CASE: COMPETITIVE DYNAMICS IN the INDIAN WIRELESS TELEPHONY

September 1, 2016 is a date the Indian telecom industry cannot easily forget. With a backbone of the most evolved commercial technology standard of 4G LTE (Long Term Evolution) at the time, Reliance Jio entered the Indian mobile telecommunications market and posed a major challenge to the entrenched incumbents. Within a few days, Reliance Jio became the fastest growing technology company in the world, growing faster thanFacebook, WhatsApp, andSkype in terms of number of subscribers added^[1]. With a pan-India footprint, cutting-edge technology and a promise of free-for-life voice calls, the company posed the most significant challenge to the structure and composition of Indian telecom industry in more than a decade.

While the sheer scale of the onslaught by Reliance Jio surprised analysts and consumers, the incumbents had been bracing themselves for the imminent impact of the same for a few preceding months. Also, while the subscription numbers of the new service were impressive, it was not clear to what extent these would impact the revenues of existing players. However, one month into the launch of Jio, it was clear that the status quo within the second-largest telecommunications market in the world would no longer hold. The changes in the industry structure was evident and how bigger players such as Bharti, Vodafone and Idea would react to this development needed to be watched.

Industry Overview

With a little more than one billion subscribers of wireless telecom services, the Indian telecommunication market was the second largest in the world in September 2016^[2]. India had entered the wireless telecommunication arena around the same time that the world started adopting GSM (Global System for Mobile Communications) based mobile telecommunications networks: it was in July 1995 that the first mobile-to-mobile call was made in India^[3].

While the headline number of more than one billion subscribers suggests a very high level of tele density in the country, the reality is a little more nuanced. There existed a major difference in tele densities in rural and urban locations, with rural tele density at 51 per hundred people and an urban tele density at 154 per hundred individuals^[4]. The penetration rate of wireless connections was lower than that of industrialized nations but was expected to grow from 51 percent in 2016 to 70 percent in 2017. Apart from competitive dynamics in the industry, the increase in penetration was also due to major programs such as 'Digital India', an initiative by Government of India, to bring semi-urban and rural population onto the internet grid. Exhibit 1 shows the CAGR of wireless subscriptions growing 23 percent from FY 2007 to FY 2016. The market share of major telecom players is given in Exhibit 2.

The industry was a significant contributor to the Indian economy, even without accounting for indirect economic benefits of faster information flow between individuals. The industry was expected to employ about 4 Million people, and had benefitted from various government initiatives. In 2015, the industry accounted for 6.5 percent of India's GDP with an equivalent contribution of almost USD140 billion of economic value added^[5]. In September 2016, the industry was allowed 100 percent FDI (Foreign Direct Investment) and easy access to telecom equipment; between the years 2000 and 2015 the industry had received a cumulative inflow of more than USD 17 Billion representing seven percent of the overall FDI received by India^[6].

The Indian telecom market was one of the hypercompetitive markets in the world with 12 active players operating across the country. The Herfindahl-Hirschman Index (HHI)^[7] measuring the market concentration of players found less than 2000 for India in 2015, in comparison to more than 4500 for China^[8]. With a harsh price competition in the market, the average revenue per user (ARPU) for India was less than $4 USD per month^[9], compared to slightly less than $11 USD per month for China^[10]. Leading international and national firms had faced mortality in this competitive environment; Etisalat Telecommunications (of United Arab Emirates), S-Tel (backed by Bahrain Telecommunications Company) and an Indian firm, Loop Mobile, were among the operators that had withdrawn from the market in recent years.

The largest three companies before the entry of Reliance Jio were Bharti Airtel, Vodafone, and Idea. Bharti Airtel had almost a quarter of mobile subscribers in the country on its network, while the other two had approximately 20 percent each; the other players like Reliance Communications (not to be confused with Jio), state-owned BSNL, Aircel, and Tata followed these with less than 10 percent each^[11] (see Exhibit 2).

