The Price War of Telecommunication

Giants in India:A Comparative

Analysis

By :– Subham Chauhan MBA (Hons.), Lovely Professional University

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TABLE OF CONTENT

PARTICULARS PAGE

TELECOMMUNICATION 3

TELECOMMUNICATION IN INDIA

3 – 4

TELECOMMUNICATION COMPANIES AND SUBSCRIBER

BASE

5 – 6

TREND IN DEMAND AND SUPPLY

6 – 7

PRICE WAR 7 – 9

DETERMINANTS OF PRICE WAR 9 – 10

OLIGOPOLY AND PRICE LEADERSHIP

10 – 11

GAME THEORY 12 – 13

ECONOMIC IMPACT OF TELECOMMUNICATION

13 – 14

CONCLUSION 14

REFERENCES 15

TELECOMMUNICATION:

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Telecommunication by name it is understandable that a communication through an indirect medium, and it is defined as the interchange of data or information between two or more than two members or groups in which utilisation of technology is must. Telecommunication has come from Greek and Latin word. “Tele” is a Greek word which means “far off” and “communication” is a Latin word which means “to share”. This phenomenon is based on the programmes (channels) which transmits the data or information in the form of electric signals, and this can be done either by a physical medium such as electric cables (analog) or it can be in the form of electromagnetic waves (digital). Generally the telecommunication is the word which is used in the plural form, telecommunications, as it involves different technologies and the communicators.

The evolution of the telecommunication consists of three stages, the first of them is ancient age in which the communication for a certain distance is being done by pigeons, horses and directly man to man. In the medieval age the communication for a distance is being done by visual signals, letters, telegram , postcard, signal flags, optical heliographs, beacons, smoke signals and semaphore telegraphs. And other mediums of pre-modern (medieval) means of communication for long distances are audio messages such as coded drumbeats, lung-blown horns, and loud whistles. And now a days (modern age) for nearer as well as farther distance the communication system is based on analog and digital technology (i.e. electric and electromagnetic) for example radio, telephone, networking, tele printer, telegraph, fiber-optics microwave transmission and communications satellites.

The evolution of the wireless communication (telecommunication) started from the first decade of 1900 with the outstanding outcomes in the analogy communication by Dr. GUGLIELMO MARCONI that was radio, who won the Nobel prize in physics discipline for this pioneering outcome in 1909. There also some notorious developers and inventors in the field of wireless communication such as ALEXANDER GRAHAM BELL known for the invention of telephone, SAMUEL MORSE and CHARLES WHEATSTONE (telegraph), Lee de Forest and Edwin Armstrong (radio), and the most revolutionary invention of the telecommunication was television invented by PHILO FARNSWORTH and JOHN LOGIE BAIRD. And why do we need telecommunications? The reason behind this is that we need a better and an appropriate medium for communication.it is very important aspect, not only for us but also for the large and small business. Mobile phones and internet are the greatest achievement of the telecommunication that we could possibly get.

Basically there are three types of telecommunication network services namely, computer networks, public switched telephone networks (PSTN) and TR networks (television – radio)

TELECOMMUNICATION IN INDIA:

The story of telecommunication (PSTN) in India was started from 1850, in that year the first experimental electric telegraph (the Indian telecom and postal sectors which is one of the world’s oldest) line switched between diamond harbour and Calcutta the service was available for east India company. In 1853 there was line of 4,000 miles started which connects Calcutta (east), Peshawar (north) and madras (south). William O’Shaughnessy who invented the telegraph and telephone in India, works for PWD; a separate department was opened in 1854 when this facility was opened to the public. In 1880, two telephone companies namely ANGLO-INDIAN TELEPHONE COMPANY LIMITED and ORIENTAL TELEPHONE COMPANY LIMITED approached to the Indian government to establish telephone exchange in India. But at that time the proposal was refused on the

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grounds that the want the establishment of the telephones because of the monopoly of the government, later on 1881, changed their decision and granted the permission to the companies. Now a days, the India’s telecom network is the world’s second largest network based on the total number of the telephone users.

