International Business Environments and Operations 16th Global Edition test b...
Comparative study of telecom sector
1. INDIAN TELECOM
SECTOR-
A COMPARITIVE STUDY
SUBMITTED TO-
PROF. ABHISHEK NIRJHAR
SUBMITTED BY-
GROUP 4
1. ASHUTOSH RANJAN
2. ASTHA BISHNOI
3. DIKSHA UNIYAL
4. NIKHIL SHARMA
5. NIRANKAR ROYAL
6. SWIMMI ALASAKA
2. INTRODUCTION
Telecommunication is a compound of the Greek prefix “tele” meaning 'far off', and the Latin
―communicare”, meaning 'to share'. In its current usage, it refers to transmission of signals
over a distance for the purpose of communication. Telecom industry has impact on every
aspect of our lives, from enabling telephone communication between people in different
locations to enabling supply-chains to work seamlessly across continents to create products
and fulfil demands. Telecom services are now recognized as a key to the rapid growth and
modernization of the economy and an important tool for socio-economic development for a
nation. It includes mainly GSM, CDMA, data and voice service.In India telecommunication
has started when the East India Company introduced telegraph services in India. Telecom
industry has seen exponential growth in last two decades in terms of technology, penetration,
as well as policy due to liberalization in this sector and huge investment by both domestic and
foreign investors. In the 1980s, government has monopoly in this sector with the department
of post and telecom. In 1986 government set up two new public sector undertakings
Mahanagar Telephone Nigam Limited (MTNL) and Videsh Sanchar Nigam Limited (VSNL).
MTNL looked after telecommunications operations in Delhi and Mumbai. VSNL provided
international telecom services in India. In 1990s, government start liberalizing this sector by
allowing private players to provide value added services (VAS) such as paging services. In
National Telecom Policy 1994 government allowed private investments and involvement of
the private sector were allowed to render basic services in the local loop.
India's telecommunication network is the third largest in the world on the basis of its
customer base and it has one of the lowest tariffs in the world. There are more than 960
million telephone subscribers and more than 121 million internet users. Whole country was
divided into 23 circles and licences were given separately for each one. The circles were
classified as Metros, A, B or C depending upon the revenue potential for the circle. Airtel,
Idea, Vodafone, Reliance communication, Aircel, Tata Docomo, MTS, Uninor, Loop, BPL,
BSNL, MTNL and Videocon are major players in the Indian Telecom sector.
Telecom services in India can be basically divided into two major segments:
(a) Telephones, Wire line and Wireless
(b) Internet services
According to TRAI's report 'Telecom Sector in India: A Decadal Profile', the tele-density has
increased from 4.3 in March 2002 to 78.1 in February 2012, wherein the rural areas registered
an increase from 1.2 in March 2002 to 38.5 in February 2012. From 2001 to 2011, the total
number of telephone subscribers has grown at a Compound Annual Growth Rate (CAGR) of
35 per cent. The increase in tele-density has mainly been driven by the increase in mobile
phones.
Telecom equipment manufacturing was delicensed in 1991 and value-added services were
declared open to the private sector in 1992, following which radio paging, cellular mobile and
other value added services were opened gradually to the private sector. The regulatory
reforms in the telecom sector from 2000 to 2011 can be broadly classified into the following
three distinct phases.
Phase 1
3. 2000–2003
Telecom sectors were opened up to competition.
Phase 2
2004–2007
Regulator encouraged competition and also set the stage for future growth.
Phase 3
2008–2011
More choices were brought in for consumers in terms of technology and services.
SHARE OF TELECOMMUNICATIONS AS PER CENT OF GDP, 2000–
01 TO 2009–10
4. TOTAL NUMBER OF WIRELINE SUBSCRIBERS AND GROWTH
RATE IN INDIA, 2001–2011
TELEDENSITY, MARCH 2000–FEBRUARY 2012
5. Thus, broadly the Indian telecommunication industry can be classified into the following
segments:
Wire line services
Wireless service: GSM and CDMA
Internet services
Public Mobile Radio Trunked Services
Global Mobile Personal Communication by Satellite (GMPCS)
Very Small Aperture Terminals (VSAT)
Mobile Value Added Services
TELECOM INDUSTRY IN 2002
There are three types of players in telecom services:
State owned companies
BSNL
MTNL
Private Indian owned companies
Reliance Info Comm
Tata Teleservices
Shyam
Foreign invested companies
Vodafone
Bharti
Idea Cellular
PORTERS FIVE FORCE MODEL OF TELECOM SECTOR FOR YEAR
2002
THREATS OF COMPETITORS(LOW)
FACTORS EFFECTING COMPETITION
1. High Exit Barriers:
In any industry, if the exit barrier is high it increases the difficulty of any organization to
leave the industry sector. The telecom industry suffers from high exit barriers, mainly due to
its specialized equipment. Networks and billing systems cannot really be used for much else,
and their swift obsolescence makes liquidation pretty difficult.
