telecom industry analysis in india
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telecom industry analysis in IndiaTRANSCRIPT
Industry Analysis : Telecom Sector in IndiaGROUP 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
57%
40%
2% 1%
Composition Of Telephone Subscribers
Urban Wireless Rural Wireless Urban Wireline Rural Wireline
*SOURCE : IBEF, DEC 2014
Major Players
Market Share
23%
18%
15%
12%
10%
8%
7%
4% 1% 2%
Airtel
Vodafone
Idea
Reliance
BSNL
Aircel
Tata
Telewings
Sistema
Others
*SOURCE : IBEF*Figures till DEC 2014
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 Fast tracked
Reforms
DoT has agreed for a defense band
Implementation of full MNP
“Make in India” to boost local gears manufacturing.
Proposal for an exit policy.
• ECONOMIC FDI raised to 74 percent in
the telecom industry
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%
• SOCIAL
• Telecom Sector expected to create 4 Million jobs in next fice years
• Untapped rural demographic, teledensity at only 44%
• Change in lifestyle towards a more on move devices.
• TECHNOLOGICAL Implementation of 4G
on a high scale
Digital India / Smart Cities project provide huge opportunities for the industry
• Emphasis also on manufacturing in India under the Make In India Initiative.
• Websites like internet.org are a threat to service providers.
PORTER’S FIVE FORCES ANALYSIS
THREAT OF NEW ENTRANTS - LOW
Barriers to entry extremely high
Serious contenders require a lot of cash
Ownership of a telecom license hard to get
Difficult to access Optical Fibre Network
POWER OF S UPPL I E RS - LOW
• Cost of product relative to total cost (Low)
• Product differentiation (Low)
• Competition between suppliers(High)
P R I C E S E N S I T I V I T Y - L O W B A R G A I N I N G P O W E R - L O W
• Size and concentration of suppliers relative to products (Low)
• Buyers’ switching cost (Low)
• Buyers’ information (High)
• Suppliers’ ability to forward integrate (Low)
PORTER’S FIVE FORCES ANALYSIS
POWER OF BUY ERS - H I GH
• Cost of product relative to total cost (High)
• Product differentiation (High)
• Competition between buyers(High)
P R I C E S E N S I T I V I T Y - H I G H B A R G A I N I N G P O W E R - L O W
• Size and concentration of buyers relative to products (High)
• Buyers’ switching cost (Low)
• Buyers’ information (High)
• Buyers ability to forward integrate (Low)
PORTER’S FIVE FORCES ANALYSISTHREAT OF SUBSTITUTES - MODERATE
• Buyer Propensity to Substitute• 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• Voice quality is an issue with internet telephony.• Internet voice services also currently limited due to
regulatory road blocks
THREAT FROM COMPETITION - HIGH
• Concentration – Market Share
• 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 tele-density 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
• 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 segmentsleveraging 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, Norway’s 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
S W
O T
Company Market Cap (In Cr)
EPS P/E(Industry-
12.90)
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
53,660.25 6.88 21.68 3.19 129.20 177.30 149.15
Reliance Comm.
15,655.68 2.58 24.38 0.48 62.45 156.90 62.90
Tata Comm. 11,884.50 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
Financial Analysis
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-plan/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/articleshow/46490768.cms
http://trak.in/tags/business/2014/11/18/indian-telecom-industry-jobs-growth/
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