Telecom industery

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IIMT SCHOOL OF MANAGEMENT

(ISM)

Managerial Economics

Semester – 1

Academic Year 2013-14

Module Leader

Ms. Neetu Ahmed

Submitted By

Rishabh Shukla

Post Graduate Diploma in

Management

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INDEX

1 Introduction

1.1 Types of Indian Telecom Market

1.2 Government Role & Policy

2 Perfect Competitive Market

2.1 Characteristics of Perfect Competitive Market

2.2 Perfect Competition in Telecom Sector

3 Competitive Scenario of Telecom Sector

3.1 Market Players

3.2 Trends in Demand & Supply

3.3 Cost & Price Elasticity

4 Problem faced by the industry

5 Growth in telecom sector

6 Opportunity for the industry

7 Executive summary

8 Conclusion

9 Reference

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Perfect competition in Telecom sector in India

Telecom Industry in India

1. Introduction:

The Indian telecom industry is the fastest growing industry in the world. India is a world second largest telecom market after the china. Telecom means is transfer information between two

people or two distance points in a space. Telecom regulatory authority of India (TRAI) have provided an environment for service providers and implemented an all types of government policy and regulatory framework. This sector is a very competitive. Because telecom sector is a

affordable tariffs to the consumer. Telecom sector are 898 million subscribers as on March 2013. Telecom infrastructures are expected to increase a compound annual growth rate of 20% during

2008-15 to reach a 571000 tower in 2015. India has a opportunities for telecom operator and is one of the best market for a telecom business. Telecom sector growths are also attracting a new player in the telecom industry with the result that intensity of competitions is also increased.

Cellular services are divided into a two categories GSM (Global System for Mobile Communication) and CDMA (Code Division Multiple Access). GSM company are basically in

India are Airtel, Idea, Vodafone, and a CDMA are provided by a Reliance, Tata Indicom.

www.trai.com (as on 4/10/2013)

1.1 Types of Indian Telecom Market

Indian telecom markets are basically divided into a two parts, the Fixed Service provider and the Cellular Service. Fixed Service network comprise a land lines basic service. BSNL and MTNL

are two major players in a fixed line service. BSNL and MTNL are covered a 90% of customer in India.

Second types of service are available in India is a cellular Service and it’s basically divided into

a two category GSM (Global System for Mobile Communication) and CDMA (Code Division Multiple Access). GSM sector, the major players are Vodafone, Airtel, Idea, Aircel and so on.

The national company BSNL are also provided a GSM service named “Cellone”. BSNL has a large number of shares in semi urban and rural areas. The major companies are provided a CDMA services in India are Reliance communication, Tata Indicom and so on.

www.cci.in (as on 4/10/2013)

1.2 Government Role & Policy in Telecom Sector

1.2.1- Government Initiative

The central government cabinet give an approval to national telecom policy 2012. This policy

are includes a free roaming, unrestricted net telephony, and a new unified licensing regime for operators. The National science and technology entrepreneurship development board, the Department of science and technology, government of India, Techno Park and Mob ME wireless

have joined a hands to setup a village. Kerala is an innovation hub of Indian telecom industry. TRAI is also work for a Green telephony. TRAI is achieving the aim of carbon emission

reduction under which operator are directed by to achieve a carbon reduction extent of 5 per cent by 2012-13.

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1.2.2- FDI Policy in telecom

As per the Department of Industrial Policy & Promotion (DIPP) data FDI in telecom sector

during April 2011-12 are US$ 1,997 million. FDI limit in telecom sector are 74% in during April 2011-12. Indian government are approved a 100% FDI in telecom sector in India. 100% FDI are

also effect a Indian telecom sector and increased a competitions.

1.2.3- Regulatory Charges

The regulatory charges a very complicated because multiple impede the smooth implementation of telecom project. The current growth rates of the industry require a attention to rationalizing the convoluted tax structure in the sector.

www.dot.gov.in (as on 4/10/2013)

Structure of Regulatory Charges

Regulatory Charges Service Tax License Fee Spectrum Charges USO

%age of revenue 12.36% 6% to 10% 2% to 6% 5% included in fees

Source: Department of telecommunication (DoT) (as on 4/10/2013)

2 Perfect competitive market

Perfect competition is a theoretical market structure. In economic theory, perfect competition is markets such as no large number of participants are enough to have to have the market power to

set the price of homogenous product. Because perfect competitions conditions are very strict. Seller and buyer are available in some auction types markets, say for commodities or some financial assets. The industry is a most closely in a perfect competitions in real life is a

agriculture. Perfect competitive market is all firms sell an identical product. All firms are related to a small market share. The perfect competitive market industry is characterized by a freedom to entry and exit.