2. High Fixed Cost:
6. The industry also suffers from high fixed cost which makes the entry barrier also very high
for the industry. It comes as no surprise that in the capital-intensive telecom industry the
biggest barrier to entry is access to finance. To cover high fixed costs, serious contenders
typically require a lot of cash. When capital markets are generous, the threat of competitive
entrants escalates. When financing opportunities are less readily available, the pace of entry
slows. Meanwhile, ownership of a telecom license can represent a huge barrier to entry.
6-7 players in each region
3 out of 4 BIG-Four present in each region
3. Very less time to gain advantage by an innovation:
Every company in this industrial sector is investing a huge amount in research and
development and marketing strategy. That is why we see any offer launched by any company
is counter attacked by other companies very soon. This makes the industry rivalry most
prominent. Example Caller tunes, life time card. Also, the new technology becomes
obsolete in short span of time.
4. Price wars:
The price war is really very fierce in this industry. Price war in telecom industry has
commoditized the market that branding has taken a backseat.
MAJOR PLAYERS IN THE MARKET IN 2002
During this period, the public sector operators viz. BSNL, MTNL and VSNLmade the major
investments. The bulk of the investments in cellular mobile segmentwere by the private
operators. The total investments by the public sector operators during the first four years of
the Ninth Plan(1997-2002) was Rs.62358.20 crore. In 2002, VSNL was privatised and there
not many players as such in the telecom industry.
Operators 1997-98 1998-99 1999-2000 2000-01 2001-02
BSNL 8646.1 9450.3 12532.3 16395 16574.0
MTNL 912.0 977.0 1250.0 1645 1600
PRIVAT E COMPANIES 2078.6 6959.2 768.1 744.6 732.6
The most important landmark in telecom reforms, however, came with the New Telecom
Policy 1999 (NTP-99) which can be termed as the new, or third, generation of reforms. Its
first qualitative difference was the acceptance by the government that telecommunications
was a sufficiently important for common man whereas earlier it had been viewed as a ―cash
cow‖. For example, the private sector had earlier been asked to bid for licenses to provide
telecom services through a sealed bid auction in which the bidder paid a fixed fee. This
proved unaffordable to the private sector owing to unrealistic calculations of the revenue
potential of a license, resulting in a near zero rollout of lines. Rather than insisting on the
prior fulfilment of its revenue obligations,NTP-99 allowed private providers to ―migrate‖
7. from fixed license fee regime to a revenue sharing regime. The second qualitative difference
was that the regulator was strengthened, domestic long distance services were opened to the
private sector, and the state-owned basic service provider under the Department of
Telecommunications was corporatized.
The guiding principles of the NTP-99 are as follows:
Affordable and effective communications to citizens is the core of the vision and goal
of telecom policy.
Balance between the provision of universal service to all uncovered areas, including
rural areas, and provision of high level services capable of meeting the needs of the
country’s economy
Building a modern and efficient telecommunications infrastructure to meet the
convergence of telecom, IT and the media
Conversion of PCOs into Public Teleinfo Centres having multimedia capability like
ISDN services, remote database access, government and community information
systems etc.
Transformation of the telecommunications sector to a greater competitive
environment providing equal opportunities and level playing field for all players
Strengthening research and development efforts in the country
Achieving efficiency and transparency in spectrum management
Protecting the defence and security interests of the country
Enabling Indian telecom companies to become truly global players.
