Strategic Management

Project: Strategic management report on Telecom Industry (Airtel)

Aashna Murli 3122 Shobhit Patni 3167 Kuru Panyu 3144 Sneha Nair 3170 Ninad Dhargawe 3152 Nakul Singh 3151 Pierre Loius

Introduction
Imagine being a part of an industry that has grown over twenty times in just ten years. The Telecom Industry of India has grown from under 37 million subscribers in the year 2001 to over 846 million subscribers in the year 2011. This portentous growth of the Indian Telecom sector in the past ten years has opened up numerous opportunities, with only traces of these being felt by rural India. The total telecom density of the country is about 71%, but only 33% of the rural India, which occupies over 70% of the countrys population, has realized the access and benefits of the industry. The beginning of the Indian Telecom Industry can be marked with the introduction of the Posts and Telegraphs Department in the year 1851. Real liberalization of the Telecom Industry started in the year 1981, when the then Prime Minister of India Indira Gandhi, joined hands with authorities in France to merge with the state owned telecom company, in an effort to set up five million lines per year in the country. The first mobile telephone service started on a non-commercial basis in Delhi in the year 1985 however, the idea of mobile communication did not take-off until the first National Telecom Policy (NTP), which was released in the year 1994. The industry has been profitable and the revenue has never been better. The total revenue of the Telecom Service Sector went up from US$ 31,597 million ( 157,985 crore) in 2009-10 to US$ 34,344 million ( 171,719 crore) in 2010-11, indicating a growth of 8.69%. The revenue contribution from the public sector telecom companies in the year 2010-11 was 20.37% and 79.66% from private sector companies. The sector is expected to witness up to US$ 55.95 billion in investments and the market will cross the US$ 100 billion revenue mark in the next 5 years. The wire line segment of the industry has a high level of concentration, with BSNL accounting for over 72% of revenue. On the other hand, the industry concentration in the wireless segment is medium, with the top four companies in the segment sharing 68% of the revenue. In a nutshell, the competition in the industry is moderate and the trend is increasing. The wireless segment has a healthy mix of competition, with players such as Bharti (Airtel), Reliance, Vodafone and Idea occupying almost an equal share of the pie and BSNL continuing to dominate the wireline market. Rural competition mirrors the overall segment, with Bharti leading the rural wireless segment and BSNL dominating the wire line market.

Industry Life Cycle

The telecom sector in India is going through the growth stage of its life cycle, with penetration in the rural areas being one of the major areas of opportunity for the next five years. Until March 2006, the rural tele-density of the Indian telecom sector was just 1.86% which has increased to 33.79% in March 2011. In the next five years, all the major telecom operators will be focusing on leveraging the opportunities that lie thereabouts.

Telecom Industry is in its growth stage. Significant achievements have happened in this sector. In 2009 February, there was a rise in subscriber base by 13.25 million. Total subscriber base was 375 million in 2009. A hike by 50%. This shows the changes in the consumption pattern among the middle class.

Bharti Airtel Limited

Bharti Airtel Limited, commonly known as Airtel, is an Indian multinational telecommunications Services Company headquartered in New Delhi, India. It operates in 20 countries across South Asia, Africa, and the Channel Islands. Airtel is the world's third largest mobile telecommunications company by subscribers, with over 275 million subscribers across 20 countries as of July 2013. It is the largest cellular service provider in India, with 192.22 million subscribers as of August 2013. Airtel is the third largest in-country mobile operator by subscriber base, behind China Mobile and China Unicom. Airtel is the largest provider of mobile telephony and second largest provider of fixed telephony in India, and is also a provider of broadband and subscription television services. It offers its telecom services under the "airtel" brand, and is headed by Sunil Bharti Mittal. Bharti Airtel is the first Indian telecom service provider to achieve Cisco Gold Certification. It also acts as a carrier for national and international long distance communication services. Airtel is credited with pioneering the business strategy of outsourcing all of its business operations except marketing, sales and finance and building the 'minutes factory' model of low cost and high volumes. The strategy has since been copied by several operators. Its network - base stations, microwave links, etc. - is maintained by Ericsson and Nokia Siemens Network whereas IT support is provided by IBM, and transmission towers are maintained by another company (Bharti Infratel Ltd. in India). During the last financial year (200910), Bharti negotiated for its strategic partner Alcatel-Lucent to manage the network infrastructure for the tele-media business. On 31 May 2012, Bharti Airtel awarded the three-year contract to Alcatel-Lucent for setting up an Internet Protocol access network (mobile backhaul) across the country. This would help consumers access internet at faster speed and high quality internet browsing on mobile handsets.