The rapid expansion of this capital intensive industry was funded not just by private equity investment, but also by high levels of debt. The total debt-to-equity ratio for all private players in the telecom sector was close to 2:1, while that of the public-sector players was almost 0.5:1 (Exhibit 3)^[12]. As of 30 September 2016, Bharti Airtel had a total consolidated debt of close to INR 1 trillion, Vodafone close to INR 600 billion, while Idea Cellular owed almost INR 400 billion^[13]. The industry had a total debt of more than INR 4.6 trillion^[14], out of which almost INR 800 billion was raised from primarily Indian banks. The growth of the telecom sector was intrinsically tied to the asset quality of the Indian financial system as well.

Regulatory Structure

Under a federal structure of governance in India, matters related to telecommunications are controlled by the Central Government rather than state governments. Consequently, the Department of Telecommunications under the Ministry of Communications of the Government of India was taskedwith developing regulations for the industry. The Department has stated objectives, among others, of "Policy, Licensing and Coordination matters relating to telegraphs, telephones, wireless, data, facsimile and telematics services and other like forms of communications", "Promotion of private investment in Telecommunications" and "Promotion of standardization, research and development in telecommunications."^[15]

The Indian telecommunications industry was a de facto state monopoly until the mid-1990s. The industry was opened for private participation in a meaningful way through the New Telecom Policy of 1994, and further privatized in another Telecom Policy announced in 1999. This new National Telecom Policy of 1999 (NTP 99) is credited with creating the structures and systems necessary for a transparent, market-based competitive environment which boosted telecom penetration in the country. In the year 2000, the Government of India exited its direct presence in telecom operations by creating Bharat Sanchar Nigam Limited (BSNL), hence segregating its regulatory and commercial roles. This new entity took over commercial operations from Department of Telecom Operations (DTO) and Department of Telecom Services (DTS) to become a major player in the industry^[16].

The Telecom Regulatory Authority of India (TRAI) was established in 1997 after the Indian Parliament passed TRAI Act 1997. TRAI initially had some quasi-judicial authority to adjudicate and settle disputes, though its rights and responsibilities were not clearly demarcated. A subsequent TRAI (Amendment) Act 2000 was passed by the Parliament to bring about functional clarity, strengthening the regulatory framework and disputes settlement mechanism^[17]. Consequently, it became mandatory for the Government of India to seek the recommendations of TRAI for specified matters, and a Telecom Disputes Settlement & Appellate Tribunal (TDSAT) was established to adjudicate disputes to promote the growth of the industry. TDSAT was empowered to "adjudicate any dispute between a licensor and licensee, between two or more service providers, between a service provider and a group of consumers" and also to "hear and dispose of appeals against any decision or order of TRAI"^[18].

THE subscribers

In year 1990, Indian telecom subscribers had only one option to access, the telecom services provided by Department of Telecom or its associated forms. By 2016, the telecom market in India had metamorphosed to one of the most competitive one in the world with 12 major service providers vying for the consumer's attention. This reflected in the prices and service levels offered by companies over time as well. In 1995 a mobile-to-mobile call would cost more than INR 16 per minute, and consumers had to pay for monthly subscription plans, an activation fee, apart from highly priced handsets[19]. By the year 2016, companies had started offering free outgoing calls, subscription plans that were as low as INR 100 per month, no activation fee and bundled handsets. Some companies had begun charging consumers for outgoing calls at a per-second pulse rate[20], while others tried to attract consumers by offering to pay them for every incoming call[21]. Some of these and other schemes by the players were considered path-breaking innovations internationally and were adapted by other players in the industry over time.

The competitive nature of the industry was furthered bolstered by supportive regulatory processes. In the year 2011, mandatory telecom number porting system was implemented across the country[22] which allowed consumers to shift from one mobile operator to another while retaining their old number. An individual was free to shift between service providers and between telecom circles as well. All service providers were under pressure to deliver on their promises to customers and maintain a high quality network, since one of the biggest reason for customer lock-in to their companies no longer applied. In the last quarter of 2015, about 18 Million people requested to port their services from their existing operator to a new one, following a near-steady increase in the trend quarter-on-quarter[23] (see Exhibit 10).

The pressure to retain existing customers and attract new one resulted in the telecom industry becoming one of the most prolific spenders on marketing and advertising, apart from taking other innovative steps. As an industry, telecom was estimated to be one of the top-5 contributors to advertising spending in India[24]. In the run-up to the launch of Jio services in 2016, other players had ramped up their media spends. Along with Jio, all companies in the industry spent close to INR 10 Billion for advertising in 2016, which was a 50 percent increase over the previous year[25].

