Indian telecommunication industry: the road ahead

Abstract

Indian Telecom Industry is going through an interesting phase. While the landscape is quite competitive with fifteen players fighting for the share in the pie still the tremendous growth rate in the market is attracting not only Indian conglomerates but foreign players too. Indian telecom industry offers opportunities such as high market growth rate and increasing disposable income as well as challenges such as one of the lowest ARPUs in the world and huge investments. The players in the telecom market can be segregated into three major categories based on revenue-large sized players (e.g. Airtel, Vodafone), medium sized players (e.g. Aircel) and small players (e.g. HFCL, Stel).We analyzed all these players on a number of parameters ROE, Market Share, Revenue, Costs, Leverage and also analyzed the impact of other factors such as Mobile Number Portability (MNP) and 3G.Based on our analysis we found that smaller players are not on a firm ground and unless there are any major turnaround, they are most likely to vanish in a few years. It is not the only smaller players who have the problems; large and medium sized players too have their own set of problems such as low profitability (some of them running into losses), high leverage post 3 G investments and inconsistent performance across circles. In the next level of consolidation, we expect that there will be mergers and acquisitions among large and medium players. As per our estimates, the next level of consolidation is going to happen in 2-3 years when the market penetration reaches 100% mark and market growth rate slows down. We used Harvard Business Review s theoretical framework to understand the current Indian Telecom environment and the broad strategic posture major players should adopt. We found that the current level of uncertainty in Indian Telecom market is level 3 uncertainty (four level of uncertainties exist as per HBR framework).Under level 3 uncertainty, there are various scenarios possible and we have recommended different strategic postures for the service providers for example Adapters for Airtel and Vodafone, Shapers for Aircel and Tata and Reserving the rights to play for BSNL. In addition to the broad strategic postures, we also recommended some strategic moves and success enablers for the various service providers.