And why is it so? Because it has one of the lowest call tariffs in the world telecom market enabled by mega telephone networks. Within last decade there is tremendous growth in the number of subscriber in India. In India the number of telephone subscribers as well as internet subscribers is increasing at the rate of 14% and 15.6% of total population. And in the world it is the highest increasing rate of a country. The graph below will determine the increase in the number of the subscriber. As per the survey of 2015.

2008 2009 2010 2011 2012 2013 2014 2015

240.01

345.75

488.65

601.23

764.56845.36

957.561019.25

TOTAL SUBSCRIBER GROWTH IN INDIA

Subscriber in Million

Telecommunication has also boosted the socio-economic development of India and has engaged in an inevitable role to bring down the urban-rural digital divide to some level. It also has helped the government to increase its transparency by introducing E-governance in India. As it is clearly shown in the graph the increase in the number of subscriber the telecom companies are coming to India to acquire the Indian subscriber market. Telecommunication has become the essential or vital part of our daily lives from enabling telephone communication between people in the different locations to enabling supply chain to work effortlessly across the continents for creating a product and full filling the demand. Telecommunication services, now days are consider as the important for the socio-economic development for the nation and it is considered as the key for the rapid growth and modernization of the economy. With the increase in the number of subscriber there is an increment in the services of telecomm companies to attract the Indian customers TARIFF plans, (call rate at 10p/min, 30p/min and 1p/sec etc.) for outgoing. Different companies has different plans and also for the INTERNET plans for 2G, 3G and 4G services.

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VARIOUS TELECOMMUNICATION COMPANIES:

COMPANY INCORPORATION SUBSCRIBER BASEBHARTI AIRTEL 1995 230 MillionVODAFONE ESSAR 2007 185 MillionIDEA CELLULAR 1995 157 MillionRELIANCE COMMUNICATION

1999 110 Million

BSNL 2000 95 MillionAIRCEL 2002 82 MillionTATA TELESERVICES 1996 68 MillionUNINOR 2009 45 MillionMTNL 1986 8 Million

The companies mentioned above are the telecommunication companies providing telecomm services in the Indian market out of which, The State owned companies (BSNL and MTNL),The Private Indian owned companies (RELIANCE COMMUNICATION and TATA TELESERVICES), The Foreign invested companies (VODAFONE, BHARTI AIRTEL, IDEA CELLULAR and UNINOR) foreign direct investment is increasing day by day in India and new players are entering the market every year. The companies acquiring the subscribers mentioned below in the PIE chart as per the survey of the 2015.

Bharti Airtel22%

Vodafone Essar19%

Reliance14%

Idea Cellular16%

BSNL11%

Aircel8%

Uninor3%

TATA5%

MTNL1% Others

2% SUBSCRIBERS IN INDIA

Bharti Airtel Vodafone Essar Reliance Idea CellularBSNL Aircel Uninor TATAMTNL Others

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On the basis of the customer base, India is the second largest in the world and it has one of the lowest tariffs in the world in telecommunication set of connections. It has more than 900 million telephone subscribers and more than 100 million internet users. All of these companies are trying to acquire the telecomm market in India so there is a price war is going on between all the companies. The main theme of the war is to provide the best service to their subscriber. In India the number of subscribers is growing at a rapid rate and they are acquiring and utilising most of the technology like wireless as well as wireline, so the companies are aiming the same. They are providing the innovative services to them; there are two segments on which the companies are targeting first one is telephone in which the companies are doing a rat race by giving the services at very attracting rates with impressive schemes and the second one is internet service, as we know that today almost everything is depending on the internet so, the companies are providing internet services like 2G, 3G and 4G and the companies are charging accordingly to gain the market. A customer will go to that company which is providing the best services at very affordable rates so the companies are introducing different price and schemes to attract customers towards themselves.Here is the comparative analysis of the companies, why they are having the price war and how will it affect the Indian telecommunication market.

