Strategic

Management - I
Internal & External Environment Analysis of
Telecommunications Industry in India

Group 6: Namrata Menon (WMP13032), Neeraj Aggarwal (WMP13033), Niraj Kumar

(WMP13034), Nitin Kumar (WMP13035), Nripendra Maurya (WMP13036), Pankaj
Bhandari (WMP13037)
Introduction
• India is currently the world’s second-largest telecommunications market with a subscriber base
of 1.75 billion and has registered strong growth in the past decade and half.

• The government has enabled easy market access to telecom equipment and a fair and
proactive regulatory framework that has ensured availability of telecom services to consumer
at affordable prices.

• The deregulation of Foreign Direct Investment (FDI) norms has made the sector one of the
fastest growing and a top 5 employment opportunity generator in the country.

• The Indian telecom sector is expected to generate 4 million direct and indirect jobs over the
next 5 years according to estimates by Randstad India.
Market Size
• Industry expected to create a total economic value of Rs 14
trillion (USD217.37 billion) by the year 2020.
• Indian telecom sector’s revenue grew from USD19.50 billion
in FY06 to USD39.5 billion in FY18.
• Revenues from the telecom equipment sector are expected
to grow to USD26.4 billion by 2020.
• The number of internet subscribers in the country increased
at a CAGR of 43% during FY06-FY18 to reach ~494 million in
2017-18.
• The number of internet subscribers in the country is
expected to double by 2021 to 829 million.
• Overall IP traffic is expected to grow four-fold at a CAGR of
30% by 2021.
Industry Incumbents
 General
Environment
Analysis
Telecom
Socio Cultural/Demographic
Factor + +/- - Remarks
Population Size + India is 2nd largest country in terms of Population. More than a quarter of India's
population or 337 million people would use a smartphone in 2018 -- a 16 per cent
growth which is the highest rate of any country in the world
Age Structure + Young generation is always close to technology. Youth population ratio is high in India
which uses telecom services as well as encourages other generation to use.

In 2018, 54% population is under 25 years

Geographic distribution + Telecom services bridges the gaps of geographic. Telecom services are present all
across country
With 70 per cent of the population staying in rural areas, the rural market would be a
key growth driver in the coming years

Ethnic Mix +/- Doesn’t have much influence

Socio Cultural/Demographic
Factor + +/- - Remarks
Shifts in preferences + India is the world’s second largest smartphone market and is expected to have almost 1
regarding products and billion unique mobile subscribers by 2020.
service characteristics:
Income Distribution + In early age of mobile technology, it appeared like, it is for upper and middle class only.
But in past couple of years, the smart phone has become affordable, telecom rates
have drastically came down, free applications are available, etc. This has made telecom
accessible to all income group.
Attitude towards imported + Although few people voice out for India made products, but generally foreign made
goods product including China is acceptable by Indian Population which complements Indian
Telecom Industry. Even in services, people doesn’t differentiate between Vodaphone
or any Indian company
Socio Cultural/Demographic
Political/Legal
Factor + +/- - Remarks
Stability of Govt. + As the govt is in majority and not dependent on collision, it is stable

Taxation Laws
Entry mode regulation
- he recent Trai regulation on MTC (mobile terminating call) is also surprising and alarming,
especially the road map to zero paisa MTC. Nowhere in the world where incoming calls are
free, have we seen zero MTC. The Goods and Services Tax (GST) is further adding to the
industry’s concern, effectively increasing the tax from 15% to 18%. Currently, the licence fee
and SUC cannot be set off against GST.
+/- Controlled by Govt

Social Policies + Govt is launching multiple scheme dependent on mobile services/number like linking aadhar
card to mobile, bank account link to mobile, subsidy linking and so many.

Educational philosophies & +/- Education system in India too supports technology and in-turn will help telecom industry but
policies doesn’t have major influence.
Govt regulation - National Telecom Policy 2012 calls for unified licensing, full MNP and free roaming
Multiple regulation imposed by TRAI and provision of fine in case of voilation
Technological
Factor + +/- - Remarks
Innovations & discoveries + Product innovation has helped telecom industry to a great extend. The low cost 4G smart
phone has complemented telecom industry.

