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Telecom Sector Analysis

Karthik Suresh
Nov 2015

Telecom Sector Analysis - Nov '15

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Agenda













History
Market Segments
Telecom Circles
Executive Summary
Trends
Key investments
Industry Analysis - Porter’s Five Forces
Industry Analysis - PESTEL
Key players and market share
SWOT Analysis – AIRTEL
Risks
Marketing campaigns
Future outlook
References
Telecom Sector Analysis - Nov '15

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Telecom : History
Private
players
were
allowed in
Value
Added
Services

Independen
t regulator
(TRAI) was
established

1999

1994

1992

BSNL was
established
by DoT

1997

National
Telecom
policy (NTP)
was
formulated

Broadband
policy was
formulated

2006

2002
2000

NTP-99 led
to low-cost
revenue
sharing
regime

3G
announced;
Spectrum
auction
passed

2004

Reduction
of license
fee; CDMA
technology
and
Internet
telephony
initiated

4G
introduced
by Bharti
Airtel in
Kolkata

2014

2010
2008

Mobile
Number
Portability
(MNP) was
formulated

2012

Facilitating
telecom
specific
SEZ’s to
promote
India as a
manufactur
ing hub

Spurt in
wifi
hotspots
due to
‘Digital
India’ and
‘Smart
Cities’
initiative by
government

Milestones
Telecom Sector Analysis - Nov '15

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VSAT – Very small aperture terminals 2. GMPCS – Global mobile personal Telecom Sector Analysis -communication Nov '15 4 by satellite .Telecom : Market Segments Telecom sector Basic services Wireless services Primary segments Internet services Radio paging and GMPCS VSAT’s and PMRTS Secondary segments 1. PMRTS – Public mobile radio trunked services 3.

Telecom : Circles Telecom circles Metro •Mumbai •Delhi •Kolkata Circle A •Andhra Pradesh •Gujarat •Karnataka •Maharashtra •Tamil Nadu •Daman and Diu •Pondicherry Circle B •Haryana •Kerala •Madhya Pradesh •Punjab •Rajasthan •Uttar Pradesh •West Bengal •Lakshadweep Telecom Sector Analysis .Nov '15 Circle C •Assam •Bihar •Himachal Pradesh •Jammu & Kashmir •North-east •Orissa 5 .

49 970. 2015 Teledensity 75.8% over the previous year 996. 2015 6 . registering a growth of 6.95 Sep '14 Dec '14 Mar '15 Telecom Sector Analysis .Nov '15 Source : TRAI Report.8 Jun '14 Sep '14 15.49 million as of Mar-15.) The number of telephone subscribers is 996.58 Dec '14 Mar '15 The tele-density is 79.01 Mar '14 79.97 957.4% over 76.38 as of Marthe previous year 75.75 Mar '14 Jun '14 Source : TRAI Report.Telecom : Executive Summary Number of subscribers ( in mil.61 933. registering a growth of 2.38 77.23 942.

12 end of Mar-15.43 74.55 The wireless tele-density increased from 75.Nov '15 7 .2 2. The contribution of the Wireless wireless segment is nearly 97% 56% 42% Source : TRAI Report.Subscriber distribution The number of wireless subscribers is Wireline 3% 969. 2015 Telecom Sector Analysis .25 72.27 at the 75.3 2.12 at the end of Mar-15 Source : TRAI Report.94 73.16 at the end of Dec-14 to 2.89 million as of Mar-15.2% over the previous year.27 2.16 Wireline 2.55 2. 2015 Teledensity trend 77.43 at the end of Dec-14 to 77. while wireline tele-density declined from 2. Rural Urban registering a growth of 7.

