MICHAEL PORTER INDUSTRYS

ANALYSIS IN RELATION TO

TELECOM INDUSTRY

MICHAEL PORTERS 5 FORCE ANALYSIS

INDUSTRY HISTORY

1851 First operational land lines were laid by the government near Calcutta. 1881 Telephone service introduced in India.

1985 Department of Telecommunications (DOT) established.

1986 Conversion of DOT into two wholly government-owned companies: VSNL, MTNL.

1999 Cellular Services are launched in India. 2000 DoT becomes a corporation, BSNL. Today, India is the largest market in the world of about 20 million mobile subscriber lines every month in an average. The FDI cap in the telecom sector in India is74 %.

RIVALRY AMONG EXISTING FIRMS

MAJOR TELECOM PLAYERS IN INDIA

State owned companies ( Bsnl and Mtnl ).

Private Indian owned companies (Ril and Tata ).

Foreign invested companies (Vodafone, Bharti TeleVentures, Idea Cellular, Spice Communications).

BARGAINING POWER OF CONSUMER

Consumer is the ultimate source on which the company is depended The ability to influence the setting of prices Monopsonistic or quasi-monopsonistic buyers will use their power to extract better terms (higher profit margins or ) at the expense of the market. The company should try to set the prices keeping in view the power of buyers

In telecom industry, service providers are the main drivers. The major booster is the wireless mobile subscriber base. Other services like Internet subscriber base has also provided significant growth. Wireline subscriber base has been declining in recent years. Subscriber base for some of the companies like Bharti Tata (Tele & Communications), MTNL and Reliance increased marginally.

MARKET SHARE OF WIRELESS OPERATORS

Sl. No. 1 2 3 OPERATORS BHARTI BSNL RELIANCE MARKET SHARE(%) 23% 19% 17%

4
5

VODAPHONE
TTSL

16%
10%

6
7

IDEA
OTHERS

9.6%
5.4%

BARGAINING POWER OF SUPPLIERS

As far as telecom industry is concerned, it is service based industry which is intangible. The role of suppliers will be very minimum that too in different domain. Some of those type are

(1) Mobile hand set suppliers. (2) Optic or aluminum fiber suppliers. (3) Soft ware suppliers.

THREATS TO NEW ENTRANTS

The Indian telecom industry has always allured foreign investors.

From August 1991 to March 2007, in the telecommunication sector FDI inflow amounted is US $ 3,892.19 million.
Telecommunication is the third-largest sector to attract FDI in India in the post liberalization era. Some of the companies which started from state level and started operations national wide are (1) Aircel. (2) Spice. (3) Unitech. etc.

SUBSTITUTE TO PRODUCT

Telecom sectors offers a wide range of services in India, such as wire line , CDMA mobile, GSM mobile, internet, broadband etc. Out of all the only substitute or option is Internet telephone, best video support and cheaper is an added advantage to that.

The leading internet service provider in INDIA is state owned company BSNL at 45.2 % share value.