Telecom Sector Analysis

Karthik Suresh
Nov 2015

Telecom Sector Analysis - Nov '15

Agenda

History
Market Segments
Telecom Circles
Executive Summary
Trends
Key investments
Industry Analysis - Porters Five Forces
Industry Analysis - PESTEL
Key players and market share
SWOT Analysis AIRTEL
Risks
Marketing campaigns
Future outlook
References
Telecom Sector Analysis - Nov '15

Telecom : History
Private
players
were
allowed in
Value
Added
Services

Independen
t regulator
(TRAI) was
established

1999

1994

1992

BSNL was
established
by DoT

1997

National
Telecom
policy (NTP)
was
formulated

Broadband
policy was
formulated

2006

2002
2000

NTP-99 led
to low-cost
revenue
sharing
regime

3G
announced;
Spectrum
auction
passed

2004

Reduction
of license
fee; CDMA
technology
and
Internet
telephony
initiated

4G
introduced
by Bharti
Airtel in
Kolkata

2014

2010
2008

Mobile
Number
Portability
(MNP) was
formulated

2012

Facilitating
telecom
specific
SEZs to
promote
India as a
manufactur
ing hub

Spurt in
wifi
hotspots
due to
Digital
India and
Smart
Cities
initiative by
government

Milestones
Telecom Sector Analysis - Nov '15

Telecom : Market Segments

Telecom
sector

Basic
services

Wireless
services

Primary
segments

Internet
services

Radio
paging
and GMPCS

VSATs and
PMRTS

Secondary
segments
1. VSAT Very small aperture
terminals
2. PMRTS Public mobile radio trunked
services
3. GMPCS Global mobile personal
Telecom Sector Analysis -communication
Nov '15
4
by satellite

Telecom : Circles
Telecom
circles

Metro

Mumbai
Delhi
Kolkata

Circle A

Andhra
Pradesh
Gujarat
Karnataka
Maharashtra
Tamil Nadu
Daman and
Diu
Pondicherry

Circle B

Haryana
Kerala
Madhya
Pradesh
Punjab
Rajasthan
Uttar Pradesh
West Bengal
Lakshadweep

Telecom Sector Analysis - Nov '15

Circle C

Assam
Bihar
Himachal
Pradesh
Jammu &
Kashmir
North-east
Orissa

Telecom : Executive Summary

Number of subscribers ( in mil.)
The number of telephone subscribers
is 996.49 million as of Mar-15,
registering a growth of 6.8% over the
previous year

996.49
970.97
957.61
933.01

Mar '14

79.38
77.58

Dec '14 Mar '15

The tele-density is 79.38 as of Marthe previous year

75.8

Jun '14

Sep '14

15, registering a growth of 2.4% over

76.75

Mar '14

Jun '14

Source : TRAI Report, 2015

Teledensity

75.23

942.95

Sep '14

Dec '14

Mar '15

Telecom Sector Analysis - Nov '15

Source : TRAI Report, 2015

Subscriber
distribution
The number of wireless subscribers is

Wireline 3%

969.89 million as of Mar-15,

Rural
Urban

registering a growth of 7.2% over the

previous year. The contribution of the
Wireless

wireless segment is nearly 97%

56%

42%

Source : TRAI Report, 2015

Teledensity trend
77.27

2.3
2.25
72.94

73.55

The wireless tele-density increased from

75.43 at the end of Dec-14 to 77.27 at the

75.43
74.55
2.2

2.16

Wireline
2.12

end of Mar-15, while wireline tele-density

declined from 2.16 at the end of Dec-14 to
2.12 at the end of Mar-15

Source : TRAI Report, 2015

Telecom Sector Analysis - Nov '15

Wireless subscribers
The percentage of GSM wireless
subscribers to the total subscriber
base has remained around 95% over
the last year, whereas the percentage

94%

94%

95%

94%

95%

6%

6%

5%

6%

5%

GSM
CDMA

of CDMA wireless subscribers has

remained around 5% over the last
year

Source : TRAI Report, 2015

Wireless subscriber base (in mil.)