1. BSNL
Bharat Sanchar Nigam Limited (BSNL)
Year of Establishment 2000
2. MTNL
Mahanagar Telephone Nigam Limited (MTNL)
Year of Establishment 1986
3. BHARTI
Year of Establishment 1985
Bharti Tele-Ventures Limited was incorporated on July 7, 1995 for promoting investments in
Tele communications services. During the year 1997-98 BhartiAirtel Ltd becomes the first
private telecom operator to obtain a license to provide basic telephone services in the state of
Madhya Pradesh and in the same period the company forms Bharti BT VSAT Ltd., focused
on providing VAST solutions across India and Bharti BT Internet Ltd. The company acquired
JT Mobiles, cellular services operator in Punjab, Karnataka and Andhra Pradesh and becomes
the largest private telecom operator in India during the period of 1999-2000. Also expands its
8. South Indian footprint by acquiring Skycell, Chennai. In 2002-03 the company made a brief
corporate restructuring by merging all the mobile operations into Bharti Cellular Limited and
all fixed line, long distance and data services into Bharat Infotel Limited. BhartiAirtel made a
historic strategic partnership with IBM and Ericsson for outsourcing the company's core IT
and network activities and also launched Blackberry wireless solution India, as a result of an
exclusive tie-up with Research in Motion (RIM). BTVL's two subsidiaries Bharti Cellular Ltd
and BhartiInfotel Ltd have been merged with the company in the year of 2004.
4. IDEA CELLULAR
IDEA Cellular Limited, a part of the Aditya Birla Group and an India's leading Global
System for Mobile communication (GSM) Mobile Services operator was began its journey in
the year 1995 as in the name of Birla Communications Limited for providing GSM-based
services in the Gujarat and Maharashtra Circles.
5. RELIANCE COMMUNICATIONS
Year of Establishment 1999
Reliance Infocomm
In December 2002, Reliance Infocomm launched its much talked about WLL(M)service
under the Basic Service license using CDMA technology.
2002
• ILD services unlocked to competition
• Go-ahead to CDMA technology
• Initiation of internet telephony in India
• Reduction of licence fees
6. TATA TELESERVICES
Year of Establishment 1996
7. VODAFONE
Vodafone Essar in India is a subsidiary of Vodafone Group Plc and commenced operations in
1994 when its predecessor Hutchison Telecom acquired the cellular licence for Mumbai
.
THREAT OF NEW ENTRANTS(HIGH)
Post liberalization, government took number of steps to improve India’s competitiveness in
global market. In order to facilitate the telecom sector, several reforms have been introduced
in the sector during the past decade. The national telecom policy of 1994 and New Telecom
Policy of 1999 has been driving force of the development and liberalization in this sector.
Since its inception, Department of Telecommunication (DoT) is formulating developmental
policies for driving the growth of the telecom sector. These policies created suitable
environment for private players to enter the telecom market.
9. The underlying theme of New Telecom Policy, 1999 was to usher in full competition through
unrestricted entry of private players in all service sectors. The policy favoured the migration
of existing operators from the era of fixed license fee regime to that of revenue sharing. The
policy further outlined the strengthening of the regulator, opening up of International Long
Distance (ILD) and National Long Distance (NLD) services to the private sector and
corporatization of telecom services. Accordingly, the year 2001 witnessed the entry of private
operators in offering basic telephony and NLD services and the introduction of additional
players, in every cellular circle. This phase of reforms also saw VSNL's monopoly ending
prematurely in April 2002, when the ILD sector was thrown open to the private sector to
herald the era of unlimited competition in the industry.
In 2002, Government brought in Unified Access Service Licensing Regime. It marked the
end of licensing regime in the Indian Telecom industry. It eliminated the need for different
licenses for different services. Players were now allowed to offer both mobile and fixed-line
services under a single license after paying an additional entry fee. It helped in aligning
convergent technologies and services.
With these reforms, the telecom sector began witnessing a trend of growth never seen before.
Basic services have been opened for unlimited competition; more licenses have been issued
to the private sector for cellular services. Tele-density, too, has increased from 1.07 in 1995
to 2.8 in 2000 and stood at 5.72 as of August 2003. While it is expected to continue rising
sharply in a very short period, the issue of telephone accessibility remains to be addressed
satisfactorily.
The telecom sector has thus completely changed, both in terms of coverage, and efficiency of
services offered. Provision of landlines on demand in certain places, telephone exchanges
going digital, and the acceptability of optic fibre and wireless technology are but a few
instances of the change that swept the industry.
In the area of cellular services, the number of licenses stood at four operators in each circle,
with the services is being run in eighteen telecom circles and four metro cities. The state of
Jammu and Kashmir was the nineteenth telecom circle to be made operational, although this
was only in August 2003. The current subscriber base in the cellular market has risen to 183
lakh as of September 2003. The cellular service providers also providing a lot of value-added
services such as SMS, location based services, etc., and these to now form an important
constituent of the cellular service providers’ revenues.
