Let us look at the various factors influencing the telecom industry in India. Telecom Industry in India has shown an amazing growth and has grown at a CAGR of 20% over the past 5 years. The growth in the telecom industry has recently been driven by the enormous growth in the Value Added Services which has grown at a CAGR of 51% over the past 5 years.
Let us apply the porters 5 forces on the Indian Telecom Industry
1) Bargaining Power of Supplier -With a large number of equipment providers the bargaining power of suppliers is low in the fixed asset sector. However when we talk about the HR supply, their power remains high. This is due to the fact that the number of engineers and managers well versed with the technology remain low. After 3G, 4G is set to come to the Indian market and the number of people exposed to this technology is even fewer.
2) Bargaining Power of Buyers - With a uniform service provided by the telecom companies and the entry of a large no. of players in the market the power of the buyers has gone up. The increase has also been driven by mobile number portability which allows the users to switch between service providers without incurring much of a cost.
3) Threat of New Entrants - Telecom requires a huge amount of capital. Therefore, the threat goes up when the capital markets are going good since it is much easier to arrange for capital. Since the industry requires ownership of licenses the entry barriers remain high. Also even though players may enter the market, the number of good spectrums is low so all in all the threat of new entrants remains low.
4) Threat of substitutes - Internet Telephony is the biggest threat to the telecom industry. With its advent many people has shifted to it thereby affecting the telecom industry. The cable and satellite operators have lines that are reaching directly to homes. Another threat to the telecom industry is the fact that railway companies have started laying telephone cables next to their railway track and thus many substitutes to this industry seem to be emerging.
5) Competitive Rivalry -Cut throat competition in this industry has made the prices of the services the lowest in the world. It has also adversely affected the industry with average revenue per user declining to Rs. 176 from Rs. 191. The rivalry continues to remain high due to high exit barriers and the difficulty in liquidating the specialized assets owned by these companies.
Let us apply the porters 5 forces on the Indian Telecom Industry
1) Bargaining Power of Supplier -With a large number of equipment providers the bargaining power of suppliers is low in the fixed asset sector. However when we talk about the HR supply, their power remains high. This is due to the fact that the number of engineers and managers well versed with the technology remain low. After 3G, 4G is set to come to the Indian market and the number of people exposed to this technology is even fewer.
2) Bargaining Power of Buyers - With a uniform service provided by the telecom companies and the entry of a large no. of players in the market the power of the buyers has gone up. The increase has also been driven by mobile number portability which allows the users to switch between service providers without incurring much of a cost.
3) Threat of New Entrants - Telecom requires a huge amount of capital. Therefore, the threat goes up when the capital markets are going good since it is much easier to arrange for capital. Since the industry requires ownership of licenses the entry barriers remain high. Also even though players may enter the market, the number of good spectrums is low so all in all the threat of new entrants remains low.
4) Threat of substitutes - Internet Telephony is the biggest threat to the telecom industry. With its advent many people has shifted to it thereby affecting the telecom industry. The cable and satellite operators have lines that are reaching directly to homes. Another threat to the telecom industry is the fact that railway companies have started laying telephone cables next to their railway track and thus many substitutes to this industry seem to be emerging.
5) Competitive Rivalry -Cut throat competition in this industry has made the prices of the services the lowest in the world. It has also adversely affected the industry with average revenue per user declining to Rs. 176 from Rs. 191. The rivalry continues to remain high due to high exit barriers and the difficulty in liquidating the specialized assets owned by these companies.
No comments:
Post a Comment