Wireless subscribers The percentage of GSM wireless subscribers to the total subscriber base has remained around 95% over the last year.) and Tamil Nadu (80 mil.) followed by Maharashtra (108 mil. 2015 Wireless subscriber base (in mil.) 108 72 69 46 59 58 61 135 80 55 47 The wireless subscriber base is maximum in the state of Uttar Pradesh (135 mil.Nov '15 8 .) Source : TRAI Report. whereas the percentage 94% 94% 95% 94% 95% 6% 6% 5% 6% 5% GSM CDMA of CDMA wireless subscribers has remained around 5% over the last year Source : TRAI Report. Telecom 2015 Sector Analysis .

66% 59% The number of Broadband and Narrowband Internet subscribers by end of Mar-15 are 99. 105 and Rs. 2015 * 128 110 465 160 110 102 441 Monthly ARPU as of Mar’15 for All 105 99 467 109 Blended Pre-paid Post-paid 490 India in Post-paid.15 million respectively 5% 1% 28% Broadband Narrowband 5% 1% Source : TRAI Report. 467. pre-paid and blended GSM services is Rs.Refer slide no 5 9 . 2015 * . 120 respectively Telecom Sector Analysis .Nov '15 Source : TRAI Report.20 million and 23% 203. Rs.

453 213.602 221.642 Mar '14 Jun '14 Sep '14 Dec '14 Mar '15 Telecom Sector Analysis .231 225.334 230.642 Mar '14 Jun '14 Sep '14 Dec '14 Mar '15 Source : TRAI Report.334 230.453 213.Nov '15 Source : TRAI Report. 2015 Number of subscribers (VSAT) 236.Number of subscribers (PMRTS) 236.231 225.602 221. 2015 10 .

99%) respectively In the wireline market segment. Reliance Group remains the market leader with a share of 51. Bharti Airtel remains the market leader with a share of 24.Telecom : Trends       There is increase in the number of wireless subscribers.83%) respectively Telecom Sector Analysis .84% followed by Tata Group (27.03%) and Idea (17.19%) and Sistema (16. whereas there is a decrease in the number of wireline subscribers The rural subscriber base showed a rise of 11. whereas the proportion of narrowband-broadband subscriber base in the wireline segment has remained more or less the same In GSM wireless market segment.01% compared to last year.Nov '15 11 .94% compared to last year There is increase in the narrowband subscriber base in the wireless segment.71% followed by MTNL (13.35%) and Bharti Airtel (12. BSNL remains the market leader with a share of 61.2%) respectively In CDMA wireless market segment. whereas the urban subscriber base showed a rise of 1.63% followed by Vodafone (20.

82 million Softbank Japanese telecom company Softbank has planned to invest around US$ 10 billion in India’s IT sector over the next few years Ericsson Ericsson has won US$ 9.Nov '15 12 . launched its telecom products under the ISUN brand that will be bundled with BSNL schemes Telecom Sector Analysis .42 million three year operation support systems (OSS) deal from Reliance Jio Infocomm Reliance Jio Reliance Jio Infocomm Ltd has signed an agreement to share telecom towers of GTL Infrastructure Ltd. the seventh tower-sharing agreement ISUN Chennai based Exotic Global Trades Pvt Ltd.Telecom : Key investments Bharti Infratel  Bharti Infratel has planned to take over the telecom towers of Vodafone and Idea Cellular in India at a valuation of US$ 785..

Nov '15 13 . leading to fierce competition Threat of New Entrants  Strict government regulations  Extremely high infrastructure setup cost  Difficulty in achieving economies of scale Bargaining power of suppliers  High bargaining power of suppliers as there are only a few suppliers in the sector  High cost of switching suppliers Threat of substitutes Bargainin g Power of Customer s (High) Competiti ve Rivalry (High)  Hardly any threat of substitute product because there are no substitutes available in the market Bargaining power of customers  Low switching cost and mobile number portability give customers high bargaining power  Customers are price sensitive Threat of New Entrants (Low) Bargainin g Power of Suppliers (High) Threat of Substitut es (Low) Telecom Sector Analysis .Telecom : Industry Analysis (Porters’ 5S) Competitive Rivalry  Customer’s low switching cost and price sensitivity are increasing competition amongst players  High exit barriers are also intensifying competition  There are around 6 to 7 players in each region.

