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http://www.linkedin.com/pub/dir/ramakrushna/panigrahi
Competitor profiling
and
analysis
ByRamakrushna PanigrahiIndian Centre for Telecom & ManagementDate: 29th November, 2006
SWEDEN
THAILAND
HONG KONGINDIA
UK
REPUBLIC OFIRELAND
NORWAY
DENMARK
MACAU
ISRAELITALY
AUSTRIA
THE FUTURE IS HERE
COUNTRYHK (+ Macau)IndiaIsraelThailandGhana & SrilankaTOTAL
SUBSCRIBERS2.08
20.352.620.740.66
26.47All Figures in Million
THAILAND
AUSTRALIA
GHANAMACAU
VIETNAM
INDONESIA
SRILANKA
HTIL TOTAL SUBSCRIBERS : 26.5 mn
INDIA 77%
REST 23%
HTIL’s 3m new additions in 3rd Quarter, 2.8m came from India Best performing market remains India, followed by Israel
All Figures in Million
Asim Ghosh
MD
Director Operations(Delhi/ Punjab/ Haryana)
Director Operations(Karnataka/ Kerala/ AP)
Dir Operations (Gujarat/ Rajasthan/ ah & Goa)
CEO Chennai/ Tamilnadu
CEOUP (E) & (W)
CEOKolkata & ROB
VP Management Services Corporate
VP Corporate Finance
CFO
Director Technical Corporate
Head Legal Counsel
Corporate
Hutchison Essar Senior Management
Team
Sandip DasDeputy MD
Kolkata & ROB
Director operationsMumbai
Director IT *Corporate
Director Business Development Corporate
Director HRCorporate
Chief Marketing Officer Corporate
Sr. VP Service Delivery Corporate
Corporate
Hutchison Essar Senior Management Team
* Jointly report to MD
6.14.4
5.8
8.57.5
8.4
12.5 13.32 14
3.3
7.2
3.65.54
12.2211.7619.35
3.4
20.922.7
24.6
27.6
19.4
0
5
10
15
20
25
30
2000 2001 2002 2003 2004 2005 2006
Indian
Economy
2000 2001 2002 2003 2004 2005 2006
GDP GROWTH PER CAPITA GDP(in Rs '000)
INFLATION(as %age of WPI) GDP(in Rs billion 000')
3.2
11.3 1.3
1.6 1.7 1.7 1.8 1.81.8
2.1
2.5
0
1
1
2
2
3
3
4
Indon
esia
Malays
iaInd
ia
Taiwan
Hong K
ong
avera
ge
Philipp
ines
Thaila
nd
Singap
oreKore
aChin
a
Vietna
m
%
Telecom spending as % of GDP
Area 3,166829 km2 Population 109 cr.7th largest country1/6th of world population
Service53.8%
Industry27.6%
Agriculture 18.6%
Economic indicators(refer definitions *)
TOTAL PER CAPITA ##
RS Billion Us $ Billion $ PPP Terms Rs US $ $ PPP Terms
GDP 27,600 599 3,036 25,356 550 2,789 6.18
National income 22,520 489 2,477 20,696 449 2,276 6.41
Net NDI* 25,971 563 2,856 23,860 518 2,624 6.55
Private income 25,296 549 2,782 23,240 504 2,556 6.73
Personal income 24,219 525 2,664 22,250 483 2,447 6.59
Personal DI** 23,585 512 2,594 21.667 470 2,383 6.57
DS of HS*** 5,799 126 638 5,328 116 586 9.77
## ANNUALIZED GROWTH RATE (1994-2004)
* / ** /*** Refer Backup Slides Source: Capitaline
Economic
Indicators
Cable TV Network+Intern
et2%
Manufacturing & Consultancy
16%
Others3%
Basic Telephone
Service4%
Cellular Mobile Telephone
Service 26%
Holding Companies
48%
Year Wise actual Inflow of FDI in Telecom Sector (August '91 to March
'2004)( Rs in Million) YEAR 1996 1997 1998 1999 2000 2001 2002 2003 2004 Total
FDIINFLOW
7648 12451 17756 2126 2885 39709 10815 3014 874 99509
Sector Wise actual Inflow of FDI in Telecom Sector
(August '91 to March '2004)( Rs in Million)
METRO
A CIRCLE
B CIRCLE
C CIRCLE
Industry Overview
Telecom Subscribers - Country wise December 2005China743
USA360
Ind125
Rus130
Germany134
Japan 153
0
200
400
600
800
mn.
