Porter's Forces on Telecom Industry

TELECOM INDUSTRY

INDIAN TELECOM INDUSTRY OVERVIEW

 315 mn mobile subscribers by September 2010
 39 mn fixed line subscribers by September 2010
 Crossed 25% teledensity mark in March 2010
 10.42 mn subscribers added in month of October 2010
 There are 6-7 telcos operating in each of 23 license areas. Airtel, Reliance, Vodafone & BSNL, who are “the Big 4” have 74% market share
 Growth is expected to continue and even accelerate, reaching a projected 496 mn mobile subs by 2010.

Fixed vs. Mobile PORTER FIVE ANALYSIS :
Threat from New Entrants

Supply Side Economies Of Scale

• declining ARPU
• Infrastructure tenancy costs
• Other FC like BPO

Demand Side Benefits

• Brand pull exists to some extent for brands like airtel /idea/
Vodafone
Customer Switching Costs

• Cost of new connection low
• Proposed number portability

Capital Requirement

• Extremely high infrastructure setup costs
• Spectrum License cost

Incumbent Advantages

• Established brand image
• Reliability of network

Uneven access to Distribution Channels

• Not a factor
Restrictive Govt Policy

• Spectrum and license allocation
• 3G and Number portability policy still unclear.
• 74% FDI cap.
• Minimum requirement of number of towers.
Power of the buyer
• Lack of differentiation among the service provider
• Cut throat competition
• Customer is price sensitive
• Low switching costs
• Number portability to have negative impact
Supplier Bargaining Power
• Large number of suppliers.
• Shared tower infrastructure.
• Limited pool of skilled managers and engineers especially those well versed in the latest technologies.
• Medium cost of switching since changing their hardware would lead to additional cost in modifying the architecture.
• Overall influence on the industry – medium
Rivalry among Existing Competitors
• High Exit Barriers
• High Fixed Cost
• 6-7 players in each region
• 3 out of 4