TELECOM PLAYERS
On the national front, in the year 2002, BSNL, BhartiAirtel, Vodafone and little known BPL
Mobile communications were the dominant players. But after the New Telecom Policy, the
increased growth prospects lured many new companies in the market. Some of the new
entrants were –
1. IDEA CELLULAR
In 2000, Tata Cellular was a company providing mobile services in Andhra Pradesh. When
Birla-AT&T brought Maharashtra and Gujarat to the table, the merger of these two entities
10. was a reality. Thus Birla-Tata-AT&T, popularly known as Batata, was born and was later
rebranded as IDEA.
Then Idea set sights on RPG’s operations in Madhya Pradesh which was successfully
acquired, helping Batata have a million subscribers, and the license to be the fourth operator
in Delhi was clinched.
In 2004, Idea (the company had by then been rechristened) bought over the Escorts group’s
Escotel gaining Haryana, Uttar Pradesh (West) and Kerala — and licenses for three more —
UP (East), Rajasthan and Himachal Pradesh. By the end of that year, four million Indians
were on the company’s network. In 2005, AT&T sold its investment in Idea, and the year
after Tatas also bid good bye to pursue an independent telecom business. And Idea was left
only with one promoter, the AV Birla group. Rs 2,700 crore adding Punjab and Karnataka
circles.Modi’s joint venture partner, Telekom Malaysia, invested Rs 7,000 crore for a 14.99%
stake in Idea. Just around then, Idea’s subsidiary, Aditya Birla Telecom sold a 20% stake to
US-based Providence Equity Partners for over Rs 2,0000 crore.
2. RELIANCE COMMUNICATIONS
Reliance Mobile (formerly Reliance India Mobile) was launched on 28th December, 2002
coinciding with the birthday of Late DhirubhaiAmbani. In 2003, AC Nielson voted reliance
Mobile as India’s most trusted telecom brand. In July 2003, it created a world record by
adding one million subscribers in 10 days through its ―Monsoon Hungama‖ Offer.
3. TATA TELESERVICES
Tata Teleservices Limited (TTL) spearheads the Tata Group's presence in the telecom sector.
Incorporated in 1996, TTL is the pioneer of the CDMA 1x technology platform in India and
embarked on a growth path after the acquisition of Hughes Telecom (India) Limited
[renamed Tata Teleservices (Maharashtra) Limited] by the Tata Group in 2002. It launched
mobile operations in January 2005 and today enjoys a pan-India presence through existing
operations in all of India's 22 telecom Circles. The company is also the market leader in the
fixed wireless telephony market and also enjoys leadership position in the enterprise space.
Tata Teleservices Limited was also the first Indian private telecom operator to launch 3G
services in India under the brand name Tata DOCOMO, with its 3G launch in all the nine
telecom Circles where it bagged the 3G license in November 2010. In association with its
NTT DOCOMO, the Company finds itself favorably positioned to leverage this first-mover
advantage.
11. Because of lucrative prospects of growth, new entrants entered in the market. Because of it,
Indian Telecom Industry witnessed price wars and aggressive marketing strategies. Incoming
calls became free in 2003, and outgoing call rates slashed by half in a matter of few years.
Because of increased competition, India's teledensity has improved from under 4% in March
2001 to around 71% by the end of March 2011. Cellular telephony has emerged as the fastest
growing segment in the Indian telecom industry. The mobile subscriber base (GSM and
CDMA combined) has grown from under 2 m at the end of FY00 to touch 812 m at the end
of March 2011 (average annual growth of nearly 73% during this eleven year period). Tariff
reduction and decline in handset costs has helped the segment to gain in scale. The cellular
segment is playing an important role in the industry by making itself available in the rural and
semi urban areas where teledensity is the lowest.
BARGAINING POWER OF SUPPLIERS (2002)(HIGH)
Analysis of the determinants of relative power between the producers in an industry and their
suppliers is precisely analogous to analysis of the relationship between producers and their
buyers. The only difference is that it is now the firms in the industry that are the buyers and
the producers of inputs that are the suppliers. The key issues are the ease with which the firms
in the industry can switch between different input suppliers and the relative bargaining power
of each party. Because raw materials, semi-finished products, and components are often
commodities supplied by small companies to large manufacturing companies, their suppliers
usually lack bargaining power. Hence, commodity suppliers often seek to boost their
bargaining power through cartelization (e.g., OPEC, the International Coffee Organization,
and farmers’ marketing cooperatives). A similar logic explains labor unions. Conversely, the
suppliers of complex, technically sophisticated components may be able to exert considerable
bargaining paper. The supplier power of Intel in microprocessors, Microsoft in operating
systems, Sharp in flat screens, and Seagate in disk drives has been a powerful factor
depressing the profitability of the PC manufacturers. Forward integration by suppliers into a
12. customer industry increases their supplier power and depresses profitability in the customer
industry.