With such initiatives and actions by service providers and regulators, consumers adapted to mobile telephony with a gusto. From zero subscribers in 1995 to more than a Billion in 2016, consumers showed their preference to shift to mobile telecommunications services. Partly due to low prices, the average revenue per user in India was close to INR 120 in 2016, but it had remained largely consistent at this figure over the preceding quarter (see Exhibit 11). Consumers had shown an increasing usage of data, which had increased from approximately 61 MB of average data usage per subscriber per month in quarter 1 of 2014 to approximately 240 MB of average data usage per subscriber per month in quarter 3 of 2016 (see Exhibit 12).

The Technologies

In the four years preceding Reliance Jio's launch, Indian telecom companies had invested almost $18 billion USD in capital expenditure. A major goal of this was to expand coverage of third-generation (3G) services, the coverage area of which increased from 30 percent to 75 percent of the population during the period 2012-2016. However, 3G accounted for only 12 percent of all active connections in the country in 2015, and less than 1 percent were on fourth-generation (4G) Long Term Evolution (LTE) networks^[26].

The 4G networks promised major capacity usage improvements over 3G and 2G networks used in the country. A report by an international consulting firmDeloitte Touche Tohmatsu Limited in 2016stated the advantages:

"LTE (Long Term Evolution) is 55 percent cheaper than HSPA and 92 percent cheaper than EDGE (Enhanced Data rates for GSM Evolution) in terms of cost per MB - thus, offering the same data pack over 4G LTE network would effectively reduce the cost for the operator compared to 3G/HSPA (High-Speed Packet Access) network....since the LTE interface is more efficient at carrying calls relative to traditional calls, it can support up to twice as many voice users in a given bandwidth (per megahertz).

VoLTE also offers a range of enhancements over standard voice. For example it offers the ability to use a data connection while being on a call, superior voice call quality, faster call connection, fewer dropped calls and the ability to switch from a voice call to a video call.^[27]"

Despite the seemingly obvious advantages that 4G had over earlier generations of networks, it was very unlikely that 4G would replace them completely. Across the world, it was expected that 3G and 4G together would only be able to cover 71 percent of usage by 2020^[28]. The Indian government had given operators the choice to deploy the services of any generation (2G, 3G or 4G) on their allocated spectrums^[29].

Beyond value creation and appropriation in the value chain, creating an ecosystem for a new platform or technology demanded resource allocation by players, be it monetary, human or other resources. The development of TD-LTE[1] ecosystem in India, for example, took more than five years of effort by incumbents and Jio, even before the services were commercially launched in the country. During the period when the ecosystem was being developed, Bharti Airtel and Reliance Jio worked in tandem and co-operated with each other to ensure that the roll-out of the technology itself is value accretive for the industry and the broader economy[30].

Incumbents as on September 2016

The three largest players in the Indian telecom sector operated under brand names of Airtel, Vodafone, and Idea respectively. Companies operating Airtel and Idea brands were headquartered in India with their majority equity stake held by Indian promoters. Vodafone PLC was based out of the United Kingdom. A brief profile of these three players is presented in this section, while specific financial snapshots of all three firms are presented in Exhibits 4, 5, and 6. Exhibit 7 presents the spectrum holdings of major private players, and Exhibit 8 presents comparative EBITDA margins for mobile operators in the world.

Bharti Airtel Limited

Bharti Airtel Limited was the largest mobile service provider in India and amongst the top 3 globally in terms of number of subscribers^[31]. It was the first company to launch 4G services in India in 2012.

This Indian company was established in 1995 under the title Bharti Tele-Ventures as a public limited company and changed its name to the current one in 2006. Apart from India, it had a presence in 19 other countries across Africa and South Asia, 16 of which it entered by acquiring Zain Africa and Telecom Seychelles in 2010. In September 2016, its operations covered various cellular technology standards such as 2G, 3G, and 4G, enterprise services, fixed line, broadband, IPTV, passive infrastructure services, and digital television services^[32]. Exhibit 9 presents the revenue split of businesses (as of March 2016) for the company.

