
Proposal for an
exit policy.
Reduction in license fee
by upto 33% planned
Service Tax to increase
under GST from current
12.5%
Vodafone to invest $3 B
in next 2 Years in
network infrastructure.
India is the fastest
growing major economy
in the world at 7.5%
Untapped
rural
demographic,
teledensity
at
only 44%
Change
in
lifestyle towards
a more on move
devices.
Digital India / Smart
Cities project provide
huge
opportunities
for the industry
Emphasis also on
manufacturing
in
India under the Make
In India Initiative.
Websites
internet.org
threat
to
providers.
like
are a
service
PORTERS FIVE FORCES ANALYSIS
THR E AT OF NE W
ENT
RANTSto- LOW
Barriers
entry
extremely high
Serious
contenders require
a lot of cash
Ownership of a
telecom
license
hard to get
Difficult to access
Optical
Fibre
Network
P O W E R O F S U P P L I E R S - LO W
P R I C E S E N S I T I V I T Y - LO W
Cost of product
relative to total
cost (Low)
Product
differentiation
(Low)
Competition
between
suppliers(High)
BARGAINING POWER LO W
Size
and
concentration
of
suppliers relative to
products (Low)
Buyers
switching
cost (Low)
Buyers information
(High)
Suppliers ability to
forward
integrate
(Low)
PORTERS FIVE FORCES ANALYSIS
POWER OF BUYERS - HIGH
PRICE SENSITIVITY HIGH
Cost of product
relative to total
cost (High)
Product
differentiation
(High)
Competition
between
buyers(High)
BARGAINING POWER LO W
Size
and
concentration
of
buyers relative to
products (High)
Buyers
switching
cost (Low)
Buyers information
(High)
Buyers ability to
forward
integrate
(Low)
PORTERS FIVE FORCES ANALYSIS
T
R E AT Propensity
O F S U B S T Ito
T USubstitute
T E S - M O D E RAT E
HBuyer
Internet subscriber base increasing in
India by 18.06% , compared to 10.60%
for GSM/CDMA services
Relative Prices
Internet Telephony eating into the
revenue of GSM/CDMA telephony.
Flat/ fixed rate revenues from internet
services - cannibalization of revenues
from GSM/CDMA services
Performance of Substitute
HR
Concentration
T
E AT F R O M CMarket
O M P EShare
TITION - HIGH
Voice quality is an issue with internet
telephony.
Internet voice services also currently
limited due to regulatory road blocks
More than 15 players in the market.
Airtel, Vodafone, Idea and RCOM itself captures
more than 75%
Market Structure
Average revenue per user for big players is
around Rs. 110 Rs. 120
Reliance has lesser ARPU because major of its
subscribers are low end customers
Global Presence and Marketing Network
Existing telecom companies are coming up
with continuous growth strategy due to high
competition
As the sector is moving closer to maturity,
further consolidation is a reality and this
will lead to the survival of more profitable
players in this segment
SWOT Analysis
Huge Customer potential
Teledensity still being 48% and rural teledensity 21%
High Growth Rate
Wireless subscribers growing at a CAGR of
60 per cent per annum since 2004
Allowed FDI limit ranging from 74% to 100%
High return on Investment
Liberalization efforts by Govt.
Poor Telecommunication Infrastructure
Result : Large number of call drops
Late adopters of New Technology
India was amongst those countries in the world
who got very late access to 3G technology
Most competitive market
10 to 12 companies offer mobile services in
most parts of India, globally, the average is 4
A market strongly regulated by the
government
S W
O T
More Quality Service
Mobile Number Portability will force the
Service provider to improve their quality to
avoid losing subscribers
Value added Services (VAS)
Text or SMS, menu based services,
downloading of music or ringtones, mobile
TV, videos, streaming etc.
3G Telecom services and 4G services
Horizontal Integration
Entry Into other consumer segments
leveraging the present channels
E.g. DTH service like Reliance BIG TV, Tata SKY, Airtel digital TV
Telecommunication Policies
e.g. Trai's 2G direction affecting new players
most notably Tata Teleservices, Norways
Telenor and Essar-owned Loop Telecom
Renewal of 2G license on the basis of market
rates of 3G auctions
Declining ARPU (average Revenue per user)
Partiality on the part of the Govt.
Ex- Allowing 3G service in a PSU (MTNL,BSNL)
before auctioning to Private Sector
Content Piracy
Financial Analysis
Company
Market
Cap (In
Cr)
EPS
P/E
(Industry12.90)
P/Book
52 week
high
52 week
low
Current
Market
Price
Bharti
Airtel
137,330.
68
28.61
12.01
2.30
289.80
419.90
343.55
Idea
Cellular
53,660.2
5
6.88
21.68
3.19
129.20
177.30
149.15
Reliance
Comm.
15,655.6
8
2.58
24.38
0.48
62.45
156.90
62.90
Tata
Comm.
11,884.5
0
22.36
18.60
14.83
275.00
474.30
415.95
MTNL
1603.35
115.91
0.22
0.32
14.01
39.10
25.45
INTERPRETATIONS
Based on different Industry Analysis carried out, the
telecom sector in India with its high entry barriers,
strong position of buyers, and long term growth
potential is an attractive sector.
With better policies & regulations it will only become
more attractive
A largely untapped rural segment , and shift of
consumers towards data services only bodes well for
the industry.
REFERENCES
A Brief Report on Telecom Sector In India, ASA & Associates LLP, Jan 2015
http://www.business-standard.com/article/government-press-release/make-in-india-telecom-conclave-115021201332_1.html
http://www.business-standard.com/article/companies/enjoy-full-mnp-across-india-from-may-3-2015-115022501118_1.html
http://economictimes.indiatimes.com/industry/telecom/spectrum-auction-modi-governments-approach-is-out-of-sync-with-digital-india-pl
an/articleshow/46487813.cms
http://www.moneycontrol.com/news/economy/union-budget-2015-fm-stressesdigital-india-no-major-reformstelecom_1315714.html
http://gadgets.ndtv.com/telecom/news/telecom-equipment-imports-grow-20-percent-in-fy2014-668472
http://trak.in/tags/business/2015/03/06/vodafone-airtel-telenor-slam-facebook-internet-org-project/
http://articles.economictimes.indiatimes.com/2015-02-28/news/59612972_1_telecom-sector-telecom-industry-service-tax-rate
http://www.ibef.org/industry/telecommunications.aspx
http://articles.economictimes.indiatimes.com/2015-03-03/news/59725111_1_procurement-bill-government-contracts-digital-india
http://www.cdot.in/tsic.pdf
http://www.dnaindia.com/scitech/report-now-97-crore-indians-use-mobile-phones-2059266
http://economictimes.indiatimes.com/news/economy/foreign-trade/fdi-in-services-sector-up-44-per-cent-during-april-december/articlesh
ow/46490768.cms
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