108
72

69

46

59

58

61

135
80

55

47

The wireless subscriber base is

maximum in the state of Uttar
Pradesh (135 mil.) followed by
Maharashtra (108 mil.) and Tamil
Nadu (80 mil.)

Source : TRAI Report, Telecom

2015 Sector Analysis - Nov '15

66%
59%

The number of Broadband and

Narrowband Internet subscribers by
end of Mar-15 are 99.20 million and

23%

203.15 million respectively

5%
1%

28%

Broadband
Narrowband

5%
1%

Source : TRAI Report, 2015

*
128
110

465

160
110
102

441

Monthly ARPU as of Mar15 for All

105
99

467

109

Blended
Pre-paid
Post-paid
490

India in Post-paid, pre-paid and

blended GSM services is Rs. 467,
Rs. 105 and Rs. 120 respectively

Telecom Sector Analysis - Nov '15

Source : TRAI Report, 2015

* - Refer slide no 5

Number of subscribers (PMRTS)

236,334
230,231
225,602
221,453
213,642

Mar '14

Jun '14

Sep '14

Dec '14 Mar '15

Source : TRAI Report, 2015

Number of subscribers (VSAT)

236,334
230,231
225,602
221,453
213,642

Mar '14

Jun '14

Sep '14

Dec '14 Mar '15

Telecom Sector Analysis - Nov '15

Source : TRAI Report, 2015

10

Telecom : Trends

There is increase in the number of wireless subscribers, whereas there is a

decrease in the number of wireline subscribers
The rural subscriber base showed a rise of 11.01% compared to last year,
whereas the urban subscriber base showed a rise of 1.94% compared to
last year
There is increase in the narrowband subscriber base in the wireless
segment, whereas the proportion of narrowband-broadband subscriber
base in the wireline segment has remained more or less the same
In GSM wireless market segment, Bharti Airtel remains the market leader
with a share of 24.63% followed by Vodafone (20.03%) and Idea (17.2%)
respectively
In CDMA wireless market segment, Reliance Group remains the market
leader with a share of 51.84% followed by Tata Group (27.19%) and
Sistema (16.99%) respectively
In the wireline market segment, BSNL remains the market leader with a
share of 61.71% followed by MTNL (13.35%) and Bharti Airtel (12.83%)
respectively

Telecom Sector Analysis - Nov '15

11

Telecom : Key investments

Bharti
Infratel

Bharti Infratel has planned to take over the telecom

towers of Vodafone and Idea Cellular in India at a valuation
of US$ 785.82 million

Softbank

Japanese telecom company Softbank has planned to invest

around US$ 10 billion in Indias IT sector over the next few
years

Ericsson

Ericsson has won US$ 9.42 million three year operation

support systems (OSS) deal from Reliance Jio Infocomm

Reliance Jio

Reliance Jio Infocomm Ltd has signed an agreement to

share telecom towers of GTL Infrastructure Ltd., the seventh
tower-sharing agreement

ISUN

Chennai based Exotic Global Trades Pvt Ltd. launched its

telecom products under the ISUN brand that will be bundled
with BSNL schemes
Telecom Sector Analysis - Nov '15

12

Telecom : Industry Analysis (Porters 5S)

Competitive Rivalry
Customers low switching cost and price sensitivity are
increasing competition amongst players
High exit barriers are also intensifying competition
There are around 6 to 7 players in each region, leading
to fierce competition
Threat of New Entrants
Strict government
regulations
Extremely high
infrastructure setup cost
Difficulty in achieving
economies of scale
Bargaining power of
suppliers
High bargaining power of
suppliers as there are only
a few suppliers in the
sector
High cost of switching
suppliers

Threat of substitutes

Bargainin
g Power
of
Customer
s (High)
Competiti
ve Rivalry
(High)

Hardly any threat of

substitute product because
there are no substitutes
available in the market

Bargaining power of
customers
Low switching cost and
mobile number portability
give customers high
bargaining power
Customers are price
sensitive