sub
scri
bers
Source: International Telecommunications Union (ITU),
India - Aug 2006165 mn. subs
Expected to overtake US by 2008
Know the other and know yourself:
Triumph without peril.Know Nature and know the
Situation: Triumph completely.
Sun Tzu (~360 B.C.)
* Based on excerpts from Worldwide Wireless Data Trends 2006 - a mid year update. Datacomm research
Penetration Circle Wise
Revenue growth
910
11
15
19.5
0
5
10
15
20
2002 2003 2004 2005 2006
$ B
illio
n
Subscriber growth
CAGR -22%
India could potentially be a USD 40 bn - USD 45 bn telecom market by FY 2010…
Indian Brand Equity Foundation
Indian Service industry (FY 2005-06)
TOTAL REVENUE : Rs 67,523 Crores
Regulatory % age of revenue
11%
10%
36%
30%
Industry Overview
Continued ……
Subscriber growth
4453
76
98
164
0
60
120
180
2002 2003 2004 2005 Aug-06
Teledensity 14.8 (Aug 2006)
CAGR -40%
Source: www.voicendata.comTelecom regulatory Authority of India (TRAI)Year indicates financial year ending March
Regulatory charges
% age of revenue
Service tax, GST 10% + GST
License Fee 5 – 10%
Spectrum Charge 2 ~ 6%*
USO Included in license fees
Total Regul.. charges 17%~26% + GST
*Backbone spectrum charges extra GST–Goods & Service Tax
Source: TRAI
20%43%
29%
67%
Falling tariffs have led to exponential subscriber growthIndustry
OverviewContinued ……
Reasons for Falling tariffsUnified Access Services Licensing Regime (which led to the growth of
CDMA operators),Calling party paysA lower access deficit charge from 30% to 5% of revenueReplacement of high fixed entry fee with revenue-sharing feeFurther reductions in revenue sharing in 2001 and 2003.Massclusivity, one for all services.
ARPU(Rs Per Month during Quarter ended June 30,2006)
CIRCLE POST-PAID
PRE-PAID
BLENDARPU
Circle A 660 275 343
Circle B 511 286 319
Circle C 580 328 374
Metro 758 287 406
All India 643 286 352
Priv SPs 686 273 345
BSNL/MTNL 544 324 370
Industry Overview
Continued ……
Average quarterly decline of 3.1% in ARPU in the past three years. Despite the decline,quarterly revenues have risen by an average of
15% during the period.
Clearly, subscribergrowth MOU have more
than compensated for thedecline in ARPU.
Telecom sector targets announced by Government of India250 million subscribers by 2007500 million subscribers by 201020 million broadband subscribers by 2010Mobile access to all villages with population more than 5,000 by 2006Mobile access to all villages with population of more than 1,000 by 2007
Sector Overview –Fixed line
37422006
4316109 38776081591071 355652 270832 188756
0
5000000
10000000
15000000
20000000
25000000
30000000
35000000
40000000
BSNL TATA MTNL BHARTI RELIANCE HFCL SHYAMHerfindahl-0
BSNL TATA MTNL BHARTI RELIANCE HFCL SHYAM
Subscriber Growth - Mobile vs Fixed
4141
434238
123
52
7 13 34
0
35
70
105
140
2002 2003 2004 2005 2006
Mn
. su
bsc
ribe
rs
Fixed (mn. subs) Mobile (mn. subs)
Fixed Mobile Crossover achieved in 2004
A commonly accepted measure of market concentration. < 1,000 competitive; 1,000-1,800 moderately concentrated; 1,800 or >highly
concentrated marketplaceHHI = s1^2 + s2^2 + s3^2 + ... + sn^2 (where sn is the market share of the ith firm).