Porters Five Forces Analysis

"Porter's five forces" is a framework for the industry analysis and business strategy development developed by School in 1979. It uses concepts developing economics to derive five forces that determine the competitive intensity and therefore attractiveness of a market. Attractiveness in this context refers to the overall industry profitability. An "unattractive" industry is one where the combination of forces acts to drive down overall profitability. A very unattractive industry would be one approaching "pure competition".

Competitive Rivalry
The Competitive Rivalry in India is high and will continue to increase as new players enter the industry. The Competition is price and quality based and the entry of every new customer brings with competition. The two large competitors of Airtel and their strategies are as follows-

Bharat Sanchar Nigam Ltd.

BSNL a state owned service provider in India, is the seventh-largest telecommunication company in the world. It offers a wide range of services in India, such as wireline, CDMA mobile, GSM mobile, internet, broadband, carrier, MPLS MPLS-VPN, VSAT, VoIP, IN, etc.

BSNL is the largest operator in basic services in India with its cellular services helping it to establish its presence as the largest operator in rural areas. a. Rural Penetration BSNL is playing a leadership role in developing the telecom infrastructure in rural areas. It has been successful in increasing its cellular subscriber base by pioneering its services in the rural terrain. Its services cover the whole of India, except Delhi and Mumbai, which are covered by MTNL, the other state-owned player. b. Low Cost Strategy BSNL is a low-cost service provider of many services. This strategy has helped BSNL in penetrating the market.

Reliance Communications
Reliance Communications, previously known as Reliance Infocom, brought about a digital revolution in the Indian telecom industry by providing Indias vast population with affordable means of Reliance Infocom, with the aim of making mobile calls cheaper than postcards, built a 60,000 the entire country. Reliance currently offers its services in 340 towns with its eight circle footprints; it also initiated mobile data services through its Rworld mobile portal. This portal leverages the data capability of the CDMA 1X network. a. Integrated Service From the beginning, Reliance believed in providing communication services to its customers. The greater number of handsets Nokia. b. Large Distribution Network Reliance has created the largest chain of digital communication stores expanding its reach aggressively through retail outlets, sales agents and electronic recharge outlets. Other Competitors being Idea, MTNL, Vodafone, Telenor, Spice, Orange

Supplier Power
The supplies in Mobile sectors primarily comprise of Switch Suppliers, Tower Service providers and the Handset providers. The supplier power for Telecom Industry is High as the suppliers have higher bargaining power. 1. Network Equipment: There Nokia Siemens, Ericsson, Huawei suppliers the power of these suppliers are high and may impact the growth plan of the operators if supplies are not smooth. Tower Providers: Though the new sharing technology has helped in utilizing the Towers but still the coverage remains a problem due to few Tower provider bargaining power of Tower providers if High. Handset Suppliers: Nokia, Samsung, LG, Sony, iPhone and numerous other players. The bargaining power of Handset Suppliers is less as they are also competing amongst themselves Overall we can make out that the key supplies powers are high for Mobile Industry

Buyer Power
Switching cost is low. Government is also introducing Number portability which will lead to further switching between the operators if the prices and services are not met. The Voice and message based services are moving toward a commodity as the competition now depends mostly on the prices as the services are similar across the operators. The customers are demanding more value for money which has led to introduction of pay per second plans. Buyers want more and more value added service at cheaper prices Hence the companies need to focus on Customer Satisfaction.