Mobile phone manufacturers are the primary supplier to the mobile phone operator market.
These manufacturers were dominated by Ericsson, Nokia, and Motorola with 61 percent of
the market. Because the mobile phone manufacturing brands were more important to
consumers than the mobile phone operators themselves, bargaining power of suppliers was
high. Industry firms are not a significant customer for the supplier group because the
suppliers operate in far more international locations and markets than the mobile phone
operators. Suppliers’ goods are critical to buyers' marketplace success. Mobile phone
manufacturers could integrate forward into the industry. These suppliers were credible,
having substantial resource and provide a highly differentiated product.
BARGAINING POWER OF BUYERS (LOW TO MODERATE)
With not of many companies in the market in 2002, which are providing the services, the
bargaining power of buyers is low. They not had much option. Other than two state owned
companies – BSNL and MTNL and some private Indian owned companies – reliance and
Tata there were not many players in market. These companies were providing some basic
services and rates were high. They were not very customer focused. The service provided by
BSNL and MTNL might not be of very good quality but they were of low cost and other
private were players were charging more. Industry was monopolistic in nature.Since the
number of players were less,buyers did not have to choose from and therefore the bargaining
power was low but my the end of 2002,because of the introduction of CDMA by reliance an
multiple tariff plans offered by other players,the bargaining power of the customers increased
moderately.
THREAT OF SUBSTITUTES (LOW)
In 2002, telecom service providers faced threat from internet. But, there were few email
services in 2002 (Yahoo mail, Hotmail, Rediffmail). Yahoo, Hotmail and Rediffmail also
provided chat messengers. But the internet had low penetration in India in 2002 with around
10 million users compared to 121 million internet users in 2012.Hence the threat to telecom
service providers from substitutes was very low in 2002.
13. INDIAN TELECOM INDUSTRY IN 2012
India's telecommunication network is the third largest in the world on the basis of its
customer base and it has one of the lowest tariffs in the world. India has the world's second-
largest mobile phone user base with over 929.37 million users as of May 2012. It has
the world's third-largest Internet user-base with over 121 million as of December 2011.
The industry is expected to reach a size of 344,921 crore (US$62.43 billion) by 2012 at a
growth rate of over 26 per cent, and generate employment opportunities for about 10 million
people during the same period. According to analysts, the sector would create direct
employment for 2.8 million people and for 7 million indirectly. The total revenue of the
Indian telecom sector grew by 7% to 283,207 crore (US$51.26 billion) for 2010–11
financial year, while revenues from telecom equipment segment stood at
117,039 crore (US$21.18 billion).
Whole country was divided into 23 circles and licences were given separately for each one.
The circles were classified as Metros, A, B or C depending upon the revenue potential for the
circle. Airtel, Idea, Vodafone, Reliance communication, Aircel, Tata Docomo, MTS, Uninor,
Loop, BPL, BSNL, MTNL and videocon are major players in the Indian Telecom sector.
PORTER FIVE FORCES ANALYSIS OF TELECOM SECTOR FOR YEAR 2012
14. 1. BARGAINING POWER OF SUPPLIERS (MEDIUM)
Telecom sector suppliers include companies providing broadband switching equipment,
fiber-optic cables, mobile handsets and billing software. There are companies like Elcoteq,
Flextronics, Perlos, ZTE, Huawei, Alcatel lucent, cisco, Seimens and Ericsson in equipment
making.
Cisco is the market leader in switching equipment. Due to investment in IT and BPO,
government e- governance initiatives these equipments are in demand.
Tyco and D-Link are market leader in cabling and major demand is from ITES, BPO, KPO
and BFSI sector. Transmission equipment, wlan, fixed phones and mobile handset are other
equipment having presence as suppliers. In mobile handset Nokia, Samsung, LG, Sony and
Blackberry are major players.
With the convergence of data and voice services companies are focusing more on IT
infrastructure to enable and sustain their growth. With the huge cost of equipments and
servicing agreement service providers usually sign long term agreement with equipment
manufacturer. These suppliers always get affected with policy changes and TRAI rulings
regarding 2G, 3G and other services which lead to surge or dip in demand. In 2010-11 this
industry has revenue of Rs 1,14,133 crore due to heavy demand from service operator for
expansion of 3G network but it falls in 2012 due to cancellation of 122 licences.
