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Growth in Adverse External Circumstances: A Study of Indian Public Sector Telecommunication Company

2011; Volume: 47; Issue: 2 Linguagem: Inglês

0019-5286

Prashant Salwan, Swapnil Satarkar,

Banking Systems and Strategies

Telecommunications is one of the fastest growing industries. Due to WTO regulations and liberalization India has allowed FDI in telecommunication. This has affected the competitive advantage of Indian public sector companies; they could not capitalize on the opportunities presented by the growing telecom industry in the country. The competition intensity has totally changed the rules of the game in the telecom service providers segment, which in turn resulted in a sharp decline of profits for the telecom public sector companies. MTNL, the oldest of the public sector, embraced resource sharing with its competitors, and developed innovative products for survival using the innovative value loop. This paper discusses the resource based view approach used by MTNL in sustaining its competitive advantage through dynamic consistency. Introduction The Indian telecommunications industry is one of the fastest growing industries in the world, touching a subscriber base of 742.12 million in 2010, and a tele-density of 62.51. The wireless subscriber base has increased to 706.69 million at the end of October 2010. India's value added service (VAS) market includes text or SMS, menu-based services, downloading of music or ring tones, mobile TV, videos and sophisticated m-commerce applications and is worth US$ 2.45 billion-US$ 2.67 billion, which is around 10 per cent of the total revenue of the wireless industry. The share of VAS in wireless revenue is likely to increase to 12-13 per cent by 2011 (IBEF2011) The Indian telecom companies are also going global. In March 2010, Bharti Airtel bought the African operations of the Kuwait-based Zain Telecom for US$ 10.7 billion. This drove the Indian player into the league of the top ten telecom players globally. The Reserve Bank of India (RBI) liberalized the investment norms for the Indian telecom companies by allowing them to invest in the international submarine cable consortia through the automatic route (IBEF 2011) According to a report published by Gartner Inc in June 2009, the total mobile services revenue in India is projected to grow at a compound annual rate (CAGR) of 12.5 percent from 2009 to 2013 to exceed US$ 30 billion. The India mobile subscriber base is set to exceed 771 million connections by 2013, growing at a CAGR of 14.3 per cent in the same period from US$ 452 million in 2009. This growth is poised to continue through the forecast period, and India is expected to remain the world's second largest wireless market after China in terms of mobile connections (IBEF 2011). The present status and forecast figures look very positive and promising for the consumer and the private companies and also for the public sector in telecom industry. [FIGURE 1 OMITTED] Market Segments in Indian Telecom As can be seen in Fig. 1, (IBEF 2011) the Indian telecom industry can be primarily divided into Basic, Cellular and Internet services. It also has relative segments such as radio paging services, very small aperture terminals (VSATs), public mobile radio trunked services (PMRTS) and global mobile personal communications by satellite (GMPCS). Market Segments--Wire Line The subscriber base of wire line services stood at 36 million as on August 2010, with a tele-density of 3 per cent. The players in this segment are the public sector companies BSNL and MTNL, covering 80 per cent of the market. MTNL is present in Delhi and Mumbai, while BSNL covers the rest of the country. Among the private players, Tata Teleservices, Bharti Airtel and Reliance are the major players. Market Segment--Wireless GSM and CDMA services come under wireless services and have become larger than the wire line segment in India. The segment is growing due to the demographics, and the value it creates is more than the wire line services. Market Segments--Broadband & the Internet This segment includes private players such as Bharti Airtel Limited, Reliance Communication, Vodafone, Tata, Idea Cellular and Aircel, and public players like BSNL and MTNL. …