In March 2015, Bharti Airtel and China Mobile joined^[33] hands to work together towards the growth of the Long Term Evolution (LTE) ecosystem in India. China Mobile was the world's largest telecom operator both in terms of customer base and revenue, with over twice the number of subscribers and five times the revenue of Bharti Airtel^[34]. In this joint-venture, they agreed to work towards the procurement of devices including Wi-Fi devices, data cards, smart phones, and LTE equipment^[35] to give both economies of scale in the procurement as wells as research and development.

The company owned its own tower infrastructure in the country until 2007 when Bharti Infratel was created as an independent tower company. Bharti Infratel created a joint venture with Vodafone and Aditya Birla Telecom the same year to create Indus Towers^[36], which was India's largest firm in its sector. Bharti Airtel also started a subsidiary Airtel M-Commerce Services Ltd in 2011 for providing semi-closed wallet services and money transfer facilities^[37]. In 2016 the company received a license from the Reserve Bank of India to start a payments bank; Kotak Mahindra Bank later acquired 19.90 percent stake in the company for a little less than INR 1 Billion^[38].

Post-2014, the company had been selling telecom towers in its portfolio of assets in Africa. Between 2014 and 2016, it had sold almost sold 10,750of its 12,500 towers in 11 countries for approximately INR 120 Billion^[39]. The company also divested telecom operations in two countries (Burkina Faso and Sierra Leone) in 2015 and 2016 respectively. Bharti Telecom sold a 7.39 percent stake to Singtel, Singapore's largest telco for $658mn in August 2016.

Vodafone India

Hutchison Telecom, now known as Vodafone India, began operations in India in 1994 after receiving a cellular license for operations in Mumbai circle. In 2007, Vodafone PLC, a United Kingdom-based telecommunications firm, acquired a 67 percent stake in the Hutchison-Essar Group to form Vodafone-Essar. In the subsequent years, Vodafone Group PLC acquired full control of the entity to form Vodafone India, the second largest telecom service provider in India. In 2016, Vodafone India had close to 200 million subscribers and a pan-India presence^[40].

The company was not listed in any Indian stock exchange though, in June 2016, the company intimated that they would file an initial public offer (IPO). The company held an almost 5 percent indirect stake in Bharti Airtel but had to sell it off in 2015 due to the regulatory norm that barred cross-holding of beneficial interest amongst telecom firms operating in the same service areas^[41].

Vodafone India had transferred its towers' infrastructure to Indus Towers, which is a joint venture including Airtel and Idea Cellular) in which it held a 42 percent stake. In 2014, Vodafone India had also entered a 50:50 joint venture called FireFly Networks[2] with Bharti Airtel in the Wi-Fi infrastructure space^[42], with a plan to provide a Wi-Fi footprint in select locations and segments in large Indian cities^[43].

Idea Cellular Limited

Idea Cellular Limited started operations in India in 1995 as Birla AT&T Communications Limited. This entity was comprised of Aditya Birla Group, AT&T (through Birla AT&T) and the Tata Group (through Tata Cellular). The two groups (Aditya Birla Group and Tata Group) were two of the largest and oldest business groups in India. Over the years it went through a few changes in its holding structure to become Birla Tata AT&T Communication Ltd in 2001, and finally Idea Cellular Limited in 2002. The Tata group exited eventually and the company became a part of the Aditya Birla Group.

Idea Cellular was the third largest telecom service provider in the country having 175 million subscribers in March 2016, and a pan-India presence. Following the cancellation of many telecom licenses by the Supreme Court of India in 2012, in response to allegations of corruption in spectrum allocation process by the government of India, the company lost seven licenses^[44]. However, it won back the same through an auction conducted a few months later.

Idea Cellular Limited holds a 16 percent stake in Indus Towers, a three-party joint venture for towers infrastructure. In August 2016, news reports in business media were rife with the likelihood of a merger of Idea Cellular and Vodafone India, though officials from both the firms denied such speculation^[45].

The Challenger: Reliance Jio Infocomm Ltd.

Reliance Jio Infocomm Limited was a wholly owned subsidiary of Reliance Industries Limited (RIL). Reliance Group was one of India's largest business groups and was controlled by Mr. Mukesh Ambani. Reliance Jio Infocomm Limited was founded in 2007 and announced its intentions in the mobile telecom market in 2010. It started by acquiring a 95 percent equity stake in Infotel Broadband Services (P) Limited for INR 48 Billion. Infotel Broadband Services (P) had won a major portion of the broadband wireless access (BWA) spectrum through a government auction^[46].

