Telecom Industry Analysis

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COMPETITION & STRATEGY

TELECOMMUNICATION INDUSTRY ANALYSIS

Submitted by: Group 2 Aditya Mahadev Prakash B Kiran Maruthi Aditi Nehete Sharad Chandran R Swati Ramteke

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Table of Contents
1. 2. 3. 3.1 Introduction .......................................................................................................................................... 4 Evolution of Telecom Industry in India ................................................................................................. 4 Porter’s Five Forces Model ................................................................................................................... 6 Threat of New Entrants ..................................................................................................................... 6 3.1.1 Barriers to Entry ........................................................................................................................... 6 I. Economies of Scale .......................................................................................................................... 6 II. Differentiation ................................................................................................................................. 7 III. Brand Identity................................................................................................................................. 7 IV. Switching Cost ................................................................................................................................ 7 V. Access to Distribution Channel ....................................................................................................... 8 VI. Capital Requirement ...................................................................................................................... 8 VII. Access to Technology .................................................................................................................... 8 VIII. Access to Raw Materials .............................................................................................................. 8 IX. Government Protection ................................................................................................................. 8 3.2 I. II. Industry Rivalry ................................................................................................................................. 9 Number of Competitors ................................................................................................................ 9 Industry Growth .......................................................................................................................... 10

III. Fixed costs ................................................................................................................................... 11 IV. Exit barriers .................................................................................................................................. 11 V. 3.3 I. II. Switching Costs, Product Differentiation .................................................................................... 12 Bargaining Power of the Suppliers .................................................................................................. 12 Number of suppliers ................................................................................................................... 12 Availability of substitutes ............................................................................................................ 12

III. Switching costs ............................................................................................................................ 12 IV. Supplier’s threat of forward integration ..................................................................................... 13 V. Industry’s threat of backward integration .................................................................................. 13

VI. Industry’s importance to supplier ............................................................................................... 13 3.4 Bargaining Power of the Buyers ............................................................................................................ 13 3.4.1 Analyzing Customer Sensitivity: ..................................................................................................... 13 I. II. Product Differentiation ............................................................................................................... 13 Competition between Buyers ..................................................................................................... 14 2

3.4.2 Analyzing Relative Buying Power: .................................................................................................. 14 I. II. Size and Concentration of Buyers relative to products .............................................................. 14 Buyers Switching Costs ............................................................................................................... 14

III. Buyers information ...................................................................................................................... 14 IV. Buyers ability to backward integrate ........................................................................................... 15 3.5 4. 5. 6. 7. 8. Threat of Substitutes....................................................................................................................... 15 Growth ................................................................................................................................................ 16 Future Trends ...................................................................................................................................... 16 Summary ............................................................................................................................................. 16 Appendix ............................................................................................................................................. 17 References .......................................................................................................................................... 23

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1. Introduction
Telecom Industry is split into the following three segments   Mobile (Wireless): Comprises establishments operating and maintaining switching and transmission facilities to provide direct communications via airwaves Fixed Line (Wireline): Consists of companies that operate and maintain switching and transmission facilities to provide direct communications through landlines, microwave or a combination of landlines and satellite link-ups  Internet Services: Includes internet service providers (ISPs) that offer broadband internet connections through consumer and corporate channels

2. Evolution of Telecom Industry in India
The telecom sector was formally introduced in India in 1881.However the actual evolution of the telecom industry started in 1985 after the Indian Government set up the Department of Telecommunications (DoT).In 1986, Mahanagar Telephone Nigam Limited (MTNL) and Videsh Sanchar Nigam Limited (VSNL) were carved out of DoT to run the telecom services of metro cities(Delhi and Mumbai) and international long distance operations respectively.1 The entire evolution of the telecom industry can be classified into three distinct phases.
  

Phase I- Pre-Liberalization Era (1980-89) Phase II- Post Liberalization Era (1990-99) Phase III- Post 2000

Until the late 90s the Government of India held a monopoly on all types of communications – as a result of the Telegraph Act of 1885. Increased demand for telephones in India in the 90’s forced the government to open doors to privatization and liberalization. Post-liberalization Indian telecom market became one of the most liberalized markets in the world with private participation in almost all of its segments.

