5(b) Snack & Beverages Co. | Market Share Decline

Tower Infrastructure Network Equipment

Device Manufacturers Network Operators Customer

Value Chain

• Infrastructure sharing • Tower Deployment & operations • Energy Management • Switches, Routers, Firewalls • Network consulting • Integration & Deployment • Support, Maintenance

Growth Key Growth Drivers

Revenue

• Build mobile phones, handsets which are used by consumers • Tech & chip makers develop tech & hardware

Cost

Increasing Internet Users

Internet Services Operation Expenditure

Untapped Rural market Telephone Services Spectrum Auctions

Mobile Penetration

Network connectivity to other telco firms Network Investments • Provide telecom services:

Voice, Messaging, Internet,

Value Added Services

Major Players

• Recharge Plans • Customer Care Centres • Engagement through online & offline advertising

Composition of Telecom Subscribers (Feb 2021)

Government Initiative

Company

Reliance

Bharti Airtel

Market Capitalization (INR Cr)

4,90,000

2,90,885

Scheme

Policy Support About

Union Cabinet approved Rs. 12,195 crore (US $ 1.65 billion) production linked incentive (PLI) scheme for telecom & networking products under the Department of Telecom

Vodafone Idea

BSNL

25,861

NA

Prime Minister Wi-Fi Access Network Interface (PM-WANI)

Provision of public Wi-Fi service through Public Data Offices (PDOs) spread across the country to accelerate the expansion of broadband internet services

Important News

• FDI cap in the telecom sector has been increased to 100% from 74%; out of 100%, 49% will be done through the automatic route and the rest will be done through the FIPB approval route • Payments on unified payments interface (UPI) hit an all-time high of 2.30 billion (by volume), with transactions worth ~Rs. 4.31 lakh crore (US$ 59.08 billion) in January 2021

• Over 75% increase in internet coverage from 251 million users to 446 million

Facts

Subscriber base of 1187.9 million as of February 2021

Gross revenue of the telecom sector stood at Rs. 68,228 crore (US$ 9.35 billion) in the third quarter of FY21

A profitability case could deal with revenue side issues, cost side issues or both. The key here is “Problem Isolation”. The candidate is expected to SEGMENT under various heads, ISOLATE the key driver causing the problem and then EXPLORE possible resolutions

Initial Questions

• Get basic understanding of the company. For e.g. - its products/ services, geographical presence etc • Try to understand if it is a company specific problem or an industry- wide phenomenon • Consider the quantum of losses and the time period for easy comparison

Profit Vs Profitability

Profits are merely a difference of Revenues and Cost, while Profitability refers to profit as a proportion of sales Many students start thinking about immediate profitability. Whereas in real world it's about breakeven

Alternate Approaches

Cost: While segregating cost, we can break down cost as fixed and variable

Revenue:

• Problem with units sold can be looked at from the demand and supply side lens • Factors affecting revenue can be bucketed as internal (Production, Distribution/Push factors or Consumer/ Pull factors) and

External factors (identified by PESTEL analysis)

ConQuest, IIM Shillong

Profits Revenue Price

# Units sold

For the problem branch (e.g. Price or # units sold) 1. SEGMENT the number, break it up into its component parts, compare to historical metrics to find where the shift is coming 2. ISOLATE the key driver causing bulk of problem 3. EXPLORE possible resolutions

Possible Segments to get data for, isolation & exploration • By product/product line • By customer type • By distribution channel (new/old, big/small) • By region • By industry vertical

Cost Cost per Unit

# Units sold

Fixed Cost

Variable Cost

For problem branch (e.g., fixed or variable cost) SEGMENT into its component parts • Segment cost by logical components • Segment costs by value chain

Value Chain Example: Identify fixed costs in each of the following: Raw Materials -> Factory -> Distribution ->Customers

Compare to historical. Find the problem component.