INDIAN TELECOM INDUSTRY OVERVIEW

315 mn mobile subscribers by September 08

39 mn fixed line subscribers by September 08

Crossed 25% teledensity mark in March 08

10.42 mn subscribers added in month of October 08

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

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

Growth is expected to continue and even accelerate, reaching a projected

496 mn mobile subs by 2010

Fixed vs. Mobile

No of new subscribers

Threat from New EntrantsSupply Side Economies Of Scale

• declining ARPU

• Infrastructure tenancy costs

• Other FC like BPO

Demand Side Benefits

• Brand pull exists to some extent for brands like airtel /idea/ vodafone

Threat from New Entrants (Cont.)Customer Switching Costs

• Cost of new connection low

• Proposed number portability

Capital Requirement

• Extremely high infrastructure setup costs

• Spectrum License cost

Threat from New Entrants (Cont.)Incumbent Advantages

Established brand image

Reliability of network

Uneven access to Distribution Channels

Not a factor

Threat from New Entrants (Cont.)Restrictive Govt Policy

Spectrum and license allocation

3G and Number portability policy still unclear.

74% FDI cap.

Minimum requirement of number of towers.

Power of the buyerLack of differentiation among the service provider

Cut throat competition

Customer is price sensitive

Low switching costs

Number portability to have negative impact

Supplier Bargaining Power Large number of suppliers.

Shared tower infrastructure.

Limited pool of skilled managers and engineers

especially those well versed in the latest

technologies.

Medium cost of switching since changing their

hardware would lead to additional cost in

modifying the architecture.

Overall influence on the industry - medium

Physical Infra Supplier

Network Infrastructure

-Ericsson

-Siemens Networks-Cisco

-Huawei

Information Technology

-IBM

-TCS

Passive Infrastructure

-Bharti Infratel

-Indus Towers

Call Center Outsourcing

-IBM Daksh

-Mphasis

-Hinduja TMT

-Aegis BPO

-Nortel

Rivalry among Existing Competitors High Exit Barriers

High Fixed Cost

6-7 players in each region

3 out of 4 BIG-Four present in each region

Very less time to gain advantage by an innovation (Eg. Caller

tunes, life time card)

Price wars

Market Share

Presence in States

Threat of SubstitutesSome Substitutes:

VOIP (Skype, Messenger etc.)

Online Chat

Email

Satellite phones

None of the above a major threat in current scenario.

Price-Performance trade-off very high.

Issues of mobility and penetration with the substitutes.