1

VanitaKohli (14 June 2006). The Indian Media Business. SAGE. pp. 189–. ISBN 978-0-7619-3469-1.

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In 1997, the government set up TRAI (Telecom Regulatory Authority of India) to provide autonomy in deciding tariffs and policy making. The New Telecom Policy (NTP-1999) provided the much needed impetus to the growth and liberalization of the industry. The policy introduced the concept of telecommunication for all and its vision was to expand the telecommunication facilities to all the villages in India. International players entered the market through joint ventures with state owned telecom companies. Foreign firms were eligible to 49% of the total stake, but were just involved in technology transfer, and not policy making. The government corporatized the operations wing of DoT on 1 October 2000 as Bharat Sanchar Nigam Limited (BSNL). After March 2002 the government increased the allowable stake to 74% for foreign companies. As a result, the service fees finally reduced and the call costs reduced greatly enabling every common middle-class family in India to afford a cell phone. Nearly 32 million handsets were sold in India. Many private operators, such as Reliance Communications, Tata Indicom, Vodafone, Airtel, Idea etc.,

successfully entered the high potential Indian telecom market. In March ’98 there were only 0.88 million mobile subscribers in India with half of them from the Mumbai and Delhi circles. NTP ’99 helped the mobile services take off in ’99-2000 adding 0.7 million customers to its base. By 2003 the additions touched 6.6 million. The implementation of Calling Party Pays (CPP) where incoming calls were made free and launch of services by Reliance brought more low usage customers to mobile telephony. In 2004-05 with 52.2m customers, the total mobile subscriber base overtook the total fixed line subscriber base. Since then the industry has been adding more than 4m mobile subscribers every month.2 India has opted for the use of both GSM (global system for mobile communications) and CDMA (codedivision multiple access) technologies in the mobile sector. Along with landline and mobile phones, some companies also provide the WLL service. The mobile tariffs in India have also become lowest in the world.

2

State of the Industry, Telecom Industry Report- Crisil, India

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3. Porter’s Five Forces Model
Bargaining power of suppliers LOW

Threat of substitutes MODERATE

Industry Rivalry HIGH

Threat of new entrants LOW

Bargaining power of buyers HIGH

3.1 Threat of New Entrants
3.1.1 Barriers to Entry

I. Economies of Scale - HIGH:
The Indian Telecom industry is a largely consolidated industry with 10 to 12 firms controlling the market.The wired segment is highly monopolized with BSNL dominating the market(70% in 2012). The wireless segment is much more competitive with 8-10 private companies competing for lion’s share of the market (around 97% in 2012). With the opening of wireless telecom services to private players throughNTP-‘99, the scale economies eased considerably and new entrants flooded the market. The private companies have established themselves in the untapped high potential Indian mobile market over the last decade. Now the telecom market has grown to a whopping 960 million subscribers as of 2012. But the growth rate has declined over the last few years. This has increased the supply and demand-side benefits of scales for the incumbents. These companies compete on cost by leveraging their economies of scale.

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The low initial returns, nation-wide coverage by well-established players, declining Average Revenue per User (ARPU- average 65% decline in last 5 years) and declining tariff rates(97% decline from 1999-2012) are some of the scale economies that discourage new entrants.However the scale economies are more influential in the wired segment than in the wireless segment because of the monopolistic power exercised by the government-run BSNL. So, in general, new entrants face unfavorable economies of scale. II. Differentiation - LOW: All the telecom service operators today provide the same basic services like voice, SMS and internet capabilities. As such, the industry is largely driven by cost-competition. Attractive cost packages, high quality and reliability of service and high accessibility differentiates the companies in the minds of the customer. Hence there is no product differentiation in terms of the variety of features offered. Low differentiation, in turn, leads to increased rivalry and lowers profitability and attractiveness of the industry as a whole.