Herfindahl-Hirschman Index or HHI
HHI FIXED = 6230
Sector Overview –Wireless
20357200
10363546
8435405
3804225
2437922
2196965
1045301
62004
29661
HUTCH
IDEA
TATA
AIRCEL
MTNL
SPICE
BPL
HFCL
SHYAM
HHI wireless 1635.42
27061349
25979332
23532080
0 5000000 10000000 15000000 20000000 25000000 30000000
BHARTI
RCVL
BSNL
Sector Overview –Wireless
Continued …….
Geographical distribution of India wireless subscribers, July 2006 India wireless market shares, July 2006
Reform thrust on independent
regulation,competition & investment
facilitation
Pre-reform Partial Deregulation Further Deregulation
Pre-1994 1994-1999 1999 - 2002
MTNL -Mumbai and Delhi; DTS elsewhere
No mobile service
NLD - DoT
4 private fixed service providers with less than 1% market share
2 GSM mobile players in each circle
13 players start
Licenses converted to revenue sharing
Private sector share less than 5% in revenue terms
Competition in NLD and ILD
4 mobile operators /
Calling Party Pays
CDMA launch
3-6 operators in each circle
Intra-circle merger guidelines
Unified Licensing
Take-off
2002 onwards
per/ BSNL ILD - VSNL
13 players start mobile service
4 mobile operators / circle
FDI - 49 %
Unified Licensing
FDI - 74% 2005
2001199919981995-1996
19971994 2000 2002 2003Upto1994
National Telecom Policy, 1994
New Telecom Policy, 1999
2004
Unified Licensing Regime
TRAI has moved to “competition regulation” from “cost-plus protections”.Pradeep Baijal(Former Chairman TRAI)
Principles of network regulation always said that once level playing field is established in a network, the regulator should allow market forces and competition to take over.
TRAI’s Recommendations
2006Number portabilityConvergence
2005Unified LicensingQuality of Service regulationRural Telephony
TRAI’s Recommendations
Independent regulation has been a critical factor
in growthMature regulatory regime and an enabling
policy framework already in place
Rural Telephony
2004Intra-circle merger guidelinesInternet / broadband penetration
2003Calling Party Pays RegimeUnified Access LicensingReference Interconnect Order
2002ILD opened to competitionInternet Telephony allowed.Reduction in License fees
Recent domestic & cross-border M&A
Industry Trends > Consolidation> Increasing Foreign Investment> Tariff Innovation> Progressive regulation> Growth driven by mobile/ penetration still low> Heavy Infrastructure Investment
TELECOM VALUE CHAIN
EV NO
ASP
SP
CP
OEM 2
SI
3PAP
NI
OEM 1
CP
CA
EU
MVNO
PORTER’SFIVE FORCES
DETERMINING SEGMENT
STRUCTURAL ATTRACTIVENESS
SUPPLIER
PO
TE
NT
IAL
E
NT
RA
NT
S
BUYERS
INDUSTRY COMPETITORS
Proprietary learning curve Economies of scale Capital requirements Brand identity Switching costs Expected retaliation Proprietary products
