BUSINESS STRATEGY ASSIGNMENT TELECOM SECTOR

BUSINESS STRATEGY

"Mission leads to strategies leads to structure

Michael Porter: "Competitive strategy is about being different. It means deliberately choosing a different set of activities to deliver a unique mix of value. The essence of strategy is choosing to perform activities differently than rivals do." Alfred Sloan: "Mission leads to strategies leads to structure." A mission is an outcome. Strategies are the "how to" to achieve the outcome. In other words, strategies are the means to work towards achieving the desired outcome. Strategic planning is the process of conducting research, defining strategies, and developing business models and plans to achieve the organization's vision. Strategic planning is dynamic and assumes that the organization needs to respond to a changing environment. Business strategies are developed to differentiate the business from its competition. The most effective strategies are often those where the organization's talent and passion merge with viable economic opportunities.

IMPORTANCE OF BUSINESS STRATEGIC PLANNING

Business strategy basically helps you define what you want your business to look like, how you want to get there and what specific steps you need to make it a reality. Well thought-out strategy should evolve from the integration of evaluated performances, corrective adjustments, changing conditions, new ideas, and new opportunities. Essentially a great strategy considers how to build a strong market position and how the business can perform in not so ideal circumstances and situations, like unpredictable occurrences, potent competition, and internal problems. The better a business strategy is the more likely competitive success is achieved in the market place. A companys ultimate success or failure is based on its long-term direction, strategic moves, and business approaches. Without a strategy, any business is like a car without a steering wheel. It is an extremely essential element. It is a great map for navigating through difficult times. Not to mention, a great business strategy is also a great source of motivation during trying times, as this blueprint will offer options for making new business decisions or strategies. Developing a strategy is important because it details the exact how to with regards to achieving any targeted results for a business. It also helps respond to changing buyer preferences, react to new market and competitive conditions, and long-term preferences. Without an established business strategy, there is no existing prescription for managers or owners to do business. There is no road map for pleasing customers or even meeting business objectives. Every good business strategy is both proactive and reactive to changing business conditions. Develop a strategy and adapt it as necessary when business events unfold and time progresses.

TELECOM INDUSTRY 1. INDUSTRY OVERVIEW

1.1 Background The Indian Telecommunications network is the third largest in the world and the second largest among the emerging economies of Asia. Today, it is the fastest growing market in the world. The telecommunication sector continued to register significant success during the year and has emerged as one of the key sectors responsible for India s resurgent India s economic growth. In fact, the Indian telecom market has gained recognition as one of the most
lucrative markets globally.

1.1.1 Regulatory Framework The Telecom Regulatory Authority of India (TRAI) was set up in March 1997 as a regulator for Telecom sector. The TRAI s functions are recommendatory, regulatory and tariff setting in telecom sector. 1.1.2 Growth This rapid growth has been possible due to various proactive and positive decisions of the Government and contribution of both by the public and the private sector. The rapid strides in the telecom sector have been facilitated by liberal policies of the Government that provide easy market access for telecom equipment and a fair regulatory framework for offering telecom services to the Indian consumers at affordable prices.

1.2 Segment wise Status 1.2.1 Wireline Services With increasing penetration of the wireless services, the wireline services in the country is becoming stagnant. On the other hand, Broadband demand has picked up and promises to stabilise fixed line growth. 1.2.2 GSM Sector
In terms of the Global System for Mobile Communication (GSM) subscriber base this now places India third after China and Russia. China had 401.7 million GSM subscribers

1.2.3 CDMA Services CDMA technology was introduced in India as a limited mobility solution. The introduction of CDMA services has created competition, lowered tariffs and offered many citizens access to communication services for the first time. 1.2.4 Internet Services Internet services were launched in India on August 15, 1995. In November 1998 the government opened up the sector to private operators. A liberal licensing regime was put in place to increase. Internet penetration across the country. The growth of IP telephony or grey market is also a serious concern. Government loses revenue, while unlicensed operation by certain operators violates the law and depletes licensed operators market share. New services like IP-TV and IP-Telephony are becoming popular with the demand likely to increase in coming years. The scope of services under existing ISP license conditions are unclear.

INDUSTRY GROWTH DRIVERS Fixed line segments Capacity expansion of fixed line exchanges helped customers avail quick connections Quick connection availability boosted number of fixed line connections Wireless segment Vast geographic expanse of India acted as a catalyst to boost mobility. Low call cost since 2002 fueled the wireless segment. Nationwide roaming facilities on GSM SMS facility Internet and subscription bundling Reduced cost of handsets Reduced custom duties. In remote areas provision of wireless helped in providing fixed line connections CDMA fixed wireless gave customers 3 in one advantage- internet, mobility and easy access. Many telecom service providers provide Global Calling Cards to their customers to make the calls from foreign countries and helps in saving upto 80-90% in international roaming.