III. Brand Identity - MEDIUM:
Indian telecom sector is dominated by well-established companies with high brand image like Airtel Idea, Vodafone etc. Brand image in telecom is built by reliability, accessibility and quality of service. A new entrant would have to incur high infrastructure and advertising costs along with low pricing to build a brand image. Also the incumbents can retaliate by further price cuts, providing availability of services in new areas etc. However in the last 5 years, new entrants like Uninor and Tata Docomo have managed to gain a substantial customer base through aggressive marketing and innovative pricing strategies. So the incumbents exercise a moderate amount of power through their ‘Brand Pull’.

IV. Switching Cost - LOW:
The switching costs are relatively low in the telecom sector. Typically, the setup costs for wired services are more than wireless sector because of the labor and material involved. Now, the Mobile number portability facility for mobile users has reduced the switching costs to practically zero. Thus overall switching cost is low.

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V. Access to Distribution Channel - HIGH:
India is a geographically diverse country that makes distribution a critical function. Since the market is now huge (tele-density is 73.3% as of 2012), the incumbents have a huge advantage having already setup their distribution channels all over the country. Since the distributors are small-time retailers and distributors, they do not have much bargaining power and are more than satisfied to work with wellestablished incumbents. So the costs for a new entrant to find new distribution channels are very high.

VI. Capital Requirement - HIGH:
A new entrant has to consider the following while entering the telecom sector     Extremely high infrastructure costs like communication equipment ,mobile towers Spectrum License fee. Cost of acquiring distribution channels Marketing costs

So the incumbents have a huge cost advantage. VII. Access to Technology – SLIGHTLY HIGH: Technology is much more of a factor in the cellular segment than the wired segment. With rapidly evolving cellular technologies like 3G and 4G, The incumbent firms can adapt more easily to the changing technologies at a lower cost, since they already have the basic infrastructure in place. However this is not a huge advantage as access to technology is readily available.

VIII. Access to Raw Materials – MODERATE:
In wired telecom sector, there is no advantage for the incumbents over new players as the access to raw materials are easily available. SIM cards and Spectrum bandwidth are only raw materials in the wireless sector. SIM cards are obtained from local manufacturers and are easily available at the same cost. So access to raw materials is not a factor.

IX. Government Protection - HIGH:
Spectrum availability is a constraint for wireless sector. Spectrum allocations are done through auctions by the government. Issues of interoperability with changing bandwidth, seamless integration of various services and lobbying by powerful incumbents are major issues. Thus, spectrum availability poses a huge barrier to entry, increasing the industry attractiveness. The entry barriers are HIGH for entry into the Indian telecom industry. 8

3.2 Industry Rivalry
There is intense rivalry in the industry due to emergence of new firms leading to price cuts. The competition has become cut-throat. Due to almost equal size of rivals and nearly same customer base, there is intense competition to attract customer with lower tariffs and more exciting services which tends to drive industry profitability down. Apart from low profits, there are high exit barriers and high fixed costs which are explained below: I. Number of Competitors: High

There are 13 telecom operators in India. The market shares of the operators are as shown below3:

As can be seen from the data, Bharti Airtel, Vodafone, Reliance Telecom and Idea are the major competitors due to their large market share compared to others. Due to price sensitive and value driven market, the preferred strategy of competitors is to provide lower prices coupled with more value added services. As on June 2013 these 3 operators hold 70.2 % of the market share,

3

http://www.bsnlteleservices.com/2013/08/teledensity-bsnl-apportion-june13.html

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Revenue Market Share
1.70% 5% 6.60% 7.50% 7.60% 16.20% 23.30% 0.70% 0.40% 0.20% 30.80% Bharti Airtel Vodafone Idea R-com TTSL BSNL/MTNL Aircel

The operators also compete in terms of subscriber base. The subscriber base of major telecom operators as on June 30, 2013 is as shown4:

Subscriber Base (in millions)
3 65 98 125 126 155 61 191 Bharti Airtel Vodafone Essar Reliance Communications Idea Cellular BSNL Tata Teleservices Ltd. Aircel/ Dishnet Uninor