2.1 Characteristics of Perfect Competitions

2.1.1- Large number of buyer and seller

Perfect competitive market is a very large number of buyer and seller. In this market each buyer

and seller has no ability to change a price and ruling price by their independent action. Perfect competitive market is each seller adjusts its sale to earn maximum profits.

2.1.2- Homogeneous Product

The second characteristics are a perfect competitive is that the product sold by the suppliers it’s a fully homogeneous. In this market are commodities available everywhere is the same. The

cross elasticity in this market between the product is infinite. The all type of the commodities is perfectly similar in quality, quantity, size and shape. The buyers are always indifferent to the entire commodity sold in the market.

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2.1.3- Uniform Price

Perfect competitive market is the ruling market price is the same. Price is the uniform as the products in the market are identical. Perfect competitive market prices are fixed by all the buyer

and seller in the market.

2.1.4- Free entry and free exit

Perfect competitive markets are buyer and sellers are always free to enter and leave the market.

Perfect competitive markets all firms are get only a normal profit. This profit is not a tendency on the part of the existing firm to leave the market.

2.1.5- Perfect knowledge about the market

It’s one of the most requisites of the perfect competitions is that buyer and seller must have a full knowledge of the market and its condition. Seller are also know the ruling price of the market

price must charged by the other sellers.

2.1.6- Perfect mobility

Perfect competitive markets are understood that a various factor of a production are perfectly mobility within the industry. In this market are factor of production can freely move from on to another occupation and one to another place. Because in this market are not an any barriers on

the movement.

2.1.7- Absence of transport cost

Perfect competitive market is single unit price. Price is charged by the free of transportation cost. In this market price are not affected by the transportation of goods. Perfect competitive market is a myth. Markets are always found in the real world.

2.3 Perfect Competition in Telecom Sector

Generally people use the term competition with a compete strongly doe sales. Each company are trying to gain a customer expect to other company. And through their competition are also affect

the market price and quantity. There is very extreme case called a perfect competitions. In which the situations are no individual suppliers in the market can individually affect the market price. Telecom industry are almost perfectly competitive market paradigm, it’s possible for a telecom

sector to effective, competition, which is defined a situation here. Buyers are always access to alternative sellers for the product. The market price of the product is determined by interaction of

the customer and company. In this type of competitions are no single customer or firm can determine, or the level of the price, and difference of the price charged by the company.

www.trai.com (as on 4/10/2013)

Types of Market Number of Sellers Entry Barriers to

Sellers

Nature of Product

Perfect Many, Small, Independent

None Homogeneous

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In perfect competitive market are suppliers are free to enter and exit a market in any time. There are a large number of firms and market price are also affected a marginal costs and the service

quality. The main goal of a perfect competitive market is to promote a economics efficiency. When a any firm are exercise in a market power so there are economy lose a efficiency. The

misallocation are comes in the firm are market power restricting its output to increase a profit. For example are supposing that a any country are allowed its mobile service to be provide by a monopoly. The company are wanted to increase profits. Indian telecom market is a very

competitive market in a world. Because there are 12 operators in a 23 circles and a every circle are minimum a 6 to 8 company are provided a services. 3G service and mobile number

portability are also increased a competition in a Indian telecom sector. Spectrum is a major sources to provide a mobile service. The price war are also put a pressure in a telecom operator. Pricing strategy of per second billing are taken a price war in a Indian telecom sector.

www.trai.com (as on 4/10/2013)

3. Competitive Scenario of Telecom Sector

The Indian telecom sector is a very fastest growing sector. Telecom sector owing a very huge competition among the players, price war etc. 15 year ago mobile consumer were made to pay

for an incoming call. And the today time mobile consumer pay for a per second of their usage. Indian telecom market are basically divided into a two parts between GSM and CDMA. Currently there are 11 players are fighting in a Indian telecom market. Airtel are leading in a

Indian telecom sector but Vodafone and Tata Teleservices give a very tough competitions to airtel. The total number of telephone subscribers as on 31st April 2013 was 897.02 Millions.