Telecom : Industry Analysis (PESTEL) Political:  The Government of India plans to cut license fees by up to 33 per cent for operators  The Government has been proactive in its efforts to transform India into a global telecommunication hub  Relaxed FDI (Foreign Direct Investment) Norms  The Government recently revised the M&A ( Mergers & Acquisition) guidelines for the telecom sector. and iii) USD18. the government has proposed an investment of USD32.2 billion in three phases: i) USD9.Nov '15 P L E E PESTE L Analy sis S T 14 .2 billion to the Telecom Research and Development Fund.6 billion for the Telecom Entrepreneurship Promotion Fund. it raised the limit on the market share of a merged entity in a circle to 50 per cent from 35 per cent earlier  To boost local research and manufacturing of telecom products. ii) USD4.4 billion to the Telecom Manufacturing Promotion Fund during the 12th Five-Year Plan Telecom Sector Analysis .

and believed that it is projected to almost double to USD$ 90 billion by 2015 GDP contribution – 6%.₹ 136. there were USD 4 trillion.833 crores per annum & Increasing 20% for every month Increase in disposable incomes Falling mobile phone prices Falling call charges rates with more utility P L E E PESTE L Analy sis S T Telecom Sector Analysis . In 2008. expected to grow at a steep 11% p. CAGR over the next 2 years India’s telecom service revenue was USD$ 55 billion in 2012. Output per annum .a.Nov '15 15 .Economic:        The Indian Telecom industry has been playing an important role in the world economy and global revenues.

voice and high-speed internet services and various social application Chain of information flow Building awareness and connecting people Exploitation of young minds. too compulsive. and sometimes too much information Irritating and annoying due to excess amount of calls and messages P L E E PESTE L Analy sis S T Telecom Sector Analysis .Nov '15 16 .Social:        Growing young population Change in Lifestyle Increment in services which includes digital television.

Technological:      Driven by 3G and 4G services.Nov '15 17 . etc SIM cards. WiFi. There’s a lot of scope for growth of M2M services in the government's ambitious Rs.000 crore (US$ 1.1 billion) 'Smart City' program Increasing MOU (Minutes Of Use) and Data usage Liberalisation of spectrum and convergence of network. etc P L E E PESTE L Analy sis S T Telecom Sector Analysis . 7. it is expected that there will be huge machine-to-machine (M2M) growth in India in 2016-17. Nano SIM cards. services and devices New and upgraded devices and applications with massive features like GPS.

by emitting unnecessary radio waves. Billboards and exploitation of papers ISO 14004:2004 provides guidelines on the elements of an environmental management system and its implementation P L E E PESTE L Analy sis S T Telecom Sector Analysis .Environmental:       Environmental Issues are increasing on daily basis Excess use of Electricity Causing air pollution.Nov '15 18 . strangling cables all over the cities No proper and systematic installation Unnecessary Ads.

The Wireless Telegraphy Act 1933 3. The Indian Telegraph Act 1885 2. aims at a ‘One Nation-One license’ regime with no roaming charges and nation wide number portability “Telecommunications” falls under the legislative competence of the Union government and the Parliament and not the States In India Legal framework. broadcasting services etc The Legal Framework is provided by: 1. The Cable Television Network (Regulation) Act1996 P L E E PESTE L Analy sis S T Telecom Sector Analysis .Legal:     National Telecom Policy. voice mail. sat.Nov '15 19 . The Telegraph Wires (Unlawful Possession) Act1950 4. ECommerce. communications. covering telecom sector include various services like Internet.

Telecom : Key Players Wireles s (GSM) Wireles s (CDMA) Wirelin e 1 2 1 2 1 2 3 3 3 Source : TRAI Report.Nov '15 20 . 2015 Telecom Sector Analysis .

