Strategic Management Group Assignment

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Strategic

Management

Telecom Industry
Vodafone

Bibhav Singh 40154


Ayushi Gupta 40147
Apratim Mukhopadyay 40139
Anurag Tumloor 40136
Aditya Rishi 40120
Abhishek Gupta 40114

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Table of Contents
Telecom Industry- Sector brief .............................................................................. 3
Key Data points- ................................................................................................. 4
Challenges faced by the sector.............................................................................. 5
Growth Drivers ................................................................................................... 5
Porter’s 5 Forces.................................................................................................... 6
Vodafone India -Company Overview ..................................................................... 7
The Merger of the year- Consolidation Story ........................................................ 8
Vodafone Idea Limited .......................................................................................... 8
Vodafone- Blue Ocean Strategy ............................................................................ 9
Vodafone IOT Offerings .................................................................................... 11
Our Analysis & Recommendation........................................................................ 12
References ........................................................................................................... 13
Appendix.............................................................................................................. 14

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Telecom Industry- Sector brief
The Indian telecom industry is the second largest in the world by number of subscribers.1 The
sector has witnessed exponential growth over the last few years primarily driven by affordable
tariffs, wider availability, roll out of Mobile number portability (MNP), 3G and 4G, evolving
consumption patterns of subscribers and a conducive regulatory environment. However, the
hyper competitive nature of the Indian telecom market and introduction of disruptive tariff
plans have put operator margins under pressure and resulted in consolidation via mergers and
acquisitions. The telecom sector finds itself in an unenviable position where despite falling
ARPU the players are forced to invest significantly in infrastructure and technology upgrades
to maintain competitiveness. Moving up the technology curve and expanding the breadth of
coverage is paramount for the industry to provide differentiated value offerings to end
customers.

10.28
25.54
0.57

15.47

3.15
0.02
6.15
18.48
0.09
2.74 17.51

Bharti Vodafone Idea R Comm


Tata Aircel Quadrant Telenor

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Growth in Total Subscribers
1400 100
90
1200
80
1000 70

800 60
50
600 40
400 30
20
200
10
0 0
FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19

Telephone Susbcriber (in Millions) Teledensity

Key Data points-


• Total telephone subscribers in India increased from 1,190.67 million at the end of Dec-
17 to 1,206.22 Million.
• Total wireless subscribers in India: 1183.41 Million
• Total wireless subscribers in India: 22.81 Million
• Total Internet Subscribers: 493.96 Million
• Overall Tele-density in India increased from 91.90 as on QE Dec-17 to 92.84 as on QE
Mar-18.
• Gross Revenue (GR) during the quarter: ₹62,198 Crore

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Challenges faced by the sector
In the last 10 years, telecom has transformed from a multi-player sector (10+ Service Providers)
to just 4 service providers including the public sector operator

• Gross revenue has dropped by 15% to 20% for 2017-18 for the incumbents
• Voice revenue /min has dropped by 50% to 18p
• Data revenue /MB has dropped by 90% to ₹1.5/MB

Tariff wars, increasing debt burden, spectrum license fees, taxes and new types of internet-based
players etc. have fuelled this situation resulting in a phase of financial stress in the industry.

Growth Drivers
• High demand of Telecom services.
• Growing Income & young population
• Expedite Merger & Acquisition activity
• Government Initiatives like BharatNet, NOFN.
• Liberal Policy by Government in FDI norms, License Fees & Spectrum Sharing
• Cable TV digitization efforts
• Proliferation of next-generation broadband technologies (5G)
• Digitalization of the country
• Rise in digital payments platform.
• Skilled Work force Available

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Porter’s 5 Forces

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Vodafone India -Company Overview
• Vodafone India was the Indian subsidiary of UK-based Vodafone Group plc.
• Entered India in 2007 on acquiring 67% of controlling shares of Hutchison Essar Ltd for
$11.1 Billion
• In 2018, it was the 2nd largest provider of telecommunications services in India.
• As of March 2018, Vodafone India had a market share of 21% with 223 million
subscribers
• In August 2018, the company merged with Idea Cellular to form Vodafone Idea Ltd.

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The Merger of the year- Consolidation Story
• Merged entity will leverage Idea's
leadership in semi-urban & rural
areas and Vodafone’s strong
presence in metro cities to cater to
a pan-India audience
• 1st Consolidation in Domestic
telecom Market to counter the
competition
• The transaction will cut Vodafone
Group's net debt by nearly ₹54,552
crore
• ₹ 3,926.3 crore (in cash) by
Vodafone as spectrum liberalisation
charge & bank guaran-tee of
₹3,322.4 crore by Idea Cellular for
one-time spectrum charges
• A partnership to harness synergy
benefits, debt reduction & cost optimization through spectrum pooling. To become
India’s leading telecom service provider
• Developing world-class infrastructure to introduce newer and smarter technologies,
making both retail and enterprise customers future ready with innovative offerings
conveniently accessible through an ecosystem of digital channels as well as extensive
on-ground presence

Vodafone Idea Limited


The merger is expected to generate-

• 408 million Subscriber Base


• 32.2% Market Share
• 1.7 million Retail touchpoints
• Large spectrum portfolio ~1850 MHz
• ₹140 billion annual synergy
• 2,00,000 Enterprise Customers
Vision-
Create world class digital experiences to connect and inspire every Indian to build a better
tomorrow
Mission-