Telecom sector growth are also attract a new players to this industry. Internet subscribers in India as on 31st April were 160 Millions. According to a TRAI out of 160 million Indian internet user , 86 million user go online on their mobile phone. 40% searches on Google originate from a

mobile device. 30% of Facebook users in India are use a mobile internet.

www.dot.gov.in (as on 4/10/2013)

www.cci.in

(as on 4/10/2013)

0

100

200

300

400

500

600

Mar-13 Apr-13

548.8 544.55

349.22 352.47

Total Subscribers (in Millions)

Urban

Rural

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3.1 Market Players

There are many players in the telecom sector and many new players comes in the telecom sector. When new players are coming in the market so competitions are also increased. The market share of the telecom company are also effected a industry. There are a 15 players in the market at

the end of 31st April 2013. Bharti telecom lead a market with a 19.94% share, second is a Reliance with a 16.58 % share, Vodafone (16.41%), Idea (12.4%), BSNL (10.51%), Tata

(8.77%), Aircel (6.93%), and other remaining share held by other smaller operators. Airtel are leading company with a 20% share, Reliance (16.58%) and Vodafone (16.41) are both has a close competitions. Reliance has a 154 millions customer and Vodafone have a 152.5 million

customers. Uninor one of the company who enter a late in Indian telecom market now uninor has a 45 million customer and 5% of market share in Indian market.

www.trai.com (as on 5/10/2013)

Table: List of Cellular Mobile Service Providers and Currently Area of Operation

S.N. Service Provider Area of Operation

1 Bharti Airtel All India

2 Aircel Group All India

3 Reliance Communication All India

4 Reliance Telecom Kolkata, MP, WB,HP, Bihar, Assam & NE

5 Vodafone All India

6 Tata Teleservices All India

7 IDEA All India

8 Sistema Shayam Telelink Delhi, Kolkata, Gujrat, Karnataka, Tamilnadu, Kerala, Maharashtra, Mumbai, UP(E), UP (W), Rajasthan & WB

9 BSNL All India

10 MTNL Delhi & Mumbai

11 Loop Mobile Ltd. Mumbai

12 Quadrant (HFCL) Punjab

13 Unitech Group Maharashtra, Gujrat, Andhrapradesh, UP, Bihar

14 Videocon Telecommunication Ltd. Gujrat, Haryana, UP, MP, Bihar

Source: www.trai.com (as on 6/10/2013)

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Telecom Operator wise market share

Source : www.trai.in (as on 8/10/2013)

3.2 Trends in Demand Supply

3.2.1Demand Analysis

Indian population in a age group of 14-70 years are a major group of mobile users. Most

of the use are belong a this category. Indian telecom market is a very potential market for

telecom operators. Because young generation of India also attracted for a mobile phones.

This assures a high growth in telecom sector.

Today time most of the users are provided a services in a urban areas. But many of the

village in India are not connected through a mobile phone. The demand in rural areas is

also increased in a day by day. Because 72 % of population are lives in a rural areas.

Indian telecom sector are continue growth in every year. This has been make a impact on

economics and government policy.

FDI is a one of the a major sources to meet a funds that required for a network

expansion. The FDI policy provide a foreign company to invest in a India. Ina present

time 74% to 100% FDI permitted by a Indian government in a various telecom services.

www.kpmg.com (as on 10/10/2013)

3.2.2 Supply Analysis

Indian telecom industry is a very vast because there are very large number of players in a

market. Many of the players are down the cost to a attract a consumers. Indian market are

a very successful and aggressive players in a market like Airtel, Reliance and Tata.

Competition has just heating every day.

BSNL10%

Idea12%

Vodafone16%

Reliance17%

Airtel20%

HFCL0%

LOOP0%

MTNL1%

Videocon1%

sistema2%

Uninor5%

aircel7%

Tata9% Market Share

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Indian telecom market entry is a easy for a new players. The Indian telecom sector today

is not a small market. There are a many of the players in telecom sector. The Indian

government in today recognized to provide a world class infrastructure in a country.

Indian telecom market is supply a landline phone is more but the demand are reduced in a

landline phone.

www.kpmg.com (as on 10/10/2013)

3.2.3 Demand and Supply Graph

www.assocham.org (downloaded on 12/10/2013)

In this graph we make a supply constant because we conclude in all the firm enter a equally in a

perfect competitive market and buyers buy a equal quantity so the supply is constant.

3.3 Cost and Price Elasticity

The spectrum price are increased in a India so telecom operator are required to invest a huge

capital. Subscribers are increasing in India year by year , but due to heavy competitions the traffic rates are lowest in the world. The call rate in 1995 are INR 16.80 and 2013 are INR 0.30. telecom operators are launch a new scheme including reduction in tariffs for voice call. Due to

price war the profit margin and return of capital is reduced over the year. customer due to the price war easily switch to the service provider the service at a lower price.

www.dot.gov.in (as on 14/10/2013)

4 Problems faced by the industry

The Indian telecom market is saturated with a urban tele-density reaching a 168%

and the India overall average is a75%. Further increase in a customer base seen a

difficulty in a next coming year.

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The Indian telecom industry is a very competitive in a world and lowest traffic

rates in a world. Telecom operator are also launched a new promotional scheme

including a reduction rate in a voice call, lowest roaming charges, and many

other types of the scheme.