Reliance Jio was a late entrant in an already competitive telecom market, with the network beta-tested in December 2015 and launched commercially in September 2016. However, it used this delay to its advantage by creating a digital network over an end-to-end all-IP network which was ready to be upgraded to future standard of 5G. It also built a national network of fibre-optic cables more than 250 thousand kilometres long, a multi-terabit capacity international network, and had a latent capacity to add 100 million wireless broadband users to its network^[47].

Commercial mobile services were launched by Reliance Jio on September 05, 2016 with extremely aggressive price offers. The company offered free, unlimited voice and data usage to all customers across the country for a period of three months, with a promise that voice calls would never be charged on its national network. It launched its own 4G enabled handsets under LYF brand-name in a price range of INR 2999 to INR 19999. To comply with the government mandated know-your-customer requirements before activating a SIM, it leveraged the strengths of the then maturing national identity database, Aadhaar. Within a month it had signed up and activated 16 million subscribers on its network^[48].

Apart from launching a mobile telecom operation, the company also started testing fibre-to-home broadband services in the September 2016 under the Reliance JioFiber brand-name. The company expected to reach speeds of 100 MBPS and roll out the service across the country in the future.

Changes in the VALUE Chain

Mobile operators constituted one part of a complex value chain in the telecommunications industry (see Exhibit 13). From infrastructure (towers) to consumer equipment (devices), or from software (apps) to content (media), there existed multiple opportunities for firms to add value and draw profits. For instance, Bharti had joined hands with taxi aggregator company Uber and with budget travel company OYO rooms for Airtel money application. According to some industry estimates, the proportion of services and content in the value chain was expected to increase continuously over the next few years, while that of operators was expected to remain more or less constant^[49].

Mobile base trans-receiver stations (BTS) and towers were a notable, capital-intensive part of the value chain. The telecom tower industry of India had 10 major players, with the top six accounting for almost 70 percent of total revenue share. In terms of number of towers, Indus Towers was the largest player amongst the owner-controlled towers segment, while American Tower Corporation (with Viom) was the largest among independent companies in the industry. The overall tenancy ratio (number of BTS per tower) was around three, although most towers could support four to seven BTS each^[50].

The tower industry had been facing consolidation pressures in the last few years. Indus Towers itself was formed when the three largest telecom operators pooled part of their tower infrastructure together.The pressure on firms to monetize their assets led to further consolidation; private equity firms, financial investors, and independent operators like American Tower Corporation showed considerable interest in buying such assets^[51].

Compared to towers and infrastructure, the content and services component of the value chain of mobile telecommunications ecosystem was considered very asset-light. This segment was also expected to grow from 10 percent to 14 percent of the value chain between 2016 and 2020^[52] on the back of increasing demand for streaming video and audio on devices. Services like mobile wallets were finding increasing acceptance amongst mobile-phone users due to the convenience of making direct payments to other services/apps in the ecosystem.

The Road Ahead

The telecommunications industry, world over, is heavily dependent on two underlying pillars: technology and services. Rapid and continuous changes in technology are unavoidable; and while operators compete in the market, they often collaborate in developing technology standards.

In 2011, GTI (Global TD-LTE Initiative) was formed as a platform for 122 mobile service members and 103 partners from the industry. GTI's 1.0 mission was completed by building an end-to-end TD-LTE ecosystem, and realizing worldwide commercialization of TD-LTE and FDD-LTE[3]technologies. In 2016, firms including China Mobile, Vodafone, Bharti Airtel, KT Corp and Softbank initiated GTI 2.0 to advance 4G services and industrialize 5G technology^[53]. GTI 2.0 included a five-year plan with an objective to promote the worldwide development of 4G TD-LTE (using 2300 MHz band currently used by Reliance Jio and Bharti Airtel) and that of 4G FD-LTE (using 1800 MHz band). Such initiatives and standardization procedures reflect an avenue where firms that are competitors in the field co-operate with each other and co-opt mutually shareable technologies and standards. TRAI had also begun preliminary work on the 5G standards and policies in India.

