porter’s model for cellular service

7/31/2019 Porters model for cellular service

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PORTERS MODEL FORCELLULAR SERVICE


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Introduction

Most vibrant sector with highest growth rate more than 60lakh customers are added every month

Airtel is a market leader with 28.09% market share andVodafone on the 2 nd place with 23.56% market share .


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IntroductionIndia has a total of 960.9 Million telecom subscribers,

comprising of 929.37 Million mobile subscribers & 31.53Million wire-line subscribers.The Indian tele density now stands at 79.28%.

Rank in world in network size 3rd

Teledensity (per hundred populations) 79

Telephone connections (In Million)

Fixed 929.37

Mobile 31.53

Total 960.9


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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.


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Market leader AIRTEL

Market Challenger Reliance, VodafoMaket Follower TATA, IDE


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Buyer Power High

Buyers in Telecom industry generally land in twocategories: Individual and Enterprise Customers like ITcompanies, Banks etc. There are many number oftelecom providers in the market with big product

variance and cheaper prices which gives buyer manyoptions to select operators and thus have a largebargaining leverage.


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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 .


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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.


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Buyers information

Buyers information regarding the availability of other

options has become high

Increased social networking, high advertisementsthrough 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


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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


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BUYER POWER CONCLUSION

Buyers can easily change their service providers.

Buyers power is very low.


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SUPPLIER POWER


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Suppliers Power - Low

Suppliers switching cost LowSuppliers 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.


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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 Companies2. Aluminum Providers3. Other Raw material providers


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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)

TelecosOwned,

72%

ITTC, 28%

Telecos Owned

ITTC


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Suppliers Power

List of Mobile Operator and their Tower Services .

Operator Tower Service

Bharti BIL/ITL

Reliance RITLVodafone ITL

BSNL MTNL, BSNL and Others

Idea ITL

Tata Viom

Less Bargaining power because of morenumber of suppliersLittle or no forward Integration


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Suppliers Power

Sim Card Manufacturers

Sim card for the mobile operators are mostlyproduced in India and some are imported.

The mobile operators doesnt alwaysprocure the sim card from a single supplier toavoid any delays.

The Bargaining power of suppliers is less

There is little or no threat of forwardintegration .


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SUPPLIERS POWER CONCLUSION

Suppliers has less Bargaining power dueto the Presence of many suppliers.


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Threat of Substitutes - Moderate

Buyer tendency To

Substitute

Relative PricesPerformance Of

Substitut e


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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 theDoT to open up Net telephony.

It provides unified access license, which includes

broadband and Internet companies such as Googleand Skype to offer telephony services for international calling and PC-to-PC domestic calls.


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Threat of Substitutes

Relative PricesInternet Telephony eating into the revenue ofGSM/CDMA telephony.

Performance of SubstituteVoice quality is an issue with internet telephony.Internet voice services also currently limited dueto regulatory road blocks.


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THREAT OF SUBSTITUTESCONCLUSION

Increasing threat from the substitutes.


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Entry baarriers -highGovernment 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 infrastructurewith 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


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ENTRY BARRIERS CONCLUSION

Not much Threats from new entries asgovernment has imposed certainRegulations.


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INTENSITY OF COMPETITION(HIGH)


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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 toraid 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


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INTENSITY COMPETITION

CONCLUSION

Companies have cut throat competition.

They to gain subscribers from other serviceproviders.


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CONCLUSION

This factor makes the telecom industrymoderately attractive for the new playersand investors but companies need to face

Certain restrictions while making a newentry and have to be innovative to staycompetent in the market.


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porter’s model for cellular service

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