BSNL Aircel Tata Telewings Sistema Others 16% Source : TRAI Report.Mar ‘15 5% 2% 7% 23% 8% 9% 18% 11% Bharti Airtel Vodafone Idea Reliance Comm. 2015 Telecom Sector Analysis .Nov '15 21 .Telecom : Top 10 market players Market share – e.

Telecom : Wireless GSM market share Market share – e. Aircel BSNL Tata Telewings Videocon Others Source : TRAI Report.Nov '15 22 .Mar ‘15 5% 1% 1% 6% 25% 8% 9% 9% 20% 17% Bharti Airtel Vodafone Idea Reliance Comm. 2015 Telecom Sector Analysis .

2015 Telecom Sector Analysis .Nov '15 23 .Mar ‘15 4% 0% 0% 17% 52% 27% Reliance Comm. Tata Sistema BSNL MTNL Quadrant Source : TRAI Report.Telecom : Wireless CDMA market share Market share – e.

2015 Telecom Sector Analysis .Mar ‘15 4% 1% 0% 0% 6% 13% 13% 62% BSNL MTNL Bharti Tata Reliance Quadrant Sistema Vodafone Source : TRAI Report.Nov '15 24 .Telecom : Wireline market share Market share – e.

and the recent one being Apple. Telecom Sector Analysis . 5. Renowned Telecom company: With its 19+ years of rich experience in telecom industry this MNC had travelled far to become world’s 3rd largest telecom operator overseas with operations in nearly 20 countries. Airtel is a leading nationwide player in India and the torchbearer of the telecom industry in India. Such strategic alliances boost the brand equity and the bottom line of the company. 2. where Vodafone is an external entrant.Nov '15 Strengths Weakness Opportuni ties Threats 25 . Torchbearer of the telecom Industry: With its number 1 spot due to its excellent services in developing economies. namely Sony Ericsson. 4. Airtel has interconnected the life of people in an highly efficient way. Extensive infrastructure: With the formation of Indus tower & due to its partnership with Idea & Vodafone. Thus. the infrastructure of Airtel has extended in all parts of the country resulting into nationwide penetration. Nokia and singtel. Strategic Alliances: The company has top notch stakeholders. High Brand Equity: It is one of the pioneer brands in telecommunication having a high brand recall and with a whopping subscriber base. 3.Telecom : SWOT Analysis (AIRTEL) Strengths: 1.

and credit being high and margins being low. Venturing into African operations: Although it’s been 4 years that Airtel has acquired Zain’s Africa business. Airtel does not have as deep pockets as Vodafone. but Airtel is still struggling to turn around the unit which was bought at a whoppy 9 billion dollars. 2. But on the other hand.Weakness: 1. High Debt: With its acquisitions turning out to bad investment. Telecom Sector Analysis . 3.Nov '15 Strengths Weakness Opportuni ties Threats 26 . they are running the risk of being dependent on some other companies which may affect its operations. Airtel group is under high debt. Outsourced Operations: Outsourcing operations helped Airtel in lowering its cost.

LTE: Airtel has taken the lead with this version of LTE in 4 cities. but deployment needs to catch up pace. VAS: VAS (Value Added services) is going to future of the telecommunication industry & by specializing itself in this vertical Airtel can differentiate itself in highly competitive market Untapped geography of the current market: Although it is currently providing 3G & 4G services. venturing out in new markets/developing economies will prove fruitful for the company. Airtel’s LTE network for mobile broadband is still confined to only 4 cities in India.Nov '15 Strengths Weakness Opportuni ties Threats 27 . Expansion of these services to most of its regions will help the company get more margins and customers. 5. 3. Telecom Sector Analysis . but these services are limited to specific geographical locations.Opportunities : 1. Market Development: With fierce competition in the telecom industry & shrinking margins. Strategic Partnership: Partnering with smart phone companies is going to be a smart strategy as far as MNP (mobile number portability in India) is concerned. 2. 4.

