Competitor profiling and Analysis of Hutch Competitior Profiling and analysis of indian telecom Service providers Marketing Stratergy, SWOT, Porters five forces, Telecom Value chain,

1. Competitor profiling
and
analysis
By
Ramakrushna Panigrahi
Indian Centre for Telecom & Management
Date: 29th November, 2006
http://www.linkedin.com/pub/dir/ramakrushna/panigrahi

2. THE FUTURE IS HERE
REPUBLIC OF NORWAY
COUNTRY SUBSCRIBERS
IRELAND
HK (+ Macau) 2.08 SWEDEN
India 20.35 UK DENMARK
Israel 2.62 AUSTRIA
ITALY
Thailand 0.74 ISRAEL
Ghana & Srilanka 0.66
TOTAL 26.47 INDIA HONG KONG
All Figures in Million MACAU
THAILAND
GHANA VIETNAM
SRILANKA
REST 23%
INDONESIA
INDIA 77%
AUSTRALIA
HTIL TOTAL SUBSCRIBERS : 26.5 mn
HTIL’s 3m new additions in 3rd Quarter,
2.8m came from India
Best performing market remains India,
followed by Israel

3. VP Management
Services Corporate
Asim
Ghosh CFO
VP
MD
Hutchison Essar Corporate Finance
Senior Management
Director Operations
Team (Delhi/ Punjab/ Haryana)
CEO
Director Technical Chennai/ Tamilnadu
Corporate
Director Operations
(Karnataka/ Kerala/ AP)
CEO
UP (E) & (W)
Head Legal
Dir Operations (Gujarat/
Counsel Rajasthan/ ah & Goa)
Corporate CEO
Kolkata & ROB
Director operations
Mumbai
Director HR
Corporate
Director IT *
Corporate
Sandip Das Chief Marketing
Deputy MD Officer Corporate
Director Business
Development Corporate
Sr. VP Service
Delivery Corporate
* Jointly report to MD
Hutchison Essar Senior Management Team

4. 30
27.6
25 24.6
Indian 22.7
20.9
19.4
Economy 20
15
13.32 14
12.5
11.76 12.22
10 19.35
8.5 8.4
7.2 7.5
6.1 5.8 4 5.5
5 4.4
3.3 3.6
3.4
0
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')
Service
Industry
53.8% %
27.6% 4
3
Telecom spending as % of GDP 2.5
3.2
3 2.1
Agriculture
2 1.8
18.6%
1.7 1.7 1.8 1.8
1.6
2 1.3 1.3
1
Area 3,166829 km2 1
Population 109 cr. 1
7th largest country 0
1/6th of world population
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5. Economic indicators TOTAL PER CAPITA ##
(refer definitions *)
RS Billion Us $ Billion $ PPP Terms Rs US $ $ PPP Terms
Economic GDP 27,600 599 3,036 25,356 550 2,789 6.18
Indicators 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
Basic
Sector Wise actual Inflow of FDI in Others Telephone
Cellular Mobile
Telecom Sector 3% Service
Telephone
(August '91 to March '2004) 4%
Service 26%
( Rs in Million)
Holding
Companies
48%
Cable TV
Manufacturing Network+Intern
Year Wise actual Inflow of FDI in & Consultancy et
16% 2%
Telecom Sector (August '91 to March
'2004)
( Rs in Million) YEAR 1996 1997 1998 1999 2000 2001 2002 2003 2004 Total
FDI 7648 12451 17756 2126 2885 39709 10815 3014 874 99509
INFLOW

6. Telecom Subscribers - Country wise December 2005
China
800 743
Industry
Expected to overtake US by 2008
Overview 600
mn. subscribers
USA India - Aug 2006
400 360 165 mn. subs
METRO
Japan Rus Ind
A CIRCLE Germany
200 153 130
134 125
B CIRCLE
C CIRCLE 0
Source: International Telecommunications Union (ITU),
Penetration Circle Wise
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