Threat of
New
Entrants
(Low)

Bargainin
g Power
of
Suppliers
(High)

Threat of
Substitut
es (Low)

Telecom Sector Analysis - Nov '15

13

Telecom : Industry Analysis (PESTEL)

Political:

The Government of India plans to cut license fees by up to 33 per

cent for operators
The Government has been proactive in its efforts to transform India
into a global telecommunication hub
Relaxed FDI (Foreign Direct Investment) Norms
The Government recently revised the M&A ( Mergers & Acquisition)
guidelines for the telecom sector; it raised the limit on the market
share of a merged entity in a circle to 50 per cent from 35 per cent
earlier
To boost local research and manufacturing of telecom products, the
government has proposed an investment of USD32.2 billion in three
phases:
i) USD9.2 billion to the Telecom Research and Development Fund,
ii) USD4.6 billion for the Telecom Entrepreneurship Promotion
Fund, and
iii) USD18.4 billion to the Telecom Manufacturing Promotion Fund
during the 12th
Five-Year Plan

Telecom Sector Analysis - Nov '15

P
L

E
PESTE
L
Analy
sis

S
T

14

Economic:

The Indian Telecom industry has been playing an important role in

the world economy and global revenues. In 2008, there were USD 4
trillion, expected to grow at a steep 11% p.a. CAGR over the next 2
years
Indias telecom service revenue was USD$ 55 billion in 2012, and
believed that it is projected to almost double to USD$ 90 billion by
2015
GDP contribution 6%.
Output per annum - 136,833 crores per annum & Increasing 20%
for every month
Increase in disposable incomes
Falling mobile phone prices
Falling call charges rates with more utility

P
L

E
PESTE
L
Analy
sis

S
T

Telecom Sector Analysis - Nov '15

15

Social:

Growing young population

Change in Lifestyle
Increment in services which includes digital television, voice and
high-speed internet services and various social application
Chain of information flow
Building awareness and connecting people
Exploitation of young minds, too compulsive, and sometimes too
much information
Irritating and annoying due to excess amount of calls and messages

P
L

E
PESTE
L
Analy
sis

S
T

Telecom Sector Analysis - Nov '15

16

Technological:

Driven by 3G and 4G services, it is expected that there will be

huge machine-to-machine (M2M) growth in India in 2016-17.
Theres a lot of scope for growth of M2M services in the
government's ambitious Rs. 7,000 crore (US$ 1.1 billion) 'Smart
City' program
Increasing MOU (Minutes Of Use) and Data usage
Liberalisation of spectrum and convergence of network, services
and devices
New and upgraded devices and applications with massive features
like GPS, WiFi, etc
SIM cards, Nano SIM cards, etc

P
L

E
PESTE
L
Analy
sis

S
T

Telecom Sector Analysis - Nov '15

17

Environmental:

Environmental Issues are increasing on daily basis

Excess use of Electricity
Causing air pollution, by emitting unnecessary radio waves,
strangling cables all over the cities
No proper and systematic installation
Unnecessary Ads, Billboards and exploitation of papers
ISO 14004:2004 provides guidelines on the elements of an
environmental management system and its implementation

P
L

E
PESTE
L
Analy
sis

S
T

Telecom Sector Analysis - Nov '15

18

Legal:

National Telecom Policy, aims at a One Nation-One license regime

with no roaming charges and nation wide number portability
Telecommunications falls under the legislative competence of the
Union government and the Parliament and not the States
In India Legal framework, covering telecom sector include various
services like Internet, voice mail, sat. communications, ECommerce, broadcasting services etc
The Legal Framework is provided by:
1. The Indian Telegraph Act 1885
2. The Wireless Telegraphy Act 1933
3. The Telegraph Wires (Unlawful Possession) Act1950
4. The Cable Television Network (Regulation) Act1996

P
L

E
PESTE
L
Analy
sis

S
T

Telecom Sector Analysis - Nov '15

19

Telecom : Key Players

Wireles
s (GSM)

Wireles
s
(CDMA)

