Analysis of Telecom Industry through

Porter’s Five Force Model

TRODUCTION
elecom Market
Growth in Telecom Industry
 The monthly data usage per smartpho
in India is expected to increase from 3
GB in 2017 to 18 GB by 2023.

 Data usage on Indian telecom operato

networks (excluding Reliance Jio),
doubled in six months as 4G data usag
share increased to 34 per cent by the
end of June 2017$.

 According to a report by leading resea

firm Market Research Store, the India
telecommunication services market w
likely grow by 10.3 per cent year-on-y
to reach US$ 103.9 billion by 2020.
reless Segment Revenue dominates Market

 In November 2017, India’s telephone subscriber

base reached 1,185.88 million.

 In November 2017, the wireless segment (98.03 per

cent of total telephone subscriptions) dominated
the market.

 Urban regions accounted for 57.20 per cent share in

the wireless telecom subscriptions in the country,
while rural areas accounted for the remaining share.
ey Companies
ORTER’S FIVE FORCE MODEL
hreat of New Entrants: Low
• The biggest barrier to entry is access to finance.

• When financing opportunities are less readily available, the pace of entry slows.

• Obtain ownership of a telecom license.

• Large economies of scale.

• Low product differentiation.

• Access to Optical Fiber network.

• Unfavorable government policies.

• Presence of 6-7
7 players in each region dissuades new players from entering the market
argaining Power of Buyers : High
• Buyer power vary between different market segments.

• Buyer in Telecom Industry divided into

• Individual
• Enterprise customers(IT Companies, Banks etc.)

• Buyer’s Information regarding availability of other options has become high.

• Low cost of switching for retail customers.

• Service treated by the customer as a commodity.

• Competition between Enterprise customers.

• The bargaining power of buyers is rising.

roduct Differentiation
argaining Power of Suppliers : Moderate
• Suppliers power refers to increasing price, limiting availability of raw materials,
reducing quality.

• It’s power is inversely proportional to No: of suppliers & directly proportional to no:
of buyers

Different equipment / supplies needed :

• Mobile Towers
• Network Equipment
• SIM Cards
• Hand Set

Different Services needed:

• Spectrum Bandwidth
• Information Technology
• Customer Support
argaining Power of Supplies
Bargaining power classification
Entity Name Power
Mobile Tower Low
Network Equipment Medium
SIM Cards Low
Hand Set Low
Spectrum Bandwidth High
Information Technology Medium
Customer Support Medium
hreat of Substitutes : Low
uyer Propensity to Substitute.
• Buoyed by cheaper smartphones, faster connectivity, and affordable services, the number
of mobile internet users in India is estimated to touch 478 million by June 2018.

Products and services from non-traditional

traditional telecom industries pose
serious substitution threats.

Some Substitutes for voice communication:

• VOIP (Skype, Messenger etc.)
• Online Chat (WhatsApp)
• Email
• Satellite phones
hreat of Substitutes
ative Prices

• Previously Airtel would lead the telecom industry and now as we know that JIO is
the main substitute for Airtel and most of the telecom industry.
industry

• with the advent of Jio which combines both the services and charges the client only
for data and not for voice calls, which is a master stroke by Jio which separates Jio
and others like Airtel with a complete distinction.

• This was the major scheme that Jio implemented that compelled the customers
from Airtel or other telecom industry to switch to a substitute (Jio)
(
ndustry Rivalry: High
Industry rivalry can be categorised into high intensity and low intensity.

• High intensity of competitors are aggressively targeting each other’s markets

and aggressively pricing products.

• Low intensity of competitive rivalry makes an industry less competitive and

increases profit potential for the existing firms.
firms

• The industry is highly fragmented with 15 players, such that there are as many as
five-six players in one region.
ndustry Rivalry

• With low product and service differentiation, lower prices and innovative services
are means of attracting new customers.

• This tends to drive the margins and profits down.

• In addition the high exit barriers in form of regulations and specialized equipment
have increased the overall competition.

• Merger & Acquisitions

dustry Rivalry
Current Market Share

Aircel
7%

BSNL + MTNL
10%

Airtel + Telenor + Tata

Teleservices
Jio + Rcom 32%
15%

Vodafone + Idea
36%
inal Conclusion
Factors of an Attractive industry:

•Threat of entrants is low.

•Threat of substitute products is low.
•Bargaining power of buyers is low.
•Bargaining power of suppliers is low.
•Intensity of rivalry among existing firms is low.

Telecom Industry in India has limited players as

requires huge investment in infrastructu
development and its profitability depends
number of subscribers and pan India de
penetration network. Although Threats
substitution is low and bargaining power of suppl
is moderate, with high Industry Rivalry and h
bargaining power of customer make it a modera
attractive industry.