7. Indian Service industry (FY 2005-06) Revenue growth
19.5
20
Industry 15
CAGR -22% 15
Overview 30%
$ Billion
11
10
10 9
Continued …… 36%
10%
5
11%
0
2002 2003 2004 2005 2006
TOTAL REVENUE : Rs 67,523 Crores India could potentially be a USD 40 bn - USD 45 bn
telecom market by FY 2010…
Indian Brand Equity Foundation
Regulatory % age of revenue Subscriber growth
charges 180 164
Service tax, GST 10% + GST CAGR -40%
120
License Fee 5 – 10% 98
76
67%
Spectrum Charge 2 ~ 6%*
60 53
44 29%
USO Included in license fees
43%
Total Regul.. charges 17%~26% + GST 20%
0
*Backbone spectrum charges extra GST– 2002 2003 2004 2005 Aug-06
Goods & Service Tax
Source: TRAI
Teledensity 14.8 (Aug 2006)
Source: www.voicendata.com
Telecom regulatory Authority of India (TRAI)
Year indicates financial year ending March

8. Falling tariffs have led to exponential subscriber growth
Industry
Overview
Continued ……
ARPU(Rs Per Month during Quarter
ended June 30,2006)
CIRCLE POST- PRE- BLEND
PAID PAID ARPU
Reasons for Falling tariffs
Circle A 660 275 343
Unified Access Services Licensing Regime (which led to the growth of
Circle B 511 286 319
CDMA operators),
Circle C 580 328 374 Calling party pays
Metro 758 287 406 A lower access deficit charge from 30% to 5% of revenue
All India 643 286 352 Replacement of high fixed entry fee with revenue-sharing fee
Priv SPs 686 273 345 Further reductions in revenue sharing in 2001 and 2003.
BSNL/MTNL 544 324 370 Massclusivity, one for all services.

9. 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.
Telecom sector targets announced by Government of India
250 million subscribers by 2007
Clearly, subscriber 500 million subscribers by 2010
growth MOU have more 20 million broadband subscribers by 2010
than compensated for the Mobile access to all villages with population more than 5,000 by 2006
decline in ARPU. Mobile access to all villages with population of more than 1,000 by 2007

10. 40000000 37422006
35000000
Sector Overview –
30000000
Fixed line
25000000
20000000
15000000
10000000
5000000 4316109 3877608
1591071 355652 188756
270832
0
Herfindahl- BSNL TATA MTNL BHARTI RELIANCE HFCL SHYAM
Hirschman
Index or HHI
A commonly accepted Subscriber Growth - Mobile vs Fixed
measure of market
HHI FIXED = 6230 140
concentration. 123
Mn. subscribers
< 1,000 competitive; 105
1,000-1,800 moderately
concentrated;
1,800 or >highly 70
52
42 43
concentrated marketplace Fixed Mobile 38
35 41 41
HHI = s1^2 + s2^2 + s3^2 + Crossover achieved in 7 13 34
... + sn^2 (where sn is the
market share of the ith
2004 0
firm). 2002 2003 2004 2005 2006
Fixed (mn. subs) Mobile (mn. subs)

11. Sector Overview – SHYAM 29661
Wireless HFCL 62004
BPL 1045301
SPICE 2196965
MTNL 2437922
AIRCEL 3804225
TATA 8435405
IDEA 10363546
HUTCH 20357200
BSNL 23532080
RCVL 25979332
BHARTI 27061349
0 5000000 10000000 15000000 20000000 25000000 30000000
HHI wireless 1635.42

12. Sector Overview –
Wireless
Continued …….
Geographical distribution of India wireless
subscribers, July 2006 India wireless market shares, July 2006

13. Pre-reform Partial Deregulation Further Deregulation Take-off
Reform thrust on
independent Pre-1994 1994-1999 1999 - 2002 2002 onwards
regulation,competition  4 private fixed  Calling Party
 MTNL -  Licenses converted to
& investment service providers Pays
Mumbai and revenue sharing
facilitation with less than 1%
Delhi; DTS  Private sector share  CDMA launch
elsewhere market share
less than 5% in revenue  3-6 operators in
 2 GSM mobile terms each circle
 No mobile
players in each
service  Competition in NLD and  Intra-circle
circle ILD merger guidelines
 NLD - DoT  13 players start
per/ BSNL ILD  4 mobile operators /  Unified Licensing
mobile service circle
- VSNL  FDI - 74% 2005
Principles of network  FDI - 49 %
regulation always said that National Telecom New Telecom Unified Licensing
once level playing field is Policy, 1994 Policy, 1999 Regime
established in a network,
the regulator should allow Upto 1995-
market forces and 1994 1997 1998 1999 2000 2001 2002 2003 2004
1994 1996
competition to take over.
TRAI has moved to
“competition regulation”
from “cost-plus protections”.
Pradeep Baijal
(Former Chairman TRAI)