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• To be most loved brand for customers by delightful experience & meaningful
innovations
• To be an inspirational, agile & winning team to challenge status quo
• To be the most valued company through smart leadership
• To be the most respected company by leveraging technology to catalyse social
prosperity, digital literacy & inclusivity
Offerings-
For consumers-
The power of technology to enhance customers’ lives through ubiquitous presence &
connectivity through PAN India coverage, a continuously expanding 4G LTE network,
integrated worry-free propositions and some of the best entertainment on mobile – all
packaged into a completely unmatched customer experience.
For enterprise-

• To be the most trusted and valued partner helping businesses succeed in a digital world
• From market-leading Enterprise Mobility, robust Connectivity and world-class IoT
Solutions, to superior business communication, insightful business analytics & Enabling
Solutions, to serve businesses in the digital era

Vodafone- Blue Ocean Strategy


Backdrop
Vodafone is one of the major telecom players globally. In 2007, it entered India and soon
became the 2nd largest operator by market share. Recently, a new player has entered, namely
Jio has entered the market disrupting the telecom industry, that a Porter five forces analysis
would say it is a blood bath. Vodafone is now divesting from Indian market, and has merged its
Indian operations with Idea Cellular.
Value Innovation
▪ Vodafone is also, world’s largest player in IoT which it is now extending into India
▪ It has always positioned itself as a premium telecom service provider, and price wars
isn't doing any help
▪ Have shifted major focus on IoT products garnering early mover’s advantage and
creating a blue ocean and changed its tagline to “Future is exciting. Ready?” from
“Power to You” in November 2017
▪ All the other major players are only focusing on increasing data consumption via
consuming content, Vodafone has shifted focus to Enterprise solutions, and is
increasing data consumption via telematics

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▪ With the advent of AIS 140 norms, i.e every public transport vehicle must have a vehicle
tracking device installed, Vodafone becomes the front runner in providing this service,
and the opportunity size is huge with minimal competition
Result
Vodafone created a blue ocean by changing its positioning from a telecom company to a
technology company, thus opening its door to immense possibilities. Now, where the
competitions are targeting consumers & businesses to sell fixed line, broadband, voice and
data, Vodafone is selling Internet of Things and connecting all the devices possible with their
network, making them dependable on Vodafone’s network infrastructure in the long run. 3
solutions i.e Mobility Solutions, Non-mobility solutions and People Tracking Solutions have
large number of use cases and thus large number of potential clients.

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Vodafone IOT Offerings
• Start-Ups
• OEMs
• VTS
• Kiosk & Signage
• Tablet & Vending Machine
• Smart Lighting

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Our Analysis & Recommendation

• Consolidations or exits will continue in the near future, Telcos will have to upgrade their
network qualities, operations & customer services
• With boost for Digital India & data prices going down, the demand will continue to rise
along with the reach/penetration
• Seek Govt’s support for the following:
•Reduction in GST
•Reduction in revenue share/spectrum usage charge
•Setting transparent and non-discriminatory minimum pricing level
•Realistic Pricing of Spectrum
• In spite of the debilitated financial condition of telecom operators, it is likely India will
roll out 5G with a minimum time by the year 2022
• Airtel, VIL have to leverage their passive infrastructure alliance and stitch an alliance
for the active network for spectrum cost optimisation
• Meanwhile Technological advancements will play the game changer role, in the
transition to complete digitization like with Vodafone’s IOT offerings
• Vodafone should create a 5G specific strategy for India & be an early entrant to the 5G
spectrum space
• Vodafone should introduce IoT products which are already existing in the UK market in
India. Being the largest IoT company in the world, it can leverage its existing assets to
gain substantial strategic and consulting mindshare among the Indian consumer

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References
• Vodafone Mumbai - Prepaid | Postpaid | Callertunes | Mobile Services. (n.d.).
Retrieved from https://www.vodafone.in/home-mumbai
• Vodafone Idea Limited | An Aditya Birla Group & Vodafone partnership. (2018).
Retrieved from https://www.vodafoneidea.com
• Brand India. (n.d.). Retrieved from
https://www.ibef.org/industry/telecommunications.aspx
• NDTV Profit Team. (2018, June 02). Vodafone-Idea Merger: New Entity To Be Called
Vodafone Idea Ltd, Set To Raise Rs 15,000 Crore. Retrieved from
https://www.ndtv.com/business/vodafone-idea-merger-new-entity-to-be-called-
vodafone-idea-ltd-set-to-raise-rs-15-000-crore-1861493
• https://www.ey.com/Publication/vwLUAssets/transactions-annual-2018-ey-
report.pdf/$File/transactions-annual-2018-ey-report.pdf
• Philipose, M. (2017, March 20). The rationale behind Idea-Vodafone merger in five
charts. Retrieved from
https://www.livemint.com/Companies/liVpiwdNALGfOgccApI6sK/The-rationale-
behind-IdeaVodafone-merger-in-five-charts.html
• T. (2018, June 18). Vodafone - Idea merger: The new telecom king may take throne
today - Times of India. Retrieved from
https://timesofindia.indiatimes.com/business/india-business/vodafone-idea-merger-
the-new-telecom-king-may-adorn-throne-today/articleshow/64629103.cms
• W. (2018, July 26). India has 472.72 million wireless internet subscribers: Manoj Sinha
- ET CIO. Retrieved from
https://cio.economictimes.indiatimes.com/news/internet/india-has-472-72-million-
wireless-internet-subscribers-manoj-sinha/65142397

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Appendix

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