Power Shift of Telecommunications in India (2)

8/4/2019 Power Shift of Telecommunications in India (2)

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Power Shift ofTelecommunication in India


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The Case

Evolution of the mobile telephony in Indiasince 1995.

Revenue and Growth Regulatory bodies

Major Players

Value added services Next Generation Networks


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Evolution of Mobile phones


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Scenario in 1995!!

1st mobile telephoneservice started on15th August 1995.

Average Handsetcost Rs. 15000.

Outgoing was Rs.16/min and incomingRs. 8/min.

Only 3000 users in1995 -96.


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NTP99

Licensee fees reduced

Call rates reduced by 60%

Free Incoming Affordabletelecommunication servicesto the common man.

Benefits of VAS like internetequally to urban rich as wellas rural poor.


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Revamp of Telecom Industry

Formation of TRAI

Major roles assignedto DOT

Foreign DirectInvestment


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Growth of Telecom Industry


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Growth

India has the 2nd largest customer base with 826 million users.India will have the largest customer base by 2013 surpassingChina.


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1995: .03 million users

1999: 1.8 million users

2003: 13 million users

2007: 165 millionusers

2011: 826.93 millionusers

2013: 1.159 billion usersestimated


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GSM and CDMA

GSM(Global Searching for system forMobile Communication)

GSM is a cellular network which meansmobile phones connect to it by searchingfor cells in immediate vicinity.

CDMA(Code division multiple access)

It is a digital technology that uses spreadspectrum techniques.


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Market share % of GSM operators

GSM services reached the478.68 million subscribermark at the end of March2010, as compared to297.26 million as at the endof March 2009.

It added around 181.42

million subscribers duringthe year, registering anannual growth of 61.03%.


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Market share % of CDMAoperators

In CDMA servicesReliance with 56.06million subscriber base

remains the largestCDMA operator followedby M/s Tata and M/sBSNL with subscriberbase of 39.03 million, and6.14 million respectively.


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Demand Curve

Yr.

Qty Demand

(in Million)

Q

Cellular Tariff

(in INR)

P

Total Revenue

TRQ TR

Marginal Revenue

MR

1998 0.88 15 13.2

1999 1.19 15 17.85

0.31 4.65 15.00

2000 1.88 7.2 13.5360.69 -4.314 -6.25

2001 3.58 4 14.321.7 0.784 0.46

2002 6.54 3 19.622.96 5.3 1.79

2003 13 3 396.46 19.38 3.00

2004 33.7 2 67.420.7 28.4 1.37

2005 52.2 1.5 78.318.5 10.9 0.59

2006 90 1.2 10837.8 29.7 0.79

2007 150 1 15060 42 0.70


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Demand Curve-Cross Elasticity

Law of Demand satisfied.

Cross price elasticity is more than 1.

0

2

4

6

8

10

12

14

16

0 20 40 60 80 100 120 140 160

CellularTariff(inIN

R)--------->

Qty Demand (mobile Phones) -------->


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CROSS PRICE ELASTICITY

RISE IN PRICE OF LANDLINE PHONE

VS

INCREASING DEMAND OF CELL PHONES


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Mobile v/s Landline

Decrease in number of Landline phones


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Why Mobiles over Landline..??

Stay connected anytime and anywhere

SMS

Your way out in emergencies

Navigation in your hand Mini PC

Wholesome entertainment

GPRS Transfer of data

Fashion Statement


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INCOME ELASTICITY

An expanding Indian economy withincreased focus on the services sector

Urbanization with increasing incomes

Rise in demand of Smart Phones


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Income Elasticity

INCREASING DEMAND OF SMART PAHONES

32 m units sold 65 m units sold 150 m units sold

2005 2008 2010


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Revenue

Telecom Revenue is growing at 12%during 2010-11.

Revenue was 119845cr.

Expected to grow further now when 3gservice is launched.


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0

20

40

60

80

100

120

140

160

0 20 40 60 80 100 120 140 160

TotalRevenu

e(P

xQ)---------->

Qty of Cell Phone demanded ----------->

Small decrease in Price of cellular tariff will lead to large increase inquantity demand of cell phones. MR being positive.

MR curve will shoot up as rural areas are still untapped. Therefore withthis present situation increase in Total Revenue is guaranteed with smalldecrease in price.

Marginal Revenue Curve


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Value Added Services

Internet

Video Conference

Voice mail

Caller tunes

Free text messages

Live television

broadcasting Mobile gaming


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VAS

Lucrative for Operators

At negligible costs some VAS

services make much more moneythan the average money that voicemakes.Indias churn rate is between 3.5

percent to 6 percent per month, one ofthe highest in the Asia Pacific region

Many parties makemoney

Media companies e.g.star,sony,etc are bettingbigApplication serviceproviders

Mobile Music booms

The mobile musicindustry is set toovertake legalconventional music

industry in India.

Customer is ready

More than 100 million peoplearmed with mobiles want to beentertained when they aretravelling, waiting and simply

living

Value-added services are likely to save the day for mobile serviceproviders


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Market Players

Airtel Vodafone Idea

Reliance Tata Videocon BSNL

Uninor Aircel MTS


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Market Share Of various service providers ason 31st June 2011


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1st Generation(Analogue)

2nd Generation (GSM)

3rd

Generation (IMT 2000)

1980 1990 2000 2010

HighSpeedMultimedia

Voice andData(Narrowband)

Voice

A new suite of standards to deliver Mobile multimedia

3G Mobile Service


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1. Hyper LAN- set of wireless LAN

2. 1G-First Generation : Speech

3. 2G-Second Generation : SMS , MMS, CDMA ,GPRS,

EDGE, Voice Mail

4. 3G-Third Generation : Wireless Internet,

Video Calling, Mobile TV, Hyper LAN- set of

wireless LAN

Here are the evolution pattern of technology

based on their prescribed Generations.


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Urban v/s Rural

Saturation in Urban marketNew customers coming fromRural market

Companies are makingplans of billions to tab thepotential of rural marketProviding VAS like weatherforecast with respect toagricultural activities areattracting the farmers fromrural areas


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FUTURE OF TELECOMMSECTOR

Expected to Grow at 15.86% every year

1.159 Billion Mobile subscribers by 2013

A 76.92 Billion (U.S $) Sector by 2012


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PROBLEMS FACED BY TELECOMM SECTOR

High Costs Involved in Rural Sector

Low Income Groups

35% population still under Below Poverty

Line


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RECOMMENDATION

Tap the Rural Market

Introduce Plans Suitable for Rural Sector

Cheaper Handsets for Rural Sector

Improve Services Provided


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CONCLUSION

Factors That Effect Elasticity of Demand inTelecomm Sector

Price

Quality of Network

Market Potential

Quality Of CustomerServices(GOODWILL)

Documents

Power Shift of Telecommunications in India (2)