14. TRAI’s
TRAI’s Recommendations
Recommendations
2006
Number portability
Convergence
2005
Unified Licensing
Quality of Service regulation
Rural Telephony
2004
Intra-circle merger guidelines
Internet / broadband penetration
2003
Calling Party Pays Regime
Unified Access Licensing
Reference Interconnect Order
2002
ILD opened to competition
Internet Telephony allowed.
Independent regulation Reduction in License fees
has been a critical factor
Mature regulatory regime and an enabling
in growth policy framework already in place

15. 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

16. NI SI
TELECOM EV NO
VALUE CHAIN
SP
3PAP
ASP
OEM 2
CP
MVNO
OEM 1 CA
EU

17. Supplier concentration Proprietary learning curve
ENTRANTS
POTENTIAL
Importance of volume to Economies of scale
PORTER’S supplier Capital requirements
Differentiation of inputs Brand identity
FIVE FORCES
Switching costs of firms Switching costs
DETERMINING
Threat of forward Expected retaliation
SEGMENT integration Proprietary products
STRUCTURAL
ATTRACTIVENESS
INDUSTRY
COMPETITORS
SUPPLIER BUYERS
Switching costs of Bargaining leverage
SUBSTITUTES
adopters Buyer volume
Buyer propensity to Buyer information
substitute Brand identity
Relative price Price sensitivity
performance of substi- Product differentiation
tutes Substitutes available
“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 GALLOWAY
Head of Asian Telecom
ABN AMRO BANK, December 2003

18. Wireless Industry
5-Force Analysis MARKET ENTRY ENTRY
Network Operator Hard
Infrastructure Provider Difficult
Device Manufacturer Difficult
Application Provider Easy
Content Provider Easy
SUPPLIER POWER POWER COMPETITION RIVALRY BUYERS POWER
Network Operator Many Network Operator Intense Network Operator Strong
Infrastructure Provider Intense Infrastructure Provider Intense Infrastructure Provider Weak
Device Manufacturer Intense Device Manufacturer Intense Device Manufacturer Strong
Application Provider Weak Application Provider Weak Application Provider Strong
Content Provider Strong Content Provider Strong Content Provider Strong
SUBSTITUTES NUMBER
Voice n data N/W Many
Network Components Few
Cell Phones Many
Applicaion & Content Few

19. 6,837 12,000 11,663
7,000
6,000 10,000 8,003
5,000 4,365 8,000
4,000
5,003
2,701 56.6% 6,000 45.7%
3,000
4,000
2,000
61.6% 60%
Revenue Trends of 1,000 2,000
Service Providers 0 0
2003-04 2004-05 2005-06 2003-04 2004-05 2005-06
3,000 2,966 40,000 39,500
2,262 39,000
2,500
38,000
2,000 1,663 37,000 36,090
31.1% 36,000
1,500 33,918 9.5%
35,000
1,000 34,000
36%
33,000 6.5%
500
32,000
0 31,000
2003-04 2004-05 2005-06 2003-04 2004-05 2005-06
3,000 11,288
2,575 12,000
2,500
10,000
2,000
1,347 8,000
91.2% 5,387
1,500
698 6,000 109.6%
1,000
4,000 2,707
93%
500 99%
2,000
0
0
2003-04 2004-05 2005-06
2003-04 2004-05 2005-06

20. Reach of Mobile Service Providers
Company Cumulative No of retailers as No of cities/town Techno.. Circle
Investment of Mar 2006
Mar 06 (Rs crore) Mar 06 Mar07*
Marketing
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
V&D Estimates CyberMedia Research
CATEGORY SPENDS 2004 CATEGORY SPENDS 2005
Financial Financial
15% 15%
Media & Media &
Ent 15% Ent 15%
AUTO 15% AUTO 15%
FMCG's FMCG's
Telecom 15% Telecom 15%
35% 35%
Source: Ogilvy

21. Subscriber growth
comparison:
Operator wise

22. Subscriber growth
comparison:
Operator wise
Continued….

23. Sound Management & Good Poor customer care as it is
understanding Of the consumer outsourced
market
Poor Corporate player, seen
SWOT Analysis: Strong marketing arm: 900 more as a consumer segment
Bharti Airtel showrooms & 4000 multi-brand player
outlet
Enterprise solution arm
focusing on business users
Financially stable. Cash profit
this year Rs 4,095 Cr up 46%
Vision last year
By 2010 Airtel will be the most
admired brand in India:
Loved by more customers
Targeted by top talent
Benchmarked by more business Spectrum constraint: With
GOING GLOBAL: Venturing
growing base, the pressure to
attractive overseas market
serve on limited spectrum will
affect QoS
Decreasing ARPU trend in
industry