Equipment market has become price competitive with emergence of Chinese players like
ZTE and Huawai. As equipments like switch, cable, handset and transmission devices are
backbone of telecom sector but due to presence of large number of local and multinational
manufacturers, service providers have freedom to choose and bargain. For supplier main
bargaining position is after sales service agreement and price. So first glance, it might look
like telecom equipment suppliers have strong bargaining power over telecom operators. But
they are in a weak position in reality.
2. THREAT OF NEW ENTRANTS (LOW)
Due to capital intensive industry high finance requirement is major concern for companies
who planned to enter in this industry. Also strict government regulation on frequency
allocation, evident scams, Court and TRAI interference on schemes and tough rules for entry
has made this sector difficult to enter. New player has to pay entry fee, license fee, equipment
cost and expert managers to establishment in market where there are already so many players
and prices are lowest in the world and average revenue per user (ARPU) is declining.
Recently government has fixed floor price of spectrum at Rs 14000 crore which shows strong
regulatory pressure on already bleeding telecom companies. Also most of the present telecom
companies spent huge amount of marketing and have celebrity brand ambassador as
sachintendulkar, Shahrukh khan, M S Dhoni, Kareenakapoor, etc. So a new entrant has to
face so many challenges in form of high starting cost, operating cost, marketing cost and
government pressure and have to maintain competitive call rates to be in market which
altogether make this sector difficult to enter.
15. Current telecom players in Indian market are Airtel, Vodafone, Aircel, Reliance, Idea, BSNL,
MTS, TATA Docomo, Videocon and MTNL. There are already so many players with their
profit plummeting in every subsequent quarter it is unattractive sector for new entrants.
Although government has approved FDI upto 49% in personal mobile communication,74% in
internet and radio paging services but still it is not attracting much new companies due to
socio-political environment of country.
3. BARGAINING POWER OF BUYERS (HIGH)
Without much analysis one can understand the power of buyers in Indian market with the fact
that telecom services rates are lowest in the world here. With government rules regarding
roaming free network, number portability, lack of differentiation and increased choice in
terms of products and services power of buyers is rising. With the presence of more than
fifteen telecom companies in India everyone is competing for increasing customer share.
Most of the companies have schemes for data and voice services which are similar in offering
and strong pressure of TRAI regarding service charge has also reduced their freedom to
differentiate more. Now most of the service providers are present in the entire circles so
consumers have lot of choices to switch in case of dissatisfaction with services. Also with the
commencement of regulation on number portability has make market more competitive and
buyers more strong. So overall, buyers have strong bargaining power in telecom sector.
4. COMPETITIVE RIVALRY (HIGH)
The above figure shows the revenue market share of telecom providers as on 31st
March,
2012.
Due to high fixed cost, low average revenue per user and high exit barriers have created
strong rivalry in telecom sector. There are more than 15 telecom companies in India and at
least five to six are present in each circle. To increase customer share if one reduce its prices
27.4
23.3
15.4
9.1
8.5
6.6
5
2.5
1.2
0.5 0.5
Market Share
Airtel
Vodafone
Idea
Tata
RCOM
BSNL
Aircel
Uninor
16. all do the same and innovations are no longer an advantage for particular company. All are
endorsing their products by celebrities and are providing same value added services. Due to
announcement of 3G auctioning and its lure for attracting customers many companies come
into market but can’t sustain in the price sensitive market.
5. THREAT OF SUBSTITUTES (LOW)
The threat that substitute products pose to an industry's profitability depends on the relative
price-to-performance ratios of the different types of products or services to which customers
can turn to satisfy the same basic need. The threat of substitution is also affected by switching
costs - that is, the costs in areas such as retraining, retooling and redesigning that are incurred
when a customer switches to a different type of product or service.
The potential major substitutes for telecom industry are as follows:
VOIP (Skype, Messenger etc.)
Online Chat
Email
Satellite phones
All of these technologies have a huge potential, though none of the above a major threat in
current scenario.
COMPARITIVE ANALYSIS OF YEAR 2002-2012
FORCES 2002 2012
1. THREAT OF EXISTING COMPETITORS LOW HIGH
2. THREAT OF NEW ENTRANTS HIGH MEDIUM
3. BARGAINING POWER OF SUPPLIERS HIGH 120
4. BARGAINING POWER OF CUSTOMERS LOW to
MODERATE
LOW
5. THREAT OF SUBSTITUTES LOW LOW