Airtel, Vodafone, Reliance, Idea are having higher subscriber base. Out of them, Idea has 98.55% of its connections active followed by Vodafone and Airtel with 95.18% and 95.12% respectively (as on January 2013)5. II. Industry Growth: Moderate

India is the second largest telecommunication market in the world with 873 million subscribers as on March 2013. With penetration of the market in rural India, there is potential for growth in the industry.
4 5

http://www.knowindia.net/telecom.html http://www.medianama.com/2013/03/223-january-2013-total-708-04m-active-mobile-base-in-india-15-01mbroadband/

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The average revenue per user has shown a major growth as compared to last two quarters (Refer chart below6). The reason for this being increase in tariffs rather than any significant innovation from telecom players in their offerings or an exceptional growth in data consumption.

Average Revenue Per User
150 100 50 0 Bharti Airtel Idea Vodafone 138.14 135.43 136.67 133.75 128.1 121.92 119.83112.98 107.08 Jan- Mar 2013 Oct- Dec 2012 Jul- Sep 2012

The industry has shown tremendous growth in terms of subscribers. As the industry hopes to reach 1 billion subscribers by 2014, there is threat of negative growth due to debt of Rs. 2, 50,000crore showing very little hope of early revival7. III. Fixed costs: High

The fixed costs for telecommunication industry is high due to fast technology obsolescence and high capital investment for building cellular network, backhaul and operations centre. The service providers also incur expenses in procuring licenses and laying down network infrastructure. The return on investment is low resulting in operators question the value of their capital investment. Apart from these factors, operation of cellular carrier requires resources having specialized skills which are in limited supply and expensive. Hence increasing subscriber base becomes important which further increases competition. IV. Exit barriers: High

There is high exit barriers due to the specialized equipments used in the industry. Also due to high investment on equipments, technology cables and other assets, they need to wait for years to obtain

6

http://timesofindia.indiatimes.com/business/india-business/Finally-things-start-to-look-up-for-telecomcompanies/articleshow/23131685.cms 7 http://www.thehindu.com/news/national/telecom-industry-cracking-under-financialpressure/article4902565.ece

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return on investment. Thus due to sunk costs and no exit regulations in India, there is increase in competition. V. Switching Costs, Product Differentiation: Low

As the number of operators is large, there are low switching costs resulting in higher rivalry. There is no differentiation among the service providers with innovations also easily imitable hence there is minimal customer loyalty making industry rivalry more significant. Thus overall there is HIGH rivalry in the industry.

3.3 Bargaining Power of the Suppliers
Suppliers for Telecos are    Telecom infrastructure providers (e.g. tower industry) Telecom equipment manufacturers (e.g. network routers, transmission lines) Government which allocates spectrum

Bargaining power of suppliers arises from the fact that telecos compete for equipment, labour and spectrum in input markets. In both output and input markets transactions create value, and the extent of profitability division decides their relative economic power. I. Number of suppliers

The list of infrastructure and equipment providers is provided in the Appendix. Cellular tower industry can been divided into two segments; one independent of telecom service providers and the other segment is of the telecom service provider itself. Equipment manufacturing industry has few significant players. II. Availability of substitutes

As seen from the table of suppliers, telecom firms have substitutes in terms of different companies offering the same service. Hence, telecos have an option to switch. In terms of substitutes to technology related to towers and telecom equipment, as of now there are no substitutes. III. Switching costs: Low There are quite a few network providers & equipment manufacturers. Also, input markets have been commoditized over time. Hence, switching costs are low. 12

IV. Supplier’s threat of forward integration: Moderate Suppliers can forward integrate given that they have access to infrastructure and logistics, but establishing brand identity will be a challenge. Hence there is intermediate supplier’s threat of forward integration. V. Industry’s threat of backward integration: High Large telecos can buy out network providers and backward integrate. This has happened in the case of cellular towers where big players acquired major stake in existing suppliers. They have also shared their resources in input markets to decrease costs. VI. Industry’s importance to supplier: High Suppliers form the core of telecommunication industry. Without cellular towers, transmission lines, switches, modems, routers and spectrum (allocated government) service providers cannot carry out their functions. Hence industry thrives on suppliers’ products and service.