Supplier concentrationImportance of volume to supplier Differentiation of inputs Switching costs of firms Threat of forward integration
“The Elephant is on the dance floor……and the Band is playing a Mobile Tune……Get on that dance floor with the Indian Elephant”!!!NEIL GALLOWAYHead of Asian TelecomABN AMRO BANK, December 2003
SU
BS
TIT
UT
ES
Bargaining leverage Buyer volume Buyer information Brand identity Price sensitivity Product differentiation Substitutes available
Switching costs of adopters Buyer propensity to substitute Relative price performance of substi-tutes
Wireless Industry5-Force Analysis
SUPPLIER POWERNetwork Operator
POWERMany
MARKET ENTRYNetwork OperatorInfrastructure ProviderDevice ManufacturerApplication ProviderContent Provider
ENTRYHard
DifficultDifficult
EasyEasy
BUYERSNetwork Operator
POWERStrong
COMPETITIONNetwork Operator
RIVALRYIntenseNetwork Operator
Infrastructure ProviderDevice ManufacturerApplication ProviderContent Provider
ManyIntenseIntense
WeakStrong
Network OperatorInfrastructure ProviderDevice ManufacturerApplication ProviderContent Provider
StrongWeak
StrongStrongStrong
SUBSTITUTESVoice n data N/WNetwork ComponentsCell PhonesApplicaion & Content
NUMBERMany
FewMany
Few
Network OperatorInfrastructure ProviderDevice ManufacturerApplication ProviderContent Provider
IntenseIntenseIntense
WeakStrong
33,918
36,090
39,500
35,000
36,000
37,00038,000
39,000
40,000
5,003
8,003
11,663
0
2,000
4,000
6,000
8,000
10,000
12,000
2003-04 2004-05 2005-06
2,701
4,365
6,837
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
2003-04 2004-05 2005-06
1,663
2,262
2,966
1,500
2,000
2,500
3,000
Revenue Trends of Service Providers
60%
45.7%
9.5%31.1%
61.6%
56.6%
33,918
31,000
32,000
33,00034,000
35,000
2003-04 2004-05 2005-06
2,707
5,387
11,288
0
2,000
4,000
6,000
8,000
10,000
12,000
2003-04 2004-05 2005-06
0
500
1,000
2003-04 2004-05 2005-06
698
1,347
2,575
0
500
1,000
1,500
2,000
2,500
3,000
2003-04 2004-05 2005-06
6.5%
99%
109.6%
93%
91.2%
36%
Reach of Mobile Service Providers
Company Cumulative Investment
Mar 06 (Rs crore)
No of retailers as of Mar 2006
No of cities/town Techno.. Circle
Mar 06 Mar07*
Bharti 15,923 400,000 4,000 5,200 GSM 23
Hutch NA NA NA NA GSM 16
Reliance 14,799 255,000+ 3,824 5,200 GSM,CDMA 23
BSNL NA NA 5,000 7,000 GSM,CDMA 21
Idea 7,700 125,000 1,944 3,888 GSM 11
Tata Tele 10,000+ NA 2,500 4,000 GSM 20
NA stands for not available *forecast
Marketing
V&D Estimates CyberMedia Research
Telecom 35%
Financial 15%
Media & Ent 15%
AUTO 15%
FMCG's 15%
CATEGORY SPENDS 2004 CATEGORY SPENDS 2005
Source: Ogilvy
Telecom 35%
Financial 15%
Media & Ent 15%
AUTO 15%
FMCG's 15%
Subscriber growth comparison:
Operator wise
Subscriber growth comparison:
Operator wiseContinued….