TREND IN DEMAND AND SUPPLY:

DEMAND ANALYSIS: “The law of demand states that the higher the price of a product or service, lower is the quantity demanded of the product or services and lower the price of the product or service, Higher is the quantity demanded, ceteris peribus”

According to this law the companies are doing continuous change in the price as per the demand for e.g. in densely populated state the demand will be very high so the companies have to set an affordable price for the service as there are lots of substitutes service in the field and customer will move on to the service which is affordable one. In these type of states the determinants of demands are consumer’s income, price of related services, population and advertisements.Let us take an example, if Airtel is increasing the call rates the customers will move on to other service providers like Vodafone, idea if they have a constant call rates but in the same time if the Airtel increases the validity of the call rates again the customers switched towards to Airtel. Simply, the whole price war is to take over the subscriber market.The majority of the Indian population in India of the age group 14-65 years, they are the mostly users of mobile phones belong to 14-65 year category of age. Hence, Indian holds a great potential market for telecom service providers. So, the companies are giving different types of schemes and services to attract them. Youth generation is very fond of internet services so this is the main factor of the price war between the companies, the demand for the internet is continuously increasing because of the technology in the internet world is increasing like WHATSAPP, FACEBOOK, ONLINE SHOPPING and ANDROID, young girls and boys will move on to that ISP (Internet service provider) which is providing the best speed of internet (2G, 3G and 4G) at very affordable rates; hence there is a continuous price discrimination in the internet services provided by the telecommunication giants.

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SUPPLY ANALYSIS:“The law of supply states that the higher the price of a service, greater the quantity supplied of that service and the lower the price of the service, lower the quantity supplied, ceteris paribus.”

There are several determinants of supply which are affecting the supply of telecomm services such as cost of production; if the cost of production for any product or services increases than the company have to increase the service charges but this led to consumer to switch down to other service provider whose services are cheaper than that company. Technological advancements; as the new technology introduced the supply will increase like smart phones as in earlier mobile phones there is only one sim card but in smart phones there is a facility of various sim card through which they can provide new services such as internet services. And also the new signals facility like digital signals which helped the companies a lot to provide fast call services and hi speed internet. Improvement in infrastructure; in India as the infrastructure is improving day by day which facilitates the telecomm companies free and fast movements of services within the country and hence increase in the supply of the product. Number of buyers; In India the population is very high and hence there is no shortage of the buyers in urban areas as well as in rural areas so the company will supply there services at higher amount.

PRICE WAR:

Price war is "mercantile competition distinguish by again and again repetition in cutting of prices for a product or services below those of competitors". For e.g. clearly for acquiring the market if a company lowers its prices for the services or products, the customers will move on to that company at that instant the other company will lowers its charges for the same product and service, than again the customers will switch down to the other company. But again and again both the companies will do the reductions in short term, this gives an advantage to the customers to gain the services at very cheaper rates. But from the company’s perspective it is not so good because it lowers the profit margin and threaten their survivals. Let us take an example of two telecom companies IDEA and VODAFONE for the internet services they are providing.