3.4 Bargaining Power of the Buyers
As of May 2012, the total number of telecom subscribers in India is 960 million with a growth rate of 0.84% per month. Buyers, in the telecommunication industry can be classified as8: 1. Residential or Individual Customers 2. Enterprise or Business Customers Residential Customers refer to individual subscribers, whereas Enterprise Customers are the large business firms like any IT firm or a bank et al.

3.4.1 Analyzing Customer Sensitivity:
I. Product Differentiation

The Telecom service providers, Telephone and Data services do not vary much, except for the signal strength in specific geographical locations. Moreover, the government regulations apply to all the providers. The Tariff table (Table 2 in appendix) compares the tariff plans of various telecom service providers. The tariff rates are relatively similar. However, the customers can definitely switch over to any other service provider which provides higher reliability and signal strength in their corresponding geographical area.
8

http://www.investopedia.com/features/industryhandbook/telecom.asp

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Since the product differentiation is very minimal, switching costs are low for the residential customers. The enterprise or business customers, like bank or IT firms requires bulk and customized services. In their case, bargaining power as well as switching costs goes high. II. Competition between Buyers

The residential customers don’t have any internal competition. However, the enterprise customer segment generate, especially banks who render services to telecom operators in return and supplement a major part of the provider’s revenue, have a upper hand in bargaining on the prices incurred on them.

3.4.2 Analyzing Relative Buying Power:
I. Size and Concentration of Buyers relative to products: MEDIUM

In the first segment, the size is large while the concentration of consumption per individual is relatively lower. Buyer power is thus low. On the other hand, the enterprise customer segment has large size as well as large concentration in term of consumption. They exercise a higher buyer power. The overall buying power is thus medium. II. Buyers Switching Costs: LOW

As stated in Product Differentiation, the switching costs are low. The Mobile Number Portability (MNP)9 is convenient and affordable. Due to these reasons, the number of MNP requests has gone up from 54 million subscribers to 59 million subscribers10 by the end of July 2012. Thus, switching costs are low. Another indicator of Low Switching Cost is the Churn Rate. Due to fierce competition, Telecom industry has the highest customer churn rate. This proves that the high churn rate is due to the ease of switching among the service providers. Thus the overall switching cost for customers is very low. III. Buyers information: HIGH

Due to the explosion of social networking and internet advertising these days, the customers are aware of all the available options. They can compare the tariff plans online and then decide which plan to
9

http://www.mnpindia.in/number-portability.aspx
www.trai.gov.in

10

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choose. Blogs and other online dashboards provide various discussion threads wherein every user shares his/her experience with the service provider. Using these resources, the customer does background check on many attributes like roaming charges, signal strength, seasonal offers, network reliability and quality of service before deciding on a particular operator. Hence, high buyer information corresponds to high buyer power. IV. Buyers ability to backward integrate: LOW

There are no intermediaries between the service provider and the customer. Hence, the ability to backward integrate is low. This, in turn corresponds to lower buyer power. Thus, overall Bargaining Power of the Buyers is HIGH.

3.5

Threat of Substitutes

The threat of substitutes in the telecom industry is moderate. Products and services from nontraditional telecom industries pose serious substitution threats. Cable TV and satellite operators now compete for buyers. The cable guys, with their own direct lines into homes, offer broadband internet services, and satellite links can substitute for high-speed business networking needs. Railways and energy utility companies are laying miles of high-capacity telecom network alongside their own track and pipeline assets. Another substitute, the internet is becoming a viable vehicle for cut-rate voice calls. Delivered by ISPs - "internet telephony" could take a big bite out of telecom companies' core voice revenues. VoIP Applications like Skype offers video chat and call services over the internet, whereas apps like Whatsapp offer free messaging services. India is a latecomer to the VoIP revolution. Currently, Indian laws only allow VoIP calls to a telephone in India under strict conditions. However, they allow such calls between computers within the country’s borders and between a computer in India and a telephone (fixed or wireless) outside India. India has now the world’s third largest internet using population11 with nearly 74 million Internet users, a 31% increase over March 2012. The Telecom Regulatory Authority of India (TRAI) pegged the number of Internet subscribers in India at 164.81 million as of March 31, 2013, with seven out of eight accessing the Internet from their mobile phones. This is good news for the mobile phone internet providers as well as bad news due to the threat of VoIP software.
11