Porter's 5 Forces Analysis

1. Threat of New Entrants.

It comes as no surprise that in the capital-intensive telecom industry the biggest barrier to entry is access to finance. To cover high fixed costs, serious contenders typically require a lot of cash. When capital markets are generous, the threat of competitive entrants escalates. When financing opportunities are less readily available, the pace of entry slows. Meanwhile, ownership of a telecom license can represent a huge barrier to entry. In addition, it is important to remember that solid operating skills and management experience is fairly scarce, making entry even more difficult. 2. Power of Suppliers. At first glance, it might look like telecom equipment suppliers have considerable bargaining power over telecom operators. Indeed, without high-tech broadband switching equipment, fiber-optic cables, mobile handsets and billing software, telecom operators would not be able to do the job of transmitting voice and data from place to place. But there are actually a number of large equipment makers around. There are enough vendors, arguably, to dilute bargaining power. The limited pool of talented managers and engineers, especially those well versed in the latest technologies, places companies in a weak position in terms of hiring and salaries. 3. Power of Buyers. With increased choice of telecom products and services, the bargaining power of buyers is rising. Telephone and data services do not vary much, regardless of which companies are selling them. For the most part, basic services are treated as a commodity. This translates into customers seeking low prices from companies that offer reliable service. At the same time, buyer power can vary somewhat between market segments. While switching costs are relatively low for residential telecom customers, they can get higher for larger business customers, especially those that rely more on customized products and services. 4. Availability of Substitutes. Products and services from non-traditional telecom industries pose serious substitution threats. Cable TV and satellite operators now compete for buyers.

The cable guys, with their own direct lines into homes, offer broadband internet services, and satellite links can substitute for high-speed business networking needs. Railways and energy utility companies are laying miles of high-capacity telecom network alongside their own track and pipeline assets. Just as worrying for telecom operators is the internet: it is becoming a viable vehicle for cut-rate voice calls. Delivered by ISPs - not telecom operators - "internet telephony" could take a big bite out of telecom companies' core voice revenues. 5. Competitive Rivalry. Competition is "cut throat". The wave of industry deregulation together with the receptive capital markets of the late 1990s paved the way for a rush of new entrants. New technology is prompting a raft of substitute services. Nearly everybody already pays for phone services, so all competitors now must lure customers with lower prices and more exciting services. This tends to drive industry profitability down. In addition to low profits, the telecom industry suffers from high exit barriers, mainly due to its specialized equipment. Networks and billing systems cannot really be used for much else, and their swift obsolescence makes liquidation pretty difficult.

VALUE CHAIN ANALYSIS

The pace of change has not been so fast in the mobile industry. The success of smartphones and associated platforms has increased the value chain overlaps between a handset vendor and an operator. Traditionally, the operators have had an upper hand in the relationship with the handset vendors especially in the western markets as the operators distribute the handsets themselves and provide subsidy. In return, handset vendors have shied away from antagonizing the operators by doing anything that can make the operators a dumb pipe. However, Apples entry changed everything and now there is a tussle between the operators and the handset vendors on who controls the most valuable parts of the value chain.

Earlier, carriers were the only Go-To-Market medium for the VAS providers. However, handset vendors (Apple, Nokia, Samsung, etc.), operating system providers (Windows and Android) and independent players (GetJar) now have application stores which can not only market and distribute services but can also do direct billing. Mobile payments are likely to further reduce the dependence of the application stores on carriers for billing. With players apart from the carriers becoming service inventory brokers, the new Telecom Industry value chain looks something like the figure below:

COMPETITION OVERVIEW Major Players There are three types of players in telecom services: State owned companies (BSNL and MTNL) Private Indian owned companies (Reliance Infocomm, Tata Teleservices,) Foreign invested companies (Hutchison-Essar, Bharti Tele-Ventures, Escotel, Idea Cellular, BPL Mobile, Spice Communications)

Name Year of Establishment Company Profile

Global Presence/ Marketing Network Future Prospect

Bharat Sanchar Nigam Limited (BSNL) 2000 Bharat Sanchar Nigam Ltd. is World's 7th largest Telecommunications Company providing comprehensive range of telecom services in India: Wireline, CDMA mobile, GSM Mobile, Internet, Broadband, Carrier service, MPLS-VPN, VSAT, VoIP services, IN Services etc. Within a span of five years it has become one of the largest public sector unit in India. It has a network of over 45 million lines covering 5000 towns with over 35 million telephone connections. BSNL plans to expand its customer base from present 47 millions lines to 125 million lines and infrastructure investment plan to the tune of Rs. 733 crores (US$ 16.67 million) in the next three years.

Mahanagar Telephone Nigam Limited (MTNL) Name Year of Establishment Company Profile Mahanagar Telephone Nigam Limited (MTNL) 1986 MTNL was set up by the Government of India to upgrade the quality of telecom services, expand the telecom network, introduce new services and to raise revenue for telecom development needs of India.s key metros. MTNL with a market share of about 13% of the National telecom Network has a customer base of 5.92 million. The Govt. of India currently holds 56.25% stake in thecompany. MTNL has formed a Joint Venture company in Nepal by the name of United Telecom Ltd. (UTL) in collaboration with Telecom
9

Acquisitions / Strategic Alliances

Consultants India Limited (TCIL) in 2001 for providing WLL based basic services in Nepal. MTNL has set up its 100% subsidiary .Mahanagar Telephone Mauritius Limited. (MTML) in Mauritius, for providing basic, mobile and international long distance

10