While development of technology was happening at its own pace, the launch of Reliance Jio in the second largest mobile telecommunication market had caused an upset. The ready acceptance of the service by consumers clearly implied that the old status quo would no longer hold. All players had to defend their domain, identify more streams of revenue, leverage their value chains, and possibly merge with other players to create larger, more efficient firms.

What was not clear was the impact of consumer's acceptance of alternative services, or commercialization of alternate technologies. Messaging platforms like WhatsApp, Facebook Messenger, Google Duo etc. and data-heavy over-the-top (OTT) content providers like Netflix, Hotstar etc. could pressurize telecom companies to move from 2G to more data-efficient technologies, though many consumers might not be able to afford the shift. In the network technology space, alternative modes of current cellular topology for communications were already visible: Google was testing its Project Loon using a network of floating balloons in India and, elsewhere, Facebook was testing the viability of Aquila solar powered planes, while Microsoft had proposed Project White Space to use gaps in existing TV frequency bands^[54]. Concerns regarding data privacy, net neutrality, cybersecurity etc. could present more difficulties in the future.

Beyond the technology and service pillars of the industry was the regulatory structure which was beyond the control of any players, but impacted them severely. The cancellation of spectrum licences issued to 11 companies in 2012 by Supreme Court of India[55] indicated that not all was well in the regulatory and administrative procedures in the country. Safety of investments by foreign companies, even when free of corruption, was also questioned when the Japanese telecommunications firm DoCoMo tried to exit its' stake in its joint venture with Tata Teleservices (TTSL) in 2014. While DoCoMo wanted to sell its entire stake in the joint venture to Tata Teleservices, and TTSL was ready to buy the stake at a pre-determined price as per its initial JV deal of 2009, the deal got struck when Reserve Bank of India (RBI) refused to allow the transfer to go through[56]. The RBI cited a change of rules one year prior to the proposed deal that had explicitly blocked such transfer of shares at pre-determined rates. Due to this stale-mate caused by a change in regulations, DoCoMo filed started arbitration proceedings in a London court to exit the Indian market[57].

All these known and unknowns presented an immense challenge to all players in the Indian mobile telecommunications sector at the end of September 2016. Specifically, the challenge was notable for the largest three incumbents who would be forced to respond to the entry of a new player launching its services on technologically superior platform. How should they respond to the challenge posed by Reliance Jio's commercial launch across the country?

Exhibit 1: Wireless Subscription in India (Millions)

Source: www.trai.gov.in/about-us/annual-reports

Exhibit 2: Subscriber Base of Wireless [GSM & CDMA] Services from 2011 to 2016 (Million)

Service Providers	2011-12	2012-13	2013-14	2014-15	2015-16	% age growth/ reduction over FY 2015-16
Bharti	181.28	188.20	205.39	226.02	251.24	11.16
Vodafone	150.47	152.35	166.56	183.80	197.95	7.70
Idea	112.72	121.61	135.79	157.81	175.07	10.94
Reliance	153.05	122.97	110.47	109.47	102.41	-6.45
BSNL	98.51	101.21	94.65	77.22	86.35	11.82
Aircel	62.57	60.07	70.15	81.40	87.09	6.99
Tata	81.75	66.42	63.00	66.32	60.10	-9.38
Telenor	42.43	31.68	35.61	45.62	52.45	14.97
Sistema	15.68	11.91	9.04	8.86	7.69	-13.21
Videocon	5.95	2.01	4.99	7.13	6.56	-7.99
MTNL	5.83	5.00	3.37	3.51	3.56	1.42
Loop#	3.27	3.01	2.90	-	-	-
Quadrant	1.33	1.37	2.17	2.73	3.16	15.75
S Tel*	3.43	-	-	-	-	-
Etisalat*	0.78	-	-	-	-	-
Total	919.17	867.80	904.51	969.89	1033.63	6.57