On telecommunication side, 4G innovation has changed the way people ever looked at mobile.
It is no more voice communication but data communication device.
Applications of knowledge +

Focus of private & govt. - Almost no support or encouragement from govt side
supported R&D
expenditures
Technological level of +/- It is balanced between rural and urban population.
country
New Innovation + 5G technology is invented but not yet implemented by telecom service provider as well as
mobile manufacturers. This has huge potency to boost market once availeble.
Technological
Economical
Factor + +/- - Remarks

Inflation Rate +/- Although it is high compared to other countries but we can consider this is as neutral
looking at India’s past decade.

Gross Domestic Product + Indian market is one of the rapid growing in terms of GDP

Disposable Income +/- It is balanced but telecom services are bit affordable by general population looking at
recent fall in prices

Financing capabilities + The industry gets the finance easily

Economical
General Environment Analysis -
Summary
● Overall Indian market looks stable and matured
General Environment Analysis -
Summary
The technological transformations along with digital initiatives are designed to create a competitive
advantage for the industry while empowering citizens. Telecom acts as a backbone for multiple key
sectors of the economy and with the ongoing explosion in data, the outlook for the sector remains
positive. As per the IBEF telecom industry sector report, India will emerge as a leading player in the
virtual world by having greater than 700 million internet users of the 4.7 billion global users by
2025. The industry, in collaboration with the government and regulatory bodies has been playing its
part for development of the sector as well as furthering the government’s welfare initiatives. However,
for the industry to contribute in the process more effectively, certain key steps would require to be
taken to ensure efficiency as well as sustainability.
The next wave of growth in terms of new technologies such as IoT, M2M, 5G etc. and continue in the
path of connecting the telecom industry.
5 Forces Analysis
Telecom
Five Forces Analysis
Players Subscriber Market Share Squares
Bharti 25.57% 0.06538249
Vodafone 18.76% 0.03519376
Idea 17.47% 0.03052009
Reliance Jio 15.31% 0.02343961
BSNL 9.43% 0.00889249
Aircel 6.82% 0.00465124
Telenor 3.40% 0.001156
Tata 2.87% 0.00082369
Others 0.31% 0.00000961
Reliance 0.06% 0.00000036

