indian telecom sector ddf

8/7/2019 Indian Telecom Sector ddf

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Presented By:-

Rajiv Rathi


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Telecom Sector-A Glancey Historically owned and managed by the Government

y 1986-MTNL & VSNL created as corporations

y 1989-Telecom Commission formed

y

1991- Telecom equipment manufacturing opened to privatesector

y May 1994- New Telecom Policy announced; licenses forcellular mobiles for 4 metros issued


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Pre-reform Further Deregulation

Pre-1994 1994-19991999 - 2002

MTNL -

Mumbaiand

Delhi; DTS

elsewhere

Nomobileservice

NLD - DoT per/

BSNL ILD -

VSNL

4 private fixedservice

providers

with less

than 1%

market

share

2 GSM

mobile

players in

each circle

13 playersstart mobile

service

Licenses convertedtorevenue sharing

Private sector share

less than 5% in

revenue terms

CompetitioninNLD

and ILD Licenses on Revenue

share

4 mobile operators /circle

NTP 1999

BSNL formed 2001 InternetTelephony

2002

FDI - 49 %

National Telecom

Policy(NTP) 1994

TRAI constituted

1997

Calling PartyPays

CDMA

launch

3-6

operators in

each circle

Intra-circle

merger

guidelines

Unified

Licensing

Take-off

2002 onwards

Broadband

policy2004

FDI - 74% 2005NationalTelecom

Policy, 1994

NewTelecomPolicy, 1999 Unified Licensing

Regime

PartialDeregulation


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Major Players


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0

10

20

30

40

50

60

70

80

Bharti BSNL Hutchison Idea Aircel MTNL Reliance Spice BPL

Telecom Subscriber Base of various service providers inIndia (In Millions)

Data recorded as per TRAI for the Quarter ended March 2008


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23%

22%

15%

10%

3%

5%

18%

2% 2%

Market Share (%) ofTelecom service providers in India

Bharti BSNL Hutchison Idea Aircel MTNL Reliance Spice BPL

Data recorded as per TRAI for the Quarter ended March 2008


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Evolution of the market structure

y A monopoly sector controlled by Government until

1996

y Today major 6 service providers, 2 State Owned, rest

private

y Sector growth slowed since mobile tariffs fell

y Increased competition from CDMA Services


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As aMonopoly- Till 1994y Single Seller Presence of a single producer

(BSNL)

y Large number of buyers Expected in case of amonopoly

y No close substitutes No other provider oftelecom services


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Monopoly(Cont)

y Price/Quantity selection independence

y High barriers to entry Requires heavy capital

investment which only the Govt. could provide


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Monopoly byy The first and largest operator State-owned , the 7th

largest(SubscriberBase) telecom company in world.

y BSNL was created by corporatization of the erstwhile DOT(Dept of Telecommunication), a government unitresponsible for provision of telephony services.

y The total subscriber base of the wireline and wirelessservices reaches 325.78 million for the quarter endingMarch 2008.


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As a Duopoly - 1994-1999

y Fixed line segment- Basic service provision hadbeen planned as a duopoly between the DoT and aselected service provider.

y Cellular and paging services- planned as a duopoly

between two selected service providers, with theDoT keeping the option of being the third serviceprovider open.


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As an Oligopoly-1999 till datey An oligopoly is a market form in which a market or

industry is dominated by a few sellers, characterized by

large market shares( Bharti, Hutch, Reliance, etc)

y Each oligopolist is aware of the actions of the others

y

Decisions of one firm influence, and are influenced by thedecisions of other firms

y Firms utilize non-price competition in order to accruegreater revenue and market share.


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Non-price Competition

y Marketing strategy "in which one firm tries to distinguishits product or service from competing products on the basisof attributes like design, quality and workmanship"(McConnell-Brue, 2002, p. 437-438).

y Non-price competition typically involves promotional

expenditures, (such as advertising, selling staff, salespromotions coupons, special orders, or freegifts), marketing research, new product development, andbrand management costs.


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Kinked Demand Curve

Above the kink, demand is relatively elastic because all other firms prices remainunchanged. Below the kink, demand is relatively inelastic because all other firmswill introduce a similar price cut, eventually leading to a price war. Therefore, thebest option for the oligopolist is to produce at point E which is the equilibrium point

and, incidentally, the kink point.


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Describing - Oligopoly

Few no. of Players with large market share

Product Differentiation Inter Dependency

Group Behavior

Pricing Practices

Barriers on Entry

Kinked Demand Curve


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Govt. Initiativesy Broadband policy unveiled in 2004 - Targets 20 million

broadband subscribers by2010

y Focus on making India a regional Telecom manufacturing hub

y FDI limit increased from 49% to 74%

y 100%FDI permitted under automatic route in the

manufacturing sector


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(Cont)y Deregulation virtually complete and Unified Licensing

regime

y Interconnection Usage Charge framework in place

y Exemption from customs duty for import of Mobile

Switching Centres

y Comprehensive Spectrum policy and 3G policy on the anvil


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India could potentially be a USD 40 bn - USD 45 bn

telecom market by FY 2010

Telecom sector targets announced by Government of India

y 250 million subscribers by2007

y 500 million subscribers by2010

y 20 million broadband subscribers by2010

y Mobile access to all villages with population ofmore than 1,000

by2007

and translates into an investment requirement of USD 30 bn to USD 45 bn


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indian telecom sector ddf

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