http://www.thehindu.com/sci-tech/technology/internet/india-is-now-worlds-third-largest-internet-user-afterus-china/article5053115.ece

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Therefore the overall Threat of Substitutes is MODERATE.

4. Growth
     Revenue from wireless and wireline increased at a CAGR of 11.9 % to $40.8 billion over FY07-12. Wireless subscriptions had increased at a CAGR of 34 % to 864.7 million over a 6 year period from 2006 to 2012 Mobile telephone density increased more than 5 times from 13.5% in 2006 to 70.9% in 2013 GSM services contribute the most to wireless segment with 88.1% share (June 2012); CDMA takes the remaining. Bharti Airtel is the market leader. The top five players – Bharti Airtel, Vodafone, Reliance, Idea, and BSNL – contribute to about 79% of the total subscribers

5. Future Trends
    Expansion to rural markets will be key to future growth Broadband Wireless Access (BWA) technologies like WiMax have been successful in US and hence expected to grow in India Rising investments in telecom sector is a great sign for the industry Outsourcing of non-core activities is expected to increase even more

6. Summary
The impact of each of the forces indicates that the Indian telecom industry is a moderately attractive industry. Its strengths are low bargaining powers of suppliers and high barriers to entry. The weakness is the high bargaining power of suppliers. The attractiveness index of this industry is 3.2(refer appendix) which is neither too high nor too low.

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7. Appendix
Table 1: All India Mobile Subscriber Base. (Source: TRAI, Crisil Report)

Table2: Comparison of Standard Tariff Plans of 5 telecom service provider in Mumbai Circle12
Call Charges STD P2P P2O P2L Local Outgoing Idea (Prepaid Standard Power Plan) Vodafone (Prepaid Per Sec Plan) Airtel (Prepaid RC 28 New Card Plan) Tata Docomo (Prepaid Go One Life) Aircel (Prepaid SUK 49) 1.50 1.50 1.50 All Networks: 1.00 All Networks: 1.50 All Networks: 1.00 1.00 1.50 5.00 0 49 1.50 1.50 1.50 All Networks: 1.00 All Networks: 1.50 All Networks: 1.00 1.00 1.50 5.00 2 60 1p 1p 1p All Networks: 1.00 All Networks: 1.50 All Networks: 1.00 1.00 1.00 5.00 10 28 1p 1p 1p 1p 1p 1p All Networks/ Airtel Network: 1.00/ 1.40 All Networks: 1.00 Roaming STD Outgoing All Networks/ Airtel Network: 1.50/1.90 All Networks: 1.50 All Networks/ Airtel Network: 1.00/ 1.75 All Networks: 1.00 1.00 1.00 5.00 7.6 49 0.60 1.20 5.00 Incoming Local SMS National International Free Talk Time (min) 12 56 Sim Cost (INR)

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http://www.themobileindian.com/tariff/tariffdetails.html?id=%2057&city=Mumbai&operator=Idea&plan=PrePaid

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Reliance (GSM Simply Pay Per Sec)

1p

1p

1p

All Networks: 1.00

All Networks: 1.50

All Networks: 1.00

1.00

1.50

5.00

29

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Table 3: List of Suppliers for Indian Telecom Industry Tower Infrastructure Providers Indus Reliance Infratel Bharti Infratel Quippo Telecom Infrastructure GTL Essar Telecom American Tower Corp Equipment manufacturers Nokia Solutions Network Ericson Huwei Fibcom Anda Telecom Coral Telecom HFCL