Herfindahl Index 0.17

 Barriers to Entry
S.N Barrier to Entry + +/- - Remarks
.
1 Do large firms have cost or performance + Large firms are able to attain economies of
advantage? scale. These firms have created separate
tower companies, which has helped them
lower operating cost and improve capital
structure.
2 Are there any proprietary advantages in + Ownership of spectrum like 4G and 5G, or
industry? ownership of spectrum within a certain
bandwidth. Any new entrant will have to
incur huge costs and a long time to
acquire the same spectrum.
3 Are there any established Brand identities in + There are several established brand
the industry? identities in the industry such as Airtel,
Idea and Vodafone.
4 Do the customers incur any significant cost in
switching?
5 Is a lot of capital needed to enter the
industry?
6 Does new entrant face any difficulty in
accessing distribution channels?
7 Does experience in the industry help an
incumbent to continuously lower cost?
8 Does the new entrant face any difficulty &
cost in obtaining any resource required to
participate in industry?
- Switching costs are negligible ever since
TRAI mandated Mobile Number Portability
(MNP). New connections are available for
a mere Rs.200. Subscribers often own
connections from multiple operators rather
than choosing among the options.
+ Yes, to enter the industry the firms need to
invest a lot of capital to purchase the
spectrum, buy technology and set up
mobile towers.
- Distribution channels are easy for every
firm to access.
+ Experience and number of subscribers
with incumbent allow experienced firms to
attain economies of scale in utilizing
towers and spectrum. This leads to lower
costs.
+ New entrant must incur significant costs in
setting up mobile towers and purchasing
spectrum and bandwidth and even laying
telephone fibres.
9 Do firms any proprietary technology? + Incumbent have proprietary technology
such as VoLTE and BWA
10 Are the incumbents likely to react strongly to + Incumbents lower tariffs and discounts as
the new entrant? reaction to new entrants. They also restrict
or delay tower sharing for new entrants.
11 Are there licenses & qualification difficult to +/- There are license costs involved that take
obtain? time to obtain. However, the Govt. of India
has tried to reduce the license costs and is
issuing several international and national
long-distance licenses, which has created
opportunities and attracted new
companies into the market.
 Bargaining Power of Buyers
S.N. Bargaining power of buyers
1 Are there large numbers of buyers than
the firms in the industry?
2 Are there large numbers of customers
with small purchases?
3 Does the customer face any switching
cost?
4 Does the buyer need a lot of important
information?
5 Is the buyer aware of the need for
additional information?
6 Can the buyer credibly integrate
backward & take function in-house?
+ +/- - Remarks
- The buyer base of the telecom industry is
1,147.71 million, as of April 2018. This gives the
buyers a significant negotiation power over the
firms
+ Large number of customers with varied wallet
share.
- MNP resulted very low/negligible switching cost.
- No important information is required
- No additional information is required
+ Buyers cannot integrate backward given the
industry is primarily B2C.
7 Are the customer highly sensitive to price?
8 Are the products commodities?
- Customers are price sensitive and can easily
switch telecom service providers when offered
better prices.
- Products are like commodities since the
incumbent firms use the same technology and
spectrum. There is very low differentiation.
Power of Substitutes
S.N Power of substitutes + +/- - Remarks
.
1 Substitutes have performance +/- Substitute like IP telephony,instant messaging
limitations that do not offset their have performance limitations. However,
lower prices? technological advancements, lower costs and
reach of technology to people has made the
substitutes acceptance and popular.
2 The customer is unlikely to +/- Since there is performance limitation, there is
switch trade off between performance & cost.
3 The customer shall incur costs in - No cost/very low cost in switching to
switching to substitutes substitutes.
4 The customers has really no + No commercially viable substitute as of now.
substitute
Bargaining Power of Suppliers
S.N. Bargaining power of suppliers
1 Industry inputs from suppliers are
commodities
2 Firms in the industry face no switching
cost
3 There is no threat of credible forward
integration from the suppliers in the
industry?
4 The number of suppliers far exceeds
the number of incumbents
+ +/- - Remarks
- Industry inputs from suppliers are
specialized technologies and hence
have a minor degree of differentiation.
- High cost of switching. Hardware and
software inputs are all integrated in the
industry, making it difficult to upgrade or
switch suppliers.
+ No. Currently, there is no threat or
precedents of forward integration.
+/- There are several suppliers providing
varied inputs like handset makers, cable
companies, software providers like ZTE,
Huawei. While the switching costs for
industry is high, the multiple number of
suppliers ensures suppliers keep price
competitive.
5 Business of incumbents is very important
to the suppliers
6 Cost of purchase by incumbents are
not significant for the overall cost
+ Since the products and services
provided by suppliers are unique to the
demands of the telecom industry, the
business brought in becomes important
for suppliers.
- Costs are significant, primarily because
it involves making heavy capital
investments.
Intensity of Rivalry
S.N. Rivalry
1 Industry growth is good
2 Not a cyclical industry with
significant seasonality of demand
3 Sunk costs or fixed costs are not
high relatively speaking
4 It is relatively easy to get out of the
industry as there are no long term
contracts & commitments
5 Industry is not fragmented
6 The product is not a commodity &
has many distinguishing features
+ +/- - Remarks
+ India has the world’s second largest
telecom market
+ Not a cyclic industry.
- Fixed cost/sunk costs are high. Specialised
technology implemented for the mobile
capabilities have no other use.
- High exit barrier in form of regulation.
+ Industry is concentrated. Herfindahl index
is 0.17.
+/- Just like commodity. Low product & service
differentiation
7 Customers would incur significant switching costs in - Consumer switching cost is
moving to competitors within industry negligible.
8 There is price leader to provide stability in industry +/- Reliance Jio has emerged as
the price leader in the
industry.
9 Technological obsolescence is rare - Technological obsolescence is
very common as firms have to
constantly buy new spectrum
and adapt to new
technological advancements
in the mobile phone industry.
Overall Industry Attractiveness
S. Force + +/- - Remarks
No.
1 Barrier to Entry 8 1 3 Favorable. Significant entry barriers.
2 Bargaining power of 2 0 6 Unfavorable. The bargaining power of buyers is
Buyers high in the industry.
3 Substitutes 1 2 1 Not entirely favorable or unfavorable. It depends
on the future strategy and path chosen by the
substitute firms.
4 Bargaining Power of 2 1 3 More unfavorable than favorable. Suppliers
Suppliers provide slightly differentiated technological inputs
to the incumbents. Switching costs high even
though number of suppliers is also high.
5 Intensity of Rivalry 3 2 4 Overall, rivalry in the industry, right now is
unfavorable for incumbents.

Conclusion: The industry is mostly unfavorable for telecom firms.