Nov '15 Strengths Weakness Opportuni ties Threats 28 . 2. it can see slump in subscriber base in the next fiscal year with PAN India MNP applicable from May 3rd 2015. MNP (Mobile number portability): MNP gives the customer independence to change the service provider while retaining the number and as Airtel charges are premium over other service providers.Threats: 1. 3. Competition: Price war in the home market and declining margins due to this is adversely affecting the overall business of the group. Telecom Sector Analysis . Government Regulatory Framework: With the auction of spectrum & change in the government policies on a regular basis. it is a potential threat to the stability & existence of this industry thereby affecting the players.

Failure to improve organizational agility 5. Failure to adopt new routes to innovation Telecom Sector Analysis . Failure to understand what customers value 8. Lack of data integrity to drive growth and efficiency 6. Inability to extract value from network assets 9. Ignoring new imperatives in privacy and security 4. Failure to realize new roles in evolving industry ecosystems 2. Lack of regulatory certainty on new market structures 3. Lack of performance measurement to drive execution 7.Nov '15 29 . Poorly defined inorganic growth agenda 10.Telecom : Risks 1.

Telecom : Marketing Campaign (Idea) No Ullu banana.Nov '15 30 . featuring its Brand Ambassador Abhishek Bachchan. is the new Idea! This is the essence of the latest brand campaign by Idea Cellular. Telecom Sector Analysis . The ad highlights the power of mobile internet on the Idea network. and how it can empower users to evade unscrupulous situations and people in India.

VAS is the only area where there is a huge opportunity of making large profit in current telecom market as it helps the players to increase their Average Revenue Per User Telecom Sector Analysis .Telecom : Marketing Campaign (BSNL) Almost a year since it roped in Deepika Padukone as its brand ambassador to give it a young and energetic image.Nov '15 31 . the state-owned telecom major. BSNL has rolled out an advertising campaign for its value-added-services (VAS).

Telecom : Future Outlook Telecom Sector Analysis .Nov '15 32 .

empowering people”. 57/178 A Nitin. 4/32.Nov '15 33 . T Jehil. 105/274. M James. TRAI Report . P Pradeep. 55/178 .“Technology. Pg. Pg. 34/178 . Media and Telecommunications Predictions”. 5/178 .Pg. Pg. Pg. 15/133. 4/6 D Jonathan. 29/178 . C Sandeep. Pg. Pg. 9/178 . “Future trends in Indian Telecom Industry”. 41/76. 38/178 . 42/76.“India’s technology opportunity: Transforming work. C Cornelia.“Indian Media and Entertainment Industry Report”. 66/69 Wikipedia Telecom Sector Analysis . F Holger. Pg. 23/55 ”The Indian Telecom Service Performance Indicators”. McKinsey Report. 13/76. Pg. 48/178 . 30/32 K Noshir.Mar 2015. 21/178 . FICCI Report. Pg. Pg. A Naveen.Telecom : References ◊ ◊ ◊ ◊ ◊ ◊ ◊ ◊ ◊ P Arptita. 47/133 “Telecommunication”. 22/133. Pg. 2014 . Pg. Deloitte Report. 104/274. Pg. S Duncan. Pg. Pg. 46/178 . Pg. 19/178 . 65/69. Pg. Pg. B Adrian. M Anu. S Ashish. 2015-16. Pg. Pg. 2015. 2014. Pg. 2014. 2015.“Top 10 risks in Telecom Industry”. Pg. B Jacques. Pg. Pg. KPMG Report. Pg. 49/178 . 33/178 . S Amit. 106/274 L Paul. 45/76 “Union Budget Analysis”. EY Report. 6/178 . Pg. IBEF Report. August 2015. PWC Report. Pg. Pg. V Aneesh. Pg.

com Telecom Sector Analysis .nitie2017@gmail.Nov '15 34 .Contact : karthiksuresh.