Wirelin
e

1
2

1
2

1
2

Source : TRAI Report, 2015

Telecom Sector Analysis - Nov '15

20

Telecom : Top 10 market players

Market share e.Mar 15

5% 2%
7%

23%

8%

9%
18%
11%

Bharti Airtel
Vodafone
Idea
Reliance Comm.
BSNL
Aircel
Tata
Telewings
Sistema
Others

16%

Source : TRAI Report, 2015

Telecom Sector Analysis - Nov '15

21

Telecom : Wireless GSM market share

Market share e.Mar 15

5% 1% 1%
6%
25%
8%
9%
9%

20%
17%

Bharti Airtel
Vodafone
Idea
Reliance Comm.
Aircel
BSNL
Tata
Telewings
Videocon
Others

Source : TRAI Report, 2015

Telecom Sector Analysis - Nov '15

22

Telecom : Wireless CDMA market share

Market share e.Mar 15

4% 0% 0%
17%
52%
27%

Reliance Comm.
Tata
Sistema
BSNL
MTNL
Quadrant

Source : TRAI Report, 2015

Telecom Sector Analysis - Nov '15

23

Telecom : Wireline market share

Market share e.Mar 15

4% 1% 0% 0%
6%
13%
13%

62%

BSNL
MTNL
Bharti
Tata
Reliance
Quadrant
Sistema
Vodafone

Source : TRAI Report, 2015

Telecom Sector Analysis - Nov '15

24

Telecom : SWOT Analysis (AIRTEL)

Strengths:
1.

2.
3.

4.

5.

Renowned Telecom company:With its 19+ years of rich

experience in telecom industry this MNC had travelled far to become
worlds 3rdlargest telecom operator overseas with operations in
nearly 20 countries.
High Brand Equity:It is one of the pioneer brands in
telecommunication having a high brand recall and with a whopping
subscriber base.
Extensive infrastructure:With the formation of Indus tower & due
to its partnership with Idea & Vodafone, the infrastructure of Airtel
has extended in all parts of the country resulting into nationwide
penetration.
Strategic Alliances:The company has top notch stakeholders,
namely Sony Ericsson, Nokia and singtel, and the recent one being
Apple. Such strategic alliances boost the brand equity and the
bottom line of the company.
Torchbearer of the telecom Industry:With its number 1 spot
due to its excellent services in developing economies, Airtel has
interconnected the life of people in an highly efficient way. Thus,
where Vodafone is an external entrant, Airtel is a leading nationwide
player in India and the torchbearer of the telecom industry in India.

Telecom Sector Analysis - Nov '15

Strengths

Weakness

Opportuni
ties

Threats

25

Weakness:
1.

2.

3.

Outsourced Operations:Outsourcing operations helped Airtel in

lowering its cost. But on the other hand, they are running the risk of
being dependent on some other companies which may affect its
operations.
Venturing into African operations:Although its been 4 years
that Airtel has acquired Zains Africa business, but Airtel is still
struggling to turn around the unit which was bought at a whoppy 9
billion dollars.
High Debt:With its acquisitions turning out to bad investment, and
credit being high and margins being low, Airtel group is under high
debt. Airtel does not have as deep pockets as Vodafone.

Telecom Sector Analysis - Nov '15

Strengths

Weakness

Opportuni
ties

Threats

26

Opportunities :

1.
2.
3.
4.

5.

Strategic Partnership:Partnering with smart phone companies is

going to be a smart strategy as far as MNP (mobile number
portability in India) is concerned.
Market Development:With fierce competition in the telecom
industry & shrinking margins, venturing out in new
markets/developing economies will prove fruitful for the company.
VAS:VAS (Value Added services) is going to future of the
telecommunication industry & by specializing itself in this vertical
Airtel can differentiate itself in highly competitive market
Untapped geography of the current market:Although it is
currently providing 3G & 4G services, but these services are limited
to specific geographical locations. Expansion of these services to
most of its regions will help the company get more margins and
customers.
LTE:Airtel has taken the lead with this version of LTE in 4 cities, but
deployment needs to catch up pace. Airtels LTE network for mobile
broadband is still confined to only 4 cities in India.