Fig 1 : Y/Y Online Population growth of India. Courtesy: 2013 India Digital Future in Focus, comScore

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Fig 2: GSM: ARPU vs Minutes of Use

Fig 3:CDMA: ARPU vs Minutes of use

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Attractiveness quotient of the industry to the incumbent Barrier to entry ATTRACTIVENESS TO THE INCUMBENT 1 Economies of Scale Product differentiation Brand Identity Switching Cost Access to distribution Channels Capital requirements Access to technology Access to raw materials Government protection Overall barrier to entry score: 32/9 = 3.55 High score of Attractiveness of the industry for the incumbent firm proves that the Barriers to entry are HIGH Industry Rivalry ATTRACTIVENESS TO THE INCUMBENT 1 Number of Competitors Industry Growth Fixed Costs Exit Barriers Switching Costs, Product Differentiation Overall industry rivalry score: 13/5 = 2.6 Moderate score of Attractiveness of the industry for the incumbent firm proves that the Industry Rivalry is HIGH 2 3 4 5 2 3 4 5

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Bargaining Power of Suppliers

ATTRACTIVENESS TO THE INCUMBENT 1 2 3 4 5

Number of Suppliers Availability of Substitutes Switching Costs Suppliers Threat of Forward Integration Industry Threat of Backward Integration Industry’s Importance to Suppliers Overall bargaining power of suppliers score: 19/6 = 3.16 Moderate score of Attractiveness of the industry for the incumbent firm proves that the Bargaining Power is Medium to HIGH. Bargaining Power of Buyers ATTRACTIVENESS TO THE INCUMBENT 1 Product Differentiation Competition Between Buyers Size & Concentration of Buyers relative to Products Buyers Switching Costs Buyers Information Buyers ability to Backward Integrate 2 3 4 5

Overall bargaining power of buyers score: 13/6 = 2.16 Low score of Attractiveness of the industry for the incumbent firm proves that the bargaining power of the buyers is HIGH. Threat of Substitutes ATTRACTIVENESS TO THE INCUMBENT 1 Availability of close substitutes Switching Costs 2 3 4 5

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Substitutes Price Value Profitability of Producers of Substitutes

Overall Threat of substitutes score: 13/4 = 3.25 Moderate score of Attractiveness of the industry for the incumbent firm proves that the threat of substitutes is MOERATE. Overall Attractiveness Quotient ATTRACTIVENESS TO THE INCUMBENT 1 Barriers to Entry Industry Rivalry Bargaining Power of Suppliers Bargaining Power of Buyers Threat of Substitutes Overall Attractiveness score: 16/5= 3.2 Definitions: Mobile Number Portability (MNP) It allows users to retain their existing mobile number, while switching the network from one service provider to another. The cost for doing so is as less as INR 19. The customers can port from prepaid to postpaid cross network plans. Customers can enjoy better services and eliminating the need to convey a change in the contact number to their entire contact list. Moreover, it is convenient and affordable. 2 3 4 5

Churn Rate: Churn Rate or Attrition rate is the rate at which customers leave a supplier over a specific period of time. The reasons for discontinuation of services from a supplier include cheaper/better options from the competitors. It is also an indicator of average customer lifetime.

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8. References
http://www.dnb.co.in/IndianTelecomIndustry/OverviewTI.asp http://www.slideshare.net/zinnov/indian-telecom-market-overview http://research.ijcaonline.org/ncaete/number3/mpginmc1098.pdf http://www.livemint.com/Industry/9JEh45TZDJ1HU1xae9YRTJ/What-lies-ahead-for-Indias-telecomindustry.html http://www.comviva.com/media/BEsectortelecom.pdf http://www.equitymaster.com/research-it/sector-info/telecom/Telecom-Sector-Analysis-Report.asp http://www.ibef.org/download/telecommunication-august-2013.pdf http://www.ideasmakemarket.com/2013/08/aug-entry6-analysis-of-indian.html http://www.medianama.com/2013/04/223-india-mobile-arpu-minutes-cdma-gsm-2/

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