Sound Management & Good understanding Of the consumer market
Strong marketing arm: 900 showrooms & 4000 multi-brand outlet
Enterprise solution arm focusing on business usersFinancially stable. Cash profit this year Rs 4,095 Cr up 46% last year
SWOT Analysis: Bharti Airtel
By 2010 Airtel will be the most
Poor customer care as it is outsourced
Poor Corporate player, seen more as a consumer segment player
Vision
Spectrum constraint: With growing base, the pressure to serve on limited spectrum will affect QoS
By 2010 Airtel will be the most admired brand in India:
Loved by more customers Targeted by top talent Benchmarked by more business GOING GLOBAL: Venturing
attractive overseas market
Decreasing ARPU trend in industry
Sunil B MittalCMD
President JMD
Head Corp Comm
Corp Dir Bus Delivery
JMD & CFO
Corp Dir Chair Office
Corp Dir All & CSR
Director Finance & Business
Integration
Director IT & Innovation
Director Networks
Director marketing & Communication
CTO
President’s office Strategy & Monitoring
Joint President Broadband &
telephone Services
Joint President Enterprise services
Bharti Airtel Senior Management Team
Corp Dir All & CSR
Corp Dir Alliance
Corp Dir HR
Corp Dir Gen Counsel & Company
Secy
Chief of Compliance & IA
Director CSD
Director HR
Director Legal & Regulatory
Director Supply Chain
services
CEO & Dir Corporate
Ex Director Carriers
Joint President Mobility
Ex Director (North)
Ex Director (South)
Ex Director (West)
Ex Director (East)
Bharti Airtel Senior Management Team
Established brand name
SAVES INTERCONNECT CHARGES Optical fiber backbone, which can carry inter & intra circle traffic
Large fixed line subscriber base
Large cash reserves helps in funding cellular investment
Disadvantage of being an INCUMBANT operator
Long and Constrained Decision making process: Political Considerations
SWOT Analysis:BSNL
Subscriber growth is slowing downDisadvantage of possessing a Legacy system
Image of a state owned operator
LARGE FIXED LINE SUBSCRIBER BASE : Can be tapped for second phone/multiple phone
Strong presence in B and C circle which market promising high growth potential.
Network capacity constraint which can hamper growth
Possible clash interests :use of GSM & CDMA services
Threat from private players
Fixed mobile convergence will change BSNL fortune
Deregulation of the sector and exposed to heavy competition
RCOM is the fastest growing wireless company in Asia by
No financial support following the ownership settlementYet to be profitable
High patent fees paid to QualcommHigher handset subsidy.
SWOT Analysis:Reliance
Faster implementation of projects
Integrated operator: Fixed /LD/CDMAAggressive roll out to capture market share and create an entry barrier
Offering VAS to it's customer's almost free of cost or with nominal charges.
Global Roaming remains a challenge for CDMA operators
Aggressive capex allocation for a large GSM expansion plan
wireless company in Asia by EBITDA and EPS
PCOs a high ARPU, high entry barrier business
Planned GSM expansion will pay off
CDMA technology risks
Possible clash interests :use of GSM & CDMA services
Handset subsidies a major profit dragSecond hand handset market in CDMA
SWOT Analysis:IDEA
Subscriber growth peaking up month by month
Now have a Stable ownership.
Strong local branding
Don't have PAN INDIA presence, only strong in Maharashtra circle
Targeting to women segment offering differentiated services
Rule of Three is true for any industry.
Intense Competition from 3 major private operator Bharti, HUTCH and Reliance
Attractive Indian market with monthly addition of over 5 million subscribers
Can improve on market share till the penetration reaches 40% i.e. up to 2011
SWOT Analysis:TATA indicom
Strong brand name
Under the able leadership of visionary Ratan TATA
Strong financial capability of the group to plough in money into telecom
Don't have PAN INDIA presence, only strong in Maharashtra circle
We will strive to be the preferredpartner to our customers by providing
appropriate and cost-effective communication
solutions.
Rule of Three is true for any industry.
Vision
Can improve on market share till the penetration reaches 40% i.e. up to 2011
Attractive Indian market with monthly addition of over 5 million subscribers
Intense Competition from BSNL and Reliance in CDMA platform
Decreasing ARPU
www.auspi.comwww.coai.comwww.worldfactbooks.comwww.wikipaedia.orgwww.voicendata.comwww.trai.gov.inwww.ibef.org
Reliance infocomm’s strategy and impact on the Indian mobile telecommunication scenario
BIBLIOGRAPHY
MEDIA@LSE – paper by Sangeetha VergheseA Value Chain Perspective on the Economic Drivers of Competition in the Wireless Telecommunications Industry By Scott C. Constance & Jeffrey R. GowerMacquarie:India Telecom Sector Report_Initiating Coverage_29Aug06
Thank you !