24. Sunil B Mittal
CMD
President JMD
Director Finance &
Head Corp Comm
Bharti Airtel Senior President’s office
Business
Integration
Management Team Strategy & Monitoring Corp Dir Bus
Director IT & Delivery
Innovation
Joint President JMD & CFO
Broadband &
telephone Director Networks
Services CTO
Director marketing Corp Dir Chair Office
Joint President
Enterprise & Communication
services
Corp Dir All & CSR
Director CSD
Corp Dir Alliance
CEO & Dir Ex Director Corp Dir HR
Corporate Director HR
Carriers
Corp Dir Gen
Counsel & Company
Director Legal &
Joint President Secy
Regulatory
Mobility
Chief of Compliance
& IA
Director Supply
Chain
Ex Director Ex Director Ex Director Ex Director
(North) (South) (West) (East)
Bharti Airtel Senior Management Team

25. Established brand name
Disadvantage of being an
Large cash reserves helps in INCUMBANT operator
funding cellular investment
SWOT Analysis: Long and Constrained Decision
BSNL SAVES INTERCONNECT making process: Political
CHARGES Optical fiber backbone, Considerations
which can carry inter & intra circle Subscriber growth is slowing
traffic down
Large fixed line subscriber base Disadvantage of possessing a
Legacy system
Image of a state owned operator
LARGE FIXED LINE SUBSCRIBER Network capacity constraint which
BASE : Can be tapped for second can hamper growth
phone/multiple phone
Possible clash interests :use of
Strong presence in B and C circle GSM & CDMA services
which market promising high Threat from private players
growth potential.
Deregulation of the sector and
Fixed mobile convergence will exposed to heavy competition
change BSNL fortune

26. Faster implementation of projects Global Roaming remains a
Integrated operator: Fixed challenge for CDMA operators
SWOT Analysis: /LD/CDMA No financial support following the
Reliance Aggressive roll out to capture ownership settlement
market share and create an Yet to be profitable
entry barrier
Offering VAS to it's customer's High patent fees paid to
almost free of cost or with nominal Qualcomm
charges. Higher handset subsidy.
RCOM is the fastest growing
wireless company in Asia by
EBITDA and EPS
PCOs a high ARPU, high entry Handset subsidies a major profit
barrier business drag
Planned GSM expansion will Second hand handset market in
pay off CDMA
Aggressive capex allocation for a
large GSM expansion plan
CDMA technology risks
Possible clash interests :use of
GSM & CDMA services

27. Subscriber growth peaking up Don't have PAN INDIA
month by month presence, only strong in
Maharashtra circle
Now have a Stable ownership.
SWOT Analysis:
IDEA Strong local branding
Targeting to women segment
offering differentiated services
Attractive Indian market with Rule of Three is true for any
monthly addition of over 5 million industry.
subscribers Intense Competition from 3 major
private operator Bharti, HUTCH
Can improve on market share till
and Reliance
the penetration reaches 40% i.e.
up to 2011

28. Strong brand name Don't have PAN INDIA
presence, only strong in
SWOT Analysis: Under the able leadership of Maharashtra circle
TATA indicom visionary Ratan TATA
Strong financial capability of the
group to plough in money into
telecom
Can improve on market share till Rule of Three is true for any
the penetration reaches 40% i.e. industry.
up to 2011 Intense Competition from BSNL
Attractive Indian market with and Reliance in CDMA platform
monthly addition of over 5 million
subscribers Decreasing ARPU
Vision
We will strive to be the preferred
partner to our customers by providing
appropriate and
cost-effective communication
solutions.

29. BIBLIOGRAPHY
www.auspi.com
www.coai.com
www.worldfactbooks.com
www.wikipaedia.org
www.voicendata.com
www.trai.gov.in
www.ibef.org
Reliance infocomm’s strategy and impact on the Indian mobile telecommunication scenario
MEDIA@LSE – paper by Sangeetha Verghese
A Value Chain Perspective on the Economic Drivers of Competition in the Wireless
Telecommunications Industry By Scott C. Constance & Jeffrey R. Gower
Macquarie:India Telecom Sector Report_Initiating Coverage_29Aug06

30. Thank you !