Porter’s five forces analysis for the industry and also cover industry trends and driving forces

Indian telecom industry ranked second in the world, is one of the rapidly growing and expanding industry with 1035.18 million subscribers. The growth in subscribers is dominated by the increase in number of subscribers in wireless mobile segment with a quarter growth rate in the tune of 1.66%(including wireless and wire line). The liberal and reformist policies of the Government of India have been instrumental along with strong consumer demand in the rapid growth in the Indian telecom sector. The government has enabled easy market access to telecom equipment and a fair and proactive regulatory framework that has ensured availability of telecom services to consumer at affordable prices. The deregulation of foreign direct investment (FDI) norms has made the sector one of the fastest growing and a top five employment opportunity generator in the country.

Trends observed in Telecom Industry

LTE to become mainstream in India; Indian subscripbers will adopt to 4G considering the affordability of prices and need for high speed data. This is even complemented by the growth in smart phone purchases | Public Wifi gaining traction in metropolitan cities as a part of Digital India | Smart Phone becoming integrated part of life, thus increase in the usage of data over voice | Intense competition foreseen in the telecom industry due to delayed M&A activities | Ease in regulatory mandates; with policies like infrastructure sharing between operators |

Porters Five Forces Analysis fot Telecom Industry
Competitive Rivalry: High * Very low switching cost which makes competitors to attract customers through very competitive pricing and benefits * Cannibalism from competitors with the introduction of mobile number portability. * Mobile service portability keeping the number same increased pressure on customer retention because of ever shifting customer loyalty * New innovation and technology increases the customer retention, which makes the industry to be upgraded and updated with new and revolutionary technology, for instance, 4G service * Market share is distributed among many players, of which 6 are major shareholders; Airtel, Vodafone, Tata Docomo, Aircel, BSNL and Reliance

Potential New Entrants: Low

The threat of new entrants is low for the following reasons:
Barriers to entry: * There are established brands in India with a cumulative market share of 97%. * There is no considerable difference between the services offered by them with price competition being very high. * The economies of scale for operations in terms of spectrum auction, infrastructure deters the new entrants from entering in the industry. * With urban market about to get matured, the average revenue per user is very low with rural operations gaining significance, which affects the companies new companies bottomline. * Access to optical fibre network is limited to the new operators and it is cost ineffective

Bargaining power of buyers: High
Buyers in telecom industry can be classified into two categories; i) Individual customers, ii) Enterprise customers. There are many telecom service providers with product variance as per their strengths and cheaper prices, which give the buyer many options. This results in buyer exercising high bargaining power.
The other factors which contribute to buyers bargaining power are:- * Low switching costs with the introduction of nation wide Mobile Number Portability * Information available to the buyer regarding the products on offer is high. This is due to the heavy advertisements, campaigning of service providers. * Concentration of buyers for a particular product is high. In the case of enterprise consumers, the big size and big consumption of services result in high buyer power

Bargaining power of Suppliers: High
The suppliers for the telecom industry include: * Network Infrastructure provider are of two types; Telecos owned tower companies, Independently owned telecom companies. Due to the large number of companies providing infrastructure there is less bargaining power of suppliers. In addition to that, there is low vertical integration by the independent telecom infrastructure companies * Information technology support is high with many IT companies providing related services to the service providers resulting in reduction of bargaining power of suppliers * Silicon chip manufacturers (for processors, memory chips, etc), sub-contractors and employees also act as suppliers to this industry. Due to heavy competition among chip manufacturers, their bargaining power is essentially low
Threat of substitutes: High
The potential major substitutes for the telecom industry are as follows: * VOIP (Skype, Messenger etc.) * Online Chat * Email * Satellite phones * In additon to that, products and services from non-traditional telecom industries such as Cable TV and satellite operators are laying their own direct lines into homes, offering broadband internet services * Unlicensed frequency options (ex: Wi-Fi, UWB, Walkie Talkie) also compete alongside. But, the issue of security, reliability and flexibility associated with mobile telephony, along with switching costs associated with substitutes, still make mobiles a preferred choice.