Source: www.trai.gov.in/about-us/annual-reports

Exhibit 3: Debt to Equity Ratio of Indian Telecom Companies

Source: www.trai.gov.in/about-us/annual-reports

Exhibit 4:Key Financial Indicators of Bharti Airtel Limited till March 2016

	Units	Mar-12	Mar-13	Mar-14	Mar-15	Mar-16
Operating income	(in Million US$)	10744.67	12074.98	12902.10	13844.49	15167.13
Operating margins	%	33.20	31.00	32.40	33.90	36.50
Net profits	(in Million US$)	639.83	340.63	453.70	797.64	816
Net margins	%	6.00	2.80	3.50	5.80	5.40
ROCE	%	21.40	18.40	24.70	37.70	38.80
Gearing	Times	-5.40	-5.30	-4.50	-2.60	-2.50
Net cash acr. to debt	Times	0.25	0.24	0.24	0.29	0.26
Interest coverage	Times	5.90	5.20	5.30	5.10	4.70
Current Ratio	Times	0.20	0.30	0.30	0.20	0.40

Exhibit 5:Key Financial Indicators of Vodafone India

	Units	Mar-13	Mar-14	Mar-15
Revenue	(in Million US$)	5004.53	6178.21	6963.33
EBITDA	(in Million US$)	1600.31	1954.27	2145.96
EBITDA margins	%	32.00	31.60	30.80
Capital expenditure	(in Million US$)	715.25	915.48	1402.18

Exhibit 6:Key Financial Indicators of Idea Cellular till March 2016

	Units	Mar-12	Mar-13	Mar-14	Mar-15	Mar-16
Operating income	(in Million US$)	2929.54	3368.32	3973.55	4740.09	5402.60
Operating margins	%	25.90	26.70	31.10	34.20	36.20
Net profits	(in Million US$)	108.60	151.90	277.43	464.76	454.24
Net margins	%	3.70	4.50	7.00	9.80	8.40
ROCE	%	10.80	12.70	15	17.10	20.60
Gearing	Times	2.20	2.30	2.40	3.10	-2.30
Net cash acr. to debt	Times	0.28	0.03	0.03	0.30	0.23
Interest coverage	Times	4.70	5.80	8.50	10.60	7.00
Current ratio	Times	0.40	0.60	0.40	0.90	0.50

Exhibit 7: Spectrum Holdings of Major Private Companies in India, September 2016

Operator	2300 MHz	2100 MHz	1800 MHz	900 MHz	800 MHz
Aircel	20	65	99.20	13.20
Bharti Airtel	320	100	212.45	113.80
Idea Cellular		60	156.70	65
Reliance Communications Ltd.		60	78.40	10	117.50
Reliance Jio Infocom	440		101.80		77.50
Sistema Shyam Teleservices					33.75
Tata		50	81.80		83.75
Uninor			43.40
Vodafone		75	137.60	82
Grand Total	780	410	911.35	284	312.50

Exhibit 8: Comparative EBITDA Margins of Telecom Companies across the World

Source:www.gsmaintelligence.com/research/2016/10/global-mobile-trends/580/.

Exhibit 9: Revenues of Bharti Airtel Limited across businesses (as of March, 2016)

Source:www.crisilresearch.com/industryasync.jspx?serviceId=40&State=null.

Exhibit 10: Total requests for mobile number portability in India, 2014-2017

Source: https://www.medianama.com and http://www.trai.gov.in,

EXHIBIT 11: AVERAGE REVENUE PER USER PER MONTH FOR GSM COMPANIES (inr)

Source: http://www.trai.gov.in/release-publication/reports/performance-indicators-reports,

EXHIBIT 12: Average Data Usage per subscriber per month (in MB)

Exhibit 13: Value Chain in Telecom Industry (Indicative)

[1] Time-division duplex LTE

[2] This joint-venture focused on Wi-Fi-offloading in which data from cellular networks is transferred to complementary networks

[3] Frequency division duplex LTE

1. Use Porter's Diamond analysis and indicate the important factors facing telecom industry from the macro environment.

2. Analyze the structure of Indian wireless telecom industry. Identify the key changes happening in the last decade using 5Forces Framework.

3. Illustrate the change in the value -chain for Airtel based on the value system of wire-less players shown in exhibit 13 and list down the significant reasons for this shift.

4. Illustrate with suitable examples from the case, how has Bharti Airtel responded to the entry of Reliance Jio? What are the other strategic options Bharti Airtel has in order to counter the threat of Reliance Jio?

.