Reliance Telecom Analysis

Contents

History of the Industry 3

Shift in Trend toward Mobile Telephony 3

Reasons for Growth in Mobile Subscriber Base 4

Segmenting the Indian Mobile Consumer Market 5

Key Success Factors 7

Government Policies 9

Industry Structure 11

Financial Performance and Analysis 15

SWOT Analysis 17

Company Analysis вЂ" Reliance Communications 20

Competitor Analysis 24

Bharat Sanchar Nigam Limited (BSNL) 24

Bharti Tele-Ventures Limited 25

Tata Teleservices Limited 27

Idea Cellular Limited 28

Vodafone-Essar (Erstwhile Hutchison Group) 29

Research Methodology 30

Objectives of research 30

Methodology 31

Analysis 31

Factor Analysis on the Product Attribute Importance 32

Cluster Analysis and Segmentation 33

Discriminant Analysis 35

Fishbein Behavioral Intention Model 37

Attribute Mapping 38

Perceptual Mapping 39

Recommendations 41

Exhibits 43

History of the Industry

The history of Indian mobile industry is not very old, not to mention the industry as a whole in itself is very new to the whole world. Telephones have been serving mankind for quite a long now and can boast of the world’s largest redundant legacy system. Thousands of miles of underground cables run through oceans to connect all the continents. Telecommunication industry as a whole has not seen a major revolution for a long time with the exception of a few new innovations in the type of services and call rated. The advent of wireless communication has brought about a slew of path breaking technological advancements in the way people use and see telephones. Form being an equipment kept on the side table for talking, it has walked to occupy every persons pocket for all his information needs. Furthermore the revolution has not ceased and it promises to bring even more of comfort and connectivity while on the move. (Refer to Exhibit #1 for Milestones of the telecommunication industry in India)

Recognizing the crucial role that can be played by the telecommunication sector in India’s development, the Government of India in 1999 initiated a number of changes in the telecommunication and regulatory and policy framework. Through these the Government hoped to facilitate an increase in telecommunication penetration, which stood at 1.3% in 1995. The reforms, with an eye on a telecommunication penetration of 15% by 2010, resulted in a flurry of private operators entering the market breaking the monopoly of the incumbent operator Bharat Sanchar Nigam Limited (BSNL). Reliance Infocomm was born in the year 2000 as a child of this market liberalization process with a vision to provide the latest telecommunication facilities to every Indian at the price of a post card. Reliance Infocomm helped the mobile phone penetration in India to grow from 0.25 percent in early 2001 to about 5.7 percent in June 2005.

Shift in Trend toward Mobile Telephony

India’s 1.1 billion population currently boasts a mobile telephone penetration rate of just 13 per cent. But it is growing by more than six million subscribers every month, making it the fastest growing market in the world and the focus of the industry.

At the start of the decade, India was pretty much a telecom backwater. But now, India’s teledensity has grown by about 100 percent to 17.16 percent over the past two years, TRAI said. Last year it actually grew at a faster rate than China for the first time in new mobile phone connectionsвЂ"and it is set to expand more than three times as fast as the mainland in 2007. Last year, the number of mobile connections in India more than doubled to 142.2 million and that figure is expected to expand 48% to roughly 211 million by the end of 2007.

Even as the mobile telephony market in India is booming, the number of fixed line telephone subscribers dropped, suggesting that first-time users of telephones are opting for mobile phones. The number of fixed line subscribers was down to 40.43 million in December as compared to 48.43 million a year ago, according to TRAI.

Reasons for Growth in Mobile Subscriber Base

The Indian mobile sector has been growing rapidly and has emerged as the fastest growing market in the whole world. Currently of a size of 156 m subscribers (GSM and CDMA), this sector is expected to reach a size of nearly 200 m subscribers earlier than the schedules date of December 2007. The increasing monthly addition to the subscriber base (currently at around 6 m) is indicative of the same.

According to Nokia, the launch of affordable and smart handsets with some attractive features is the major driver of the growth in the mobile market of India. The cell phone users in India have doubled during the past years to 156 million by the end of the year 2006. In India, more than six million new mobile phone users are signing up each month that makes India the fastest developing mobile phone market in the world. This growth is predicted to come greatly from above 600,000 villages where a major fraction of Indian population lives.

Although the average Indian mobile user remains cost-conscious because of low- income living and huge size of mobile subscriber in India uses only SMS or voice services; new and more multifunctional handset with features like cameras, FM radio and mobile video are becoming more and more popular. Also, India is the largest untapped market where the 20% of the total world's population lives.

The Indian telecom industry recently witnessed its biggest deal (Vodafone bidding US bn for 67%