The average revenue per user has been falling down in year by year and most of

the players are lose a 10 to 25% ARPU and goes to a declining path.

www.assocham.org (as on 16/10/2103)

5. Growth in Telecom Sector

5.1- Subscriber Base

The mobile subscribers base in India are increased by 9% to 696 Million connections this year.,

according to technology researcher Gartner. Mobile service increased in India is currently at 51% and is expected to grow to 72% by 2016.

5.2- Mobile Value Added Service (MVAS)

India MVAS industry has an estimated size of US$ 2.7 Billion. The industry earn a money through a five or six product such as game based application, music downloads etc. the Indian

MVAS industry grow in 2015 by US$ 10.8 billion. The next target of growth in a semi urban and rural areas.

5.3-Mobile Number Portability (MNP)

Mobile number portability is a one scheme its started by a Indian government according to this scheme you are able to join to another network without changing a mobile number. This scheme

are growth a telecom sector and also increase a competition. MNP are also make a pressure of a telecom company we provide a good services. Mobile number portability request are 91.73

million at the end of April 2013.

www.cci.in (as on 16/10/2013)

6 Opportunity for the industry

6.1- Rural Telephony

The Indian rural market are provided a opportunity for a different telecom companies to increased a their market. Vast rural market are holds a huge potential to drive a future growth of the telecom company. Because a teledensity in a rural areas are only 15% so its reflect a

opportunities a telecom companies. Service in a rural area are also increased a growth of telecom company and increases a demand for equipment and telecom infrastructure.

6.2- 3G Service

Today in India 3G service is a potential growth driver. Because 3G service have been launched in a recently. This service is a future growth of a telecom industry. 3G service are provided a

very high speed data and so many facilities. Introduction of 3G service in India are also increased a competitions in a India. The launch of 3G is also facilities a different service Video

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Calling, gaming, high speed internet access, and other data services. Indian government are a spectrum through a auction. Auction decision are create a competitive environment in a Indian

telecom sector.

6.3- Mobile Value Added Service (MVAS)

The value added services are also increased a revenue for the telecom service industry. 60 % of the VAS revenue part are goes to service provider. Mobile commerce and mobile banking are also increased a revenue in telecom service provider. And a future are many person are used a

mobile banking and mobile marketing and a different types of service so VAS is a sources of a revenue.

6.4- Way Forward

The Indian telecom market are rapid growth in a today time. Because improving telecom

infrastructure, skilled labour pool, favourable demographic, disposable income of consumer, declining tariffs, increasing demands, growing attraction for mobile with new features, handsets at lower price are increased a growth of telecom sector. In a near future more challenging

business environment are faces by a telecom companies. Telecom company are provided a good rural coverage, better operational efficiency, and superior quality of service are likely to stay

ahead of competitors. The Indian telecom sector are ranks among a fastest growing sector in a India. Today Indian telecom market growth rate is 45% which is the highest in the world.

www.ficci.com (as on 18/10/2103)

7. Executive Summary

Indian telecom sector has contributed significantly growth. Tele-density has reached in 77 %

in 2012. Globally, the telecom industry growth in last 5 years. While voice revenue increase,

data traffic exploded, device and content. In this period Indian telecom industry growth.

After a period of rapid growth Indian telecom operator company face a new challenges

because growth of voice revenues is slow down. The Indian government make a new

telecom policy (NTP-2012). This policy provided a long term vision for the a telecom sector.

National telecom policy main object is provided a broadband access to all citizens,

optimizing spectrum allocation and licensing. This report is basically focus on a perfect

telecom market in India. Telecom industry is a oligopoly market. There are many of a

players in this sector. Telecom sector is a free entry and exit.

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8. Conclusion

The Indian telecom network is a world second largest network in a world. The Indian

telecom sector are rapid growth in a past few years. Because improving telecom

demographic condition, rising a income of person, lower traffic rates, growing attraction of a

mobile, availability of mobile in lower rate are expected to continue growth in telecom

sector. The companies are facing a more challenges in a near future. Companies are provided

a good facility in a rural areas, better operational efficiency and superior quality of service to

stay ahead in a market. Indian telecom industry is a very fastest growing industry in a world.

And a sometime after I think Indian telecom network is a world largest network. Indian

telecom market in this time 14 main players available. And each circle minimum 6-7

company are provided a services.

Reference

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4/10/2013)

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5-http://toostep.com/topic/telecom-sector (as on 8/10/2013)

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on 5/10/2013)

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on 5/10/2013)

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12- www.trai.com (as on 5/10/2013)

13- www.kpmg.com (as on 4/10/2013)

14- www.assocham.org (as on 5/10/2013)

15- www.dot.gov.in (as on 4/10/2013)

16- www.cci.in (as on 4/10/2013)