Telecom Sector Analysis - Nov '15

Strengths

Weakness

Opportuni
ties

Threats

27

Threats:

1.

2.
3.

Government Regulatory Framework:With the auction of

spectrum & change in the government policies on a regular basis, it
is a potential threat to the stability & existence of this industry
thereby affecting the players.
Competition:Price war in the home market and declining margins
due to this is adversely affecting the overall business of the group.
MNP (Mobile number portability):MNP gives the customer
independence to change the service provider while retaining the
number and as Airtel charges are premium over other service
providers, it can see slump in subscriber base in the next fiscal year
with PAN India MNP applicable from May 3rd2015.

Telecom Sector Analysis - Nov '15

Strengths

Weakness

Opportuni
ties

Threats

28

Telecom : Risks
1. Failure to realize new roles in evolving industry ecosystems
2. Lack of regulatory certainty on new market structures
3. Ignoring new imperatives in privacy and security
4. Failure to improve organizational agility
5. Lack of data integrity to drive growth and efficiency
6. Lack of performance measurement to drive execution
7. Failure to understand what customers value
8. Inability to extract value from network assets
9. Poorly defined inorganic growth agenda
10. Failure to adopt new routes to innovation

Telecom Sector Analysis - Nov '15

29

Telecom : Marketing Campaign (Idea)

No Ullu banana,is the new Idea! This is the essence of the latest brand
campaign by Idea Cellular, featuring its Brand Ambassador Abhishek
Bachchan.

The ad highlights the power of mobile internet on the Idea

network, and how it can empower users to evade
unscrupulous situations and people in India.
Telecom Sector Analysis - Nov '15

30

Telecom : Marketing Campaign (BSNL)

Almost a year since it roped in Deepika Padukone as its brand ambassador
to give it a young and energetic image, the state-owned telecom major,
BSNL has rolled out an advertising campaign for its value-added-services
(VAS).

VAS is the only area where there is a huge opportunity of

making large profit in current telecom market as it helps
the players to increase their Average Revenue Per User
Telecom Sector Analysis - Nov '15

31

Telecom : Future Outlook

Telecom Sector Analysis - Nov '15

32

Telecom : References

P Arptita, S Ashish, C Sandeep; Future trends in Indian Telecom Industry, PWC

Report, 2014, Pg. 4/6
D Jonathan, F Holger, S Amit, B Adrian;Top 10 risks in Telecom Industry, EY
Report, 2014, Pg. 4/32, Pg. 30/32
K Noshir, M Anu, M James, B Jacques, P Pradeep;Indias technology
opportunity: Transforming work, empowering people, McKinsey Report, 2014 ,
Pg. 15/133, Pg. 22/133, Pg. 47/133
Telecommunication, IBEF Report, August 2015, Pg. 23/55
The Indian Telecom Service Performance Indicators, TRAI Report ,Mar 2015,
Pg. 5/178 , Pg. 6/178 , Pg. 9/178 ,Pg. 19/178 , Pg. 21/178 , Pg. 29/178 , Pg.
33/178 , Pg. 34/178 , Pg. 38/178 , Pg. 46/178 , Pg. 48/178 , Pg. 49/178 , Pg.
55/178 , Pg. 57/178
A Nitin, T Jehil, V Aneesh, A Naveen;Indian Media and Entertainment Industry
Report, KPMG Report, 2015, Pg. 104/274, Pg. 105/274, Pg. 106/274
L Paul, S Duncan, C Cornelia;Technology, Media and Telecommunications
Predictions, Deloitte Report, 2015, Pg. 13/76, Pg. 41/76, Pg. 42/76, Pg. 45/76
Union Budget Analysis, FICCI Report, 2015-16, Pg. 65/69, Pg. 66/69
Wikipedia
Telecom Sector Analysis - Nov '15

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Contact :
[email protected]
Telecom Sector Analysis - Nov '15

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