OLIGO-POLY MARKET ANALYSIS TELECOM-MARKET ANALYSIS

DEFINITION OF OLIGOPOLYAn oligopoly market is much like a monopoly market, in which only one company exerts control over most of the market. In an oligopoly, there are at least two firms controlling the market. Usually, a scenario in which a particular market is controlled by a small group of firms

The number of producers in oligopoly are lesser than that of perfect competition and monopolistic competition.

It is a competition among few big sellers each one of them selling either homogeneous or differentiated products.

THEORETICAL CHARACTERISTICS OF OLIGOPOLY:

Profit maximization conditions

Ability to set price (price-makers)

limited Entry

less Number of firms

Product differentiation

Interdependence

Importance of advertising and selling costs

High cross elasticity “Production of Substitutive”

Price determination under oligopoly:Independent pricing

Price wars

Price leadership

Formal agreement: cartel

Types of Telecom Services in IndiaPresently, there are three types of telecom services in India. They are

1) State Owned

2) Privately Owned

3) Foreign Invested

Indian telecom sector: a comparative study 1/2India’s telecommunication network is the third largest in the world

It is based on the number of customer base and there are more than 960 million telephone subscribers and more than 121 million internet users.

Airtel, Idea, Vodafone, Reliance communication, Aircel, Tata Docomo, MTS, Uninor, Loop, BPL,BSNL, MTNL and Videocon are major players in the Indian Telecom sector

Indian telecom sector: a comparative study 2/2Talking about the recent times, it is seen that the mobile subscribers are increasing rapidly in the rural areas.

But, that also has seen some of the worst months for new subscribers as there were only 50 million new subscribers over the last 12 months.

GENERAL DEMAND TRENDS:The regulatory reforms in the telecom sector from 2000 to 2011 can be broadly classified into the following three distinct phases.

Phase 1 (2000–2003): Telecom sectors were opened up to competition.

Phase 2 (2004–2007):Regulator encouraged competition and also set the stage for future growth.

Phase 3 (2008–2011): More choices were brought in for consumers in terms of technology and services.

Competitive rivalry

Due to high fixed cost, low average revenue per user and high exit barriers have created strong rivalry in telecom sector. There are more than 15 telecom companies in India and at least five to six are present in each circle. To increase customer share if one reduce its prices all do the same and innovations are no longer an advantage for particular company.

Share of Telecom Services in GDP

There has been an increasing share of telecom services in the growth of GDP for India. The reason for these is that the government only allowed private and foreign owned companies in India after 2003.Till then there were only state owned companies that were active.

Composition Of Telephone Subscribers

If we take all the data in consideration, then the pie chart can be distributed like it is shown here.

The wireline connection shows landline connection and wireless shows mobile phones.

The Urban sector keeps its edge over the market with over 60% of subscribers.

Wireline vs. WirelessWireline subscribers have been declined too much in the last two or three years with the increasing competition of wireless communication companies.

The trai report by government of India shows that there is almost 0.60 million loss of subscribers in every quarter of last two years bringing the total share to just 2.47% out of the total 100.

But contradicting the situation, the Broadband internet connections have increased from 14.98 million to 15.05 million in a single quarter registering the yearly growth of a whopping 8.98%.

Similarly, the per capita average revenue has increased from 98 Rupees to 105 Rupees in 2013.

Factors Affecting Telecom SectorThere are some drawbacks of Oligopoly market and they are

1) High Exit Barriers

2) High Fixed Cost

3) Less time to gain advantage by innovation

4) Price Wars