Telecom industry: Prospects for future consolidation and new entrants’ growth

Abstract

Telecommunications industry is one of the most dynamic industries in India and world. And Indian telecom market is one of the fastest growing markets in the world. The number of telecom subscribers in the country reached 621.28 million as on March 31, 2010, an increase of 3.38% from 600.98 million in February 2010. Telecom subscribers are growing with phenomenal rate. Last fiscal (FY 2009-10), growth rate was 39% and more than 50% in FY 2008-09 and FY 2007-08. Before that Overall tele-density (telephones per 100 people) has touched 52.74. And it is not just subscriber, but competition too has grown phenomenally. Today India has world’s most-fiercely competitive market. There are 15 telecom players in the market. This has resulted in intense price-war among players. Due to this high competition, Indian call rates are cheapest in world. But this price-war along with decreasing ARPU (Average revenue per user) has led to heavy margin erosions for company and they are bleeding now. The long-expected consolidation in telecom industry has started happening with various recent M&As in telecom infrastructure business. This momentum picked from infra business is likely to extend to telecom services industry very soon. Recently concluded 3G auctions and BWA (Broadband) auctions, where bids went sky high, have put further stressed telco’s already leveraged balance sheets. Indian market is going to embrace mobile number portability (MNP) from 31st December, 2010. This is going to be another insult to injury. With MNP introduction, a good subscriber’s churn is expected. Telcos which have wide network coverage, good QoS (quality of service) and better prices will benefit most from it. In our report, we have analyzed telecom industry in details. Starting with an industry current overview, we have looked into industry macro trends. We have done a detailed value chain analysis for various types of businesses which comprise telecom industry and have done telecom service industry attractiveness analysis on Porter’s framework. We have analyzed current positioning of major players with their financial performance analysis. The report mentions recent major happenings and their impact on industry and players. Finally, we have done a detailed analysis on future consolidation prospects for telecom services providers. In this analysis, we have mentioned reasons for consolidations, key success factors for survival and how various existing players fare on these factors. In the end, we have predicted which companies are likely to remain in post-consolidation market and their future positioning. We have finished our report with recommendations for future growth. Thus, report provides detailed analytical study of Indian telecom industry and tries predicting future industry structure post-consolidation, major players, their positioning in market and identifies the drivers for future growth.