INTERNET 3G PLAN FOR 1GB

IDEA VOPDAFONE

CUSTOMERS PRICE PRICE CUSTOMERS

40% 350 RS. 333 RS. 60%

55% 325 RS. 333 RS. 45%

40% 325 RS. 310 RS. 60%

65% 299 RS. 310 RS. 35%

40% 299 RS. 279 RS. 60%

50% 279 RS. 279 RS. 50%

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The above example can explain the scenario of the price war; the price for the 1GB 3G internet plan of IDEA is 350 RS. Hence the customer base for the company is only 40% but for the same service the VODAFONE is charging only 333 RS. Therefore they are having a customer base of 60%. To gain the market IDEA reduces its charges the customer base shifts towards idea and hence the same Vodafone does than the customer switch to Vodafone back. In this situation customers are in profit because they are getting the same service at cheaper prices. At one stage both companies will have to stop the reduction of service charges otherwise they will not be able to recover the cost of production and this will led to their fallen. Today, one factor is having very high influence on price war that is “SERVICE PORTABILITY” this is a facility that is customer having now a days by a virtue of which they can switch down their service provider to another for e.g. if I am having AIRTEL connection and I like the plans of VODAFONE than I can change my connection to the former and that will be activated within 24 hours without any memory wash (deleted contacts). And how this factor is affecting price war? Let us go back to 4 or 5 years back when the companies were not having such type of price war because, if a customer is having a particular telecomm connection he or she can’t switch the connection to other company if they want to do so they have to go for a new connection of new company and further have to change the number with a memory wash (deleted contacts) but what is happening now a days that customer can port their number to the new company without any problem. So the companies are giving attracting prices to the customers and they can easily switch to the company who is having the best service and cheaper price.

In India, there are some instances which determine the price war condition.

May 2005 – BSNL announces its highest ever cut in international call rates and on this action AIRTEL reacted by reducing its international as well national call rates up to 30%.

August 2006 – IDEA, AIRTEL fights for the 2G internet charges but BSNL reduces the charges for the same service up to 50%.

April 2007 – IDEA and AIRTEL got the license of 3G internet services, AIRTEL charges two third of IDEA was charging and Q1 profit of former was doubled.

November 2008 – AIRTEL introduces late night call plan on this RELIANCE lowers its charges on all of the call plan and introduces a “COIN – TELEPHONE”. IDEA reduces the call charges and introduced the charges as per seconds.

April 2009 – AIRTEL boosts broadband speed to 16 MBPS but increases the charges as well and BSNL reduces the charges of internet plan and took the customer base of AIRTEL of 40,000 people.

March 2010 – New telecom companies enters in the market MTS, DOCOMO, UNINOR and MTS took over the customer base of all the telecom companies by giving the 3G internet plan at very low prices and reached at the top tier position.

November 2010 – BSNL introduces video conferencing on 3G services and slows down the MTS market on this IDEA, VODAFONE and AIRTEL as well jump into this services and the price war begins AIRTEL was charging at half the charges of other service providers but this led former to loss in Q4 hence they have to stop the video conferencing.

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COMPANIES CHARGING FOR THEIR SERVICES PRESENTLY:

COMPANY DATA PACK SERVICE VALIDITY CHARGES IDEA 2GB 3G 28 Days 445 Rs.VODAFONE 2GB 3G 28 Days 444 Rs.AIRTEL 2GB 3G 28 Days 449 Rs.BSNL 2GB 3G 28 Days 451 Rs.RELIANCE 2GB 3G 28 Days 441 Rs.

These are the current prices of the companies charging for the internet services, it is clear that companies are in in price war condition because all are charging approximately same charges for the internet service.

THERE ARE SEVERAL FACTORS WHICH CAUSES PRICE WARS

PRODUCT DIFFERENTIATION:

This is a process according to which a company differentiate its product or service from other companies, to make the product or service more attractive to a particular target market. This involves distinguishing it from competitor’s products as well as a company’s own products. In this condition we can see that the telecom companies are providing services but some attracting services as well. Like in the case of call and tariff plans, if AIRTEL is providing the call rates at the rate of 2p/sec but at the same instant IDEA gives the same plan at the same rate but also giving the facility of caller tune or increased validity to attract the customers, this is called product differentiation but, how will this give birth to price war? When AIRTEL reduces its call rates to 1p/sec and further IDEA reduces its price as well to gain the customers but as the increase in the price of IDEA’s service this will lowers the profit margin of the former so in that case they have to remove the additional service and at this situation both the companies are standing in price war condition. If they further lowers there prices they will not be able to recover the production cost of the service and this will threaten their survival.

PENETRATION PRICING:

It is a market strategy, in which a merchant or a company is trying to enter in the market to incorporate itself but for this they may offer lower prices for the services and products, than existing firms or companies. We have seen that telecom sector is not so wide and hence there can be a new entry in the market as, in March 2010 MTS steps in Indian telecom market and charges very less for internet services as compared to the existing companies like IDEA, VODAFONE and AