Vodafone Idea-Without an Idea
Group 4
Indian telecom Industry
Second largest telecom industry in the world with 1.2 billion mobile phone subscribers
and over 90% teledensity
Contributed 6% to India's GDP in 2020-21, projected to grow at a rate of 9.4% annually,
between 2020-25
Two segments: Telecom Infrastructure industry and Telecom Service Provider Industry
Significant developments in the service provider industry triggered by the disruptive entry of
Reliance Jio forced every other player to lower their prices, resulting in the inception of an
intense rivalry in the industry.
Idea Cellular Vodafone India
1995 2007
BEGINNNING OF OPERATIONS
LAUNCH
Vodafone Group acquired a majority
Launched by Aditya Birla group in 1995,
stake in Hutchison Essar and renamed it
initially operated in Maharashtra before
Vodafone India, started operating from
expanding to other states
Mumbai
2011, 2016 2010, 2016
3G AND 4G SERVICES
M-PESA, 4G SERVICES
First cellular company to introduce 3G
Launched M-Pesa, a mobile money
services in India, in 2011 and introduced
transfer in India and launches 4G in 2016
4G services in 2016
2018
MERGER
Formed the largest telecom company in
India by subscriber count, a merger which
is hoped to be a fierce competitor in the
indian telecom industry
FRIDAY, JUNE 14
6:00 PM WEDDING REHEARSAL
Followed by Rehearsal Dinner Party at
Fleming Island Restaurant
Effects of Merger
Employee Customer Other
Uncertainty among workers Because of the increased stakeholders
5000 workers let off. Some competition brought about Merger reduced the telecom
resigned, some were by the merger, consumers sector to to three players:
demoted. will spend less Bharti Airtel, Reliance Jio,
ABG provided housing to Amalgamation of the assets and Vodafone Idea
Idea employees who were let of both the firms, improved The government gets
off, Vodafone didn't services, airwaves, and benefitted because of the
Cultural gap affected employees price wars in the telecom
surviving workers Improved network quality industry
Others
Market transition BSNL
10%
12%
Bharti Airtel
25%
Aircel
9% JIO
36%
Vi
22%
2016
BSNL
9%
2022
Reliance Vodafone
9% 19%
Idea Airtel
17% 32%
The telecom industry transitioned from 8-9 players to only 4 significant players, while the consolidated share of
Vodafone and Idea of 19% and 17% contracts to only 22%
The key player in this transition was JIO, which acquired 36% of the market share in just 6 years.
JIO was the first player to use 4G network using VoLTE also it introduces affordable pricing plans by using predator
pricing.
After the entry of JIO in the market, the key players in the market see a significant fall in net profit as compared to
the previous year, which forces some to leave the market while others merge.
This transition built a robust network infrastructure that included fiber optic cables, data centers, and cloud
computing services
Rationale behind the MERGER
JIO's monopoly Cost Market share Consolidated Customer
Effectiveness dominance spectrum satisfaction
With JIO's entry in It was expected to bring 400 M Combined Vodafone's 411Mz and Focused towards
market in sep. 2016 a 14000 crore of cost subscribers and 35% of Idea's 316 Mz spectrum, stronger and more
it becomes tough for savings and 30% of market share with 40% they can compete with customer-focused entity,
other companies to EBITDA margin of industry revenue JIO's with wider range of
survive (highest in industry) 860 Mz spectrum products and services.
Debt - Challenging the survival
Total debt- 1.8 lakh Debt conversion Share Price Credit Rating
crore
Spectrum - 96270 C 16,000 crore of The company loses CRISIL gave Vi a credit
AGR - 60960 Cr interest liabilities 94% of its share value rating of BBB+
Bank debt - 23080 Cr payable to the from all-time high whereas the
government because of this immediate competitor
converted to equity soaring debt Airtel was given AA+,
giving 33% of stake in which makes
business Vodafone to issue
debt at higher rates
Primary Activities
Inbound Operations Outbound Marketing After Sales
Logistics Logistics and Sales Service
Sourcing of The operations part It includes the Marketing via Dedicated team for
equipments such as include the design, delivery of products print media, customer support
fibre optic cables, development, and services to social media, and technical
routers, switches installation, and customers via various television. support
from different maintenance of channels such as retail
suppliers all around telecom network stores (Vi Stores), Strong emphasis
the world. services online channels & on customer
dealer networks relationship
management
Secondary Activities
Procurement R&D HRM
Negotiation and Supplier Invested heavily in new Digital Mode of training -
management to minimize technologies such as 5G delivering 113,776 hours of
the cost and remain training.
competitive in the market
Core values of Health, Safety &
Well being (HSW)
1 Operations - Vast Network Coverage
Strategic especially in rural areas.
