abhishreshthaa
Abhijeet S
Key challenges faced by Cellular Sector
Emergence Of WLL Technology
The emergence of Wireless in Local Loop (WLL) as a cheaper alternative to Global System for Mobile (GSM) technology can create a reduction in market share for the existing cellular players. The players now have to go in for a generic strategy of Differentiation to combat the Cost Leadership strategy of the WLL operators. This will lead to severe price cutting & smaller players will be washed out will the break even period for the main players will increase with lower margins.
Lesser Mobile Penetration
Cellular phone users are concentrated mainly in the metros and cities. Also the number of cellular users is also very limited which hinders the operators from achieving economies of scale in production. The cost of handset being high also causes a hindrance for buying mobile phone services for the lower & middle class, which constitutes the majority of the population.
Lesser Disposable Income Of People
Considering the reasonably high cost of taking up a cellular service connection and the high cost of operation it takes up a lion’s share of the disposable income. This makes people think twice before opting for a cellular phone connection.
Low margins
The arrival of the fourth mobile operator has changed the complexion of the telecom industry. The turf battle is now among the five big players. The cellular market that began as a low volume & high margin market (each call unit cost Rs.16 a minute once upon a time) has transformed into a low margin (a call costs less than a glass of tea now) and the operator needs higher volumes to survive helping to achieve economies of scale
Other Challenges To This Sector Are
• Government policies on the industry are still strict despite the changes that occurred in the recent past.
• Competition is fierce with 70% of the market controlled by 3 major players. The incumbent fixed line operators like MTNL and BSNL entering the cellular foray further intensify it.
• Investment cap of 49% restricts foreign investors to make an aggressive entry into the market
• The average revenue per unit subscriber has been decreasing with introduction of pre-paid cards and tariff cuts
Emergence Of WLL Technology
The emergence of Wireless in Local Loop (WLL) as a cheaper alternative to Global System for Mobile (GSM) technology can create a reduction in market share for the existing cellular players. The players now have to go in for a generic strategy of Differentiation to combat the Cost Leadership strategy of the WLL operators. This will lead to severe price cutting & smaller players will be washed out will the break even period for the main players will increase with lower margins.
Lesser Mobile Penetration
Cellular phone users are concentrated mainly in the metros and cities. Also the number of cellular users is also very limited which hinders the operators from achieving economies of scale in production. The cost of handset being high also causes a hindrance for buying mobile phone services for the lower & middle class, which constitutes the majority of the population.
Lesser Disposable Income Of People
Considering the reasonably high cost of taking up a cellular service connection and the high cost of operation it takes up a lion’s share of the disposable income. This makes people think twice before opting for a cellular phone connection.
Low margins
The arrival of the fourth mobile operator has changed the complexion of the telecom industry. The turf battle is now among the five big players. The cellular market that began as a low volume & high margin market (each call unit cost Rs.16 a minute once upon a time) has transformed into a low margin (a call costs less than a glass of tea now) and the operator needs higher volumes to survive helping to achieve economies of scale
Other Challenges To This Sector Are
• Government policies on the industry are still strict despite the changes that occurred in the recent past.
• Competition is fierce with 70% of the market controlled by 3 major players. The incumbent fixed line operators like MTNL and BSNL entering the cellular foray further intensify it.
• Investment cap of 49% restricts foreign investors to make an aggressive entry into the market
• The average revenue per unit subscriber has been decreasing with introduction of pre-paid cards and tariff cuts