PORTERS MODEL FOR CELLULAR SERVICE

Introduction
Most vibrant sector with highest growth rate more than 60 lakh customers are added every month Airtel is a market leader with 28.09% market share and Vodafone on the 2nd place with 23.56% market share.

Introduction
India has a total of 960.9 Million telecom subscribers, comprising of 929.37 Million mobile subscribers & 31.53 Million wire-line subscribers. The Indian tele density now stands at 79.28%. Rank in world in network size 3rd

Teledensity (per hundred populations)

Telephone connections (In Million) Fixed Mobile Total

79

929.37 31.53 960.9

Challenges Faced by telecom industry

Unlike many countries where the allocation of spectrum is

separate from the grant of license to provide service, in India

licenses are still bundled with the allotment of a certain amount of spectrum. Telecom manufacturing in India is not in pace. With only a few equipment manufacturers currently operating in the country.

Market leader AIRTEL Market Challenger Reliance, Vodafone, BSNL Maket Follower TATA, IDEA

Buyer Power High

Buyers in Telecom industry generally land in two categories: Individual and Enterprise Customers like IT companies, Banks etc. There are many number of telecom providers in the market with big product variance and cheaper prices which gives buyer many options to select operators and thus have a large bargaining leverage.

Buyer Power
Lack of Product differentiation
Lack of differentiation among the service provider
Airtel, Relience, Idea and all other companies have similar prices for similar products and less likely for any one to maintain product differentiation and hence buyers have the option to switch over.

Buyer Power
Buyers switching cost

Low switching cost. Low new connection cost. switching has become more easier. Meaning Low switching cost and high buyer power.

Buyers information
Buyers information regarding the availability of other options has become high

Increased social networking, high advertisements

through TV, hoardings, banners and word of mouth, buyers are well informed about the substitute products with better offerings urban as well as rural areas. Means high buyer power

Buyer Power
Buyers ability to backward integrate
Not much intermediaries between the producer and the consumers. High Investment required for backward integration.

Less likely to have backward integration and

hence low buyer power

BUYER POWER CONCLUSION

Buyers can easily change their service providers.

Buyers power is very low.

SUPPLIER POWER

Suppliers Power - Low

Suppliers switching cost Low Suppliers information High Suppliers ability to forward integrate Low Medium cost of switching since changing their hardware would lead to additional cost in modifying the architecture.

Suppliers Power Analysis

Suppliers for the Telecom Operators The suppliers bargaining power has increased influence on the profitability of the company. Increase in the bargaining power of the supplier will lead to a decrease in profits or increase in the price of the end product(Buyer).

There is a price war happening between the different mobile

operators, so even the suppliers are chosen carefully so that they do not drag down the profitability of the company .So the suppliers have less bargaining power in this industry. 1.Mobile Tower Companies 2. Aluminum Providers 3. Other Raw material providers

Suppliers Power Analysis

Mobile Tower companies in India
There are two types of tower companies in India 1.Telecoms owned tower companies 2.Independently telecom tower companies (ITTC)
ITTC, 28% Telecos Owned ITTC

Telecos Owned, 72%

Suppliers Power
List of Mobile Operator and their Tower Services.
Operator
Bharti Reliance Vodafone BSNL

Tower Service
BIL/ITL RITL ITL MTNL, BSNL and Others

Idea
Tata

ITL
Viom

Less Bargaining power because of more number of suppliers Little or no forward Integration

Suppliers Power
Sim Card Manufacturers

Sim card for the mobile operators are mostly produced in India and some are imported.
The mobile operators doesnt always procure the sim card from a single supplier to avoid any delays. The Bargaining power of suppliers is less There is little or no threat of forward integration .

SUPPLIERS POWER CONCLUSION

Suppliers has less Bargaining power due to the Presence of many suppliers.

Threat of Substitutes - Moderate

Buyer tendency To Substitute Relative Prices

Performance Of
Substitute

Threat of Substitutes
Buyer Propensity to Substitute

Internet subscriber base increasing in India by 18.06% , compared to 10.60% for GSM/CDMA services.
Representations from the industry and from within the DoT to open up Net telephony. It provides unified access license, which includes broadband and Internet companies such as Google and Skype to offer telephony services for international calling and PC-to-PC domestic calls.

Threat of Substitutes
Relative Prices Internet Telephony eating into the revenue of GSM/CDMA telephony. Performance of Substitute Voice quality is an issue with internet telephony. Internet voice services also currently limited due to regulatory road blocks.

THREAT OF SUBSTITUTES CONCLUSION

Increasing threat from the substitutes.

Entry baarriers -high

Government and legal barriers:There are restriction are been placed by the Government of India and TRAI . This makes new entries difficult to entry Spectrum License cost- Lotteries, auctions.

Capital requirement:Bharti has invested close to Rs. 230 billion to create the cellular infrastructure with 45,000 towers across the country Cost of maintaining one tower is estimated at Rs. 70,000-75,000 per month. If tower is rented then monthly rent of Rs. 45,000-50,000 for active network

ENTRY BARRIERS CONCLUSION

Not much Threats from new entries as government has imposed certain Regulations.

INTENSITY OF COMPETITION (HIGH)

Intensity of Competition (High)

Competitors are numerous. Growth is (high) Cellular service lacks switching costs and there is no major price or offer difference so this locks in the buyers and protects company to raid on its customers buy another

6-7 players in each region

Exit barriers (medium) Investment is high for starting as well as buying license. Very less time to gain advantage by an innovation

INTENSITY COMPETITION CONCLUSION

Companies have cut throat competition.

They to gain subscribers from other service providers.

CONCLUSION
This factor makes the telecom industry moderately attractive for the new players and investors but companies need to face Certain restrictions while making a new entry and have to be innovative to stay competent in the market.