Threat of Substitutes
The VOIP is getting popular for Eg. Skype, Vonage etc. Video Conferencing is also getting popular CDMA is another threat to GSM players The threat of substitutes is high as the alternate are much cheaper with similar quality and service

Potential for New Entrants

The government is also issuing new licenses in the current circles. Many mobile players are also entering the enterprise business by launching NLD/ILD operations. The sharing business has reduced the capital requirement and thus bringing down the capital requirement for new player. Barriers to Entry in the telecom industry are high and steady and the level of tax burden is medium and stable. There is also a considerable amount of assistance provided to the industry and the trend has been increasing. The major leaders of the Industry are Bharti (Airtel), Reliance, Vodafone and Idea but there have been few new entries in the industry such as the TATA DoCoMo, Uninor, Aircel who have brought significant changes in the Industry.

Strategic Group Analysis

As seen through the graph, it is clearly understandable that airtel is clearly more diverse in its offering to the consumer market. In the product range/global scope scale, airtel has a clear cut advantage with its score being 25% of the market share. This is all thanks to the strategy adopted by airtel in India. Though it loses out on global scope to Vodafone, it still has a much better product range than its competitors. Airtel also has tie ups with some foreign companies like apple for iPhone cellular services etc. The next closest competitors to airtel in the market are Vodafone at 17% (better globally), reliance at 18% and bsnl/mtnl at 15%. Other than these main competitors, there are some regional players as well like idea at 9.6%, tata at 9.3% and other local brands which score roughly around -5%

SWOT Analysis
A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, straightforward model that assesses what an organization can and cannot do as well as its potential opportunities and threats. The method of SWOT analysis is to take the information from an environmental analysis and separate it into internal (strengths and weaknesses) and external issues (opportunities and threats). Once this is completed, SWOT analysis determines what may assist the firm in accomplishing its objectives, and what obstacles must be overcome or minimized to achieve desired results.

Strength:
3rd Largest Wireless operator in the world

Largest private integrated Telecom Company in India 6th Largest integrated telecom operator in the world Largest wireless operator in India Largest private fixed line Largest telecom company listed on Indian Stock Exchanges

Weakness:
An often cited original weakness is that when the business was started by Sunil Bharti Mittal over 15 years ago, the business has little knowledge and experience of how a start-up business had to outsource to industry experts in the field. Until recently Airtel did not own its own towers, which was a particular strength of some of its competitors such as Hutchison Essar. To important if your company wishes to provide wide coverage nationally. The fact that the Airtel has not pulled off a deal with South Africa's MTN could signal the lack of any real emerging market investment opportunity for the business once the Indian Market has become mature.

Opportunities
Exponentially Growing Market both in size and usage

The Rural Landscape: The Regulators have proposed the waiver of license fees in rural areas. Clubbing the regulators policy with which is just 15 % provides immense opportunity to Airtel. Rural area provides a massive opportunity for Airtel to expand its customer base. Rural Household comprise of 70 % of Indias Population. The growth in Rural segment is currently 8-10 % per month New Technologies and Paradigms: As growth in data traffic accelerates with the proliferation and adoption of web services the telecom operators will evolve their infrastructure through their access transmission infrastructure from the base stations to the core switching network. 3 G and BWA auctions are due which provides a big opportunity to the company. Convergence will be vital phenomenon to support all network and IT services, using IP as the strategic technology Strong Strategic Partnership for Technology: Airtel has strategic alliance with Singtel, which has helped in providing quality services to the customer due to technology transfer and technology partners who also drive development and solutions. Value Added Services: These services bring both Value to customers and operators. Airtel has special services and the opportunity can still be exploited further for better profitability.

Threat
Increased Competition may reduce market share or Revenue: The wireless market in the year 2008 players in to newer circles along with operators migrating to GSM from CDMA technology. The market also saw entry of international and national long distance pressure of marketing expenditure in the coming year. Substitutes like VOIP for eg Skype, Vonage etc. these services are a big threat to international long distance calls.