Advantages 2 Sales & Marketing - Binge all night
and weekend data roll over to attract
the youth
Industry Rivalry (High)
Vodafone Idea (Market Share: 22.83%) faces stiff competition from established players like Airtel (31.55%) and Reliance Jio (35.37%), as well
as smaller players like BSNL (9.96%) and MTNL (0.28%).
Growth Rate: In recent years, the telecom industry is growing as the number of subscribers and data usage increasing rapidly. As per the
TRAI report
wireless subscribers: 1.15 billion (Dec'18) 1.17 billion (Dec'19)
CAPEX: increase in deployment of 4G and 5G network, expanding their 4G outreach. Acc. to ICRA, in 2019 the industry incurred a capex of
more than Rs. 1 lakh crore.
Capacity Augmentation: The telecom sector is set to grow at a CAGR of 9.4% from 2020 to 2025 by adding new cell towers, increasing
radio access points, deployment of 5G networks and fibre optic networks, or upgrading existing equipment to support higher data speeds
and greater capacity.
Commodity vs Differentiated products/services:
Commodity: mobile phone service or broadband internet access - marketed based on price - can create a highly competitive market
with low-profit margins.
Differentiated Products: higher network speeds, more reliable service, cloud storage or home security systems - can command higher
prices - create a competitive advantage and capture a specific market segment.
Exit Barriers: As all the firms have heavily invested in the industry, it is difficult for them to leave the industry.
Bargaining power of Suppliers (Low)
Limited number of buyers in the industry compared to numbers of suppliers present in the market - easy for
buyers to switch suppliers - suppliers don’t have luxury to switch to another buyer.
Standardised equipment, not much differentiation between suppliers
Require equipments in large quantity - can ask for lower price for bulk order
Large number of equipment manufacturers along with enough vendors lowers the switching cost and dilutes
the bargaining power.
Suppliers in the telecom industry generally offer goods and services like components, software, and network
hardware. These vendors frequently have specialized skills and abilities that are vital to the functioning of
telecom businesses. However, they may not have the means, knowledge, and delivery networks necessary to
successfully contend if they move towards integration into the telecom sector.
Bargaining power of Buyers (High)
In the consumer market, Consumers expect telecom carriers to provide a wide range of services. People want to get the greatest
services while paying the least amount of money.
In the enterprise market, Large enterprises have significant bargaining power because they typically purchase large volumes of
telecom services and have complex needs that require customised solutions.
Availability of alternatives in the industry that can provide wide range of prices and services as per the demand/preference of
the buyer, gives buyers significant bargaining power.
Buyers may also be able to switch providers more easily if they are dissatisfied with the service, which can put pressure on
telecom companies.
The low differentiation between the services provided by the telecom operators and low cost of switching for retail customers
backed by Mobile Number Portability and low connection costs has given the buyer power of switching between the telecom
operators,
Threat of New Entrants (Low)
New entrants may struggle to achieve the same economies of scale (due to high investment and it takes years to recoup), making it difficult to compete on price
or provide the same level of service quality as established companies.
Companies new in the telecom industry have to pay a huge licensing price to purchase the spectrum band, and the technology in this industry is also evolving
quickly. As a result, any new participant will have to invest heavily in network infrastructure and technology acquisition/development.
Although there isn't a lot of product difference between the existing players, the existing players have achieved a number of services, network coverage and
quality, branding and marketing, etc. that are too high for the new entrants to accomplish and have very few options to add any more services to distinguish
itself from the existing players.
Established businesses have often established large distribution networks, which include physical locations, internet sales platforms, and collaborations with
third-party merchants which restricts new entrants from distribution channels, making it harder to contact potential clients and create a customer base.
Existing players are quite aggressive and it’s not easy for a new player to survive.To maintain a competitive edge, provide smooth services, and bring in more
customers at a lower cost
Government and Legal Barriers:
For traffic between long-distance and short-distance charging centers, private operators will be required to enter into an agreement with fixed-service
providers within a circle.
The network's implementation will take about nearly seven years. Any gaps in network coverage would result in the encashment and loss of the bank
guarantee for that phase.
Threat of Substitutes (Low)
The Telecom industry is evolving, and so is the threat of alternatives, mainly services and products provided by non-
traditional telecom industries, such as cable TV and satellite providers. While, the voice traffic has decreased for
wireless telecom providers as replacements such as IP telephones and broadband services deliver quicker and more
reliable data.
Thank You
