Hot Industry : Telecom

Pick a newspaper and you are sure to read about the telecom industry and what is happening in it. It’s and industry you just cannot ignore right now, its an industry which cannot be forgotten for its role in transformation of Indian Economy. Understanding the dynamics of the industry and how it has and will shape our lives is quite important.

Telecom continues to be one of the fastest growing sectors of the Indian economy, becoming a strong contributor to India’s overall GDP. With a growth rate of 47% over the last 4 years and current subscriber base of 811 Million users the industry is attracting new players. Currently the telecom industry is dominated by big players like Bharti Airtel, Reliance, Vodafone & BSNL. However new entrants like Idea, Tata, Aircel are also making their mark with further competition increased by smaller players like Uninor, S Tel, HFCL, Loop. The industry has witnessed developments such as rollout of newer circles by operators, successful auction of 3G and BWA spectrum, growing push by telecom operators to rollout network in semi-rural areas and increased focus on the value added services market. Recent rollout of 3G services and MNP implementation are considered to change the industry significantly.

Despite all these milestones the way ahead for operators is challenging to continue the same growth story due to intense pricing competition among the 15 players. Usage of multiple SIMs, multiple tariff corrections and swelling competition continues to exert immense pressure on the operator margins. The 2G profitability is expected to dip by 3-4% over the next 2 years due to deterioration of operating Metrics and for the incumbents, EBITDA breakeven is unlikely before 4-6 years given the poor ARPU figures.

Given the intense competition, declining margins and lack of infrastructure, there is great need being seen for consolidation in the Telecom Industry. Consolidation is expected to improve operating metrics and stabilize the revenue growth to a healthy 15%.

The industry is an exciting study, the intricacies of its business model in the Indian Scenario, the operating metrics and the future outlook. I have avoided discussing here the political issues and scams that are currently surrounding the industry (there is enough of this on the news and it can form another blog post in itself) as the intent is to educate about the industry.

I have prepared a brief writeup on the Telecom Industry which I would definitely recommend you to download and read to get more insights to the current telecom scenario. The report can be downloaded from the Downloads Section. You will also find other useful material to download there.

Please do revert back on how you liked the report and your views on the Industry and its role in shaping our lives and the nation.

Strategic Safari – Kuala Lumpur – Maxis

16^th December: Little sleep during the night (details of which to be told later 😉 ) left us wanting more time to sleep but it was time to quickly finish breakfast and start for the next visit – Maxis. Having visited Ports & Medical Industry players it was time for telecommunication and who else is better than Maxis commanding +30% market share and the industry leader. Maxis is the largest mobile operator in the highly consolidated Malaysian mobile telecom market consists of 3 major players: Maxis, DiGi and Celcom. With a total worldwide subscriber base of 10.5mn, Maxis has a presence in high growth, low-penetration markets like India, Indonesia & Sri Lanka. Maxis follow a dual branding strategy with Hotlink as a separate brand for prepaid consumers. This is due to the reasons that Maxis is a traditional brand and prepaid is mostly used by youth, thus a new youthful brand with bright red color and young name.

The Safari Group was first given a corporate presentation where we were given an overview about the journey of Maxis till 2009. This was followed by an introduction to their product portfolio. The interesting thing was to know that how much internet savvy people are becoming all thanks to e-ticketing concept brought by Low cost airline Air Asia. Ironically, the speaker said that people don’t want to pay for the internet. The data card and internet usage expenses in Malaysia are very low compared to that in India. Interestingly, they are already using 3G technologies and moving towards 3.5G & 4G. India seems to lag quite a lot in this front with issues related to spectrum allocation for 3G services still going on.

In all sense, the talk and visit was purposeful and helped us gained a valuable perspective on Malaysian Telecom Sector. From there we moved on to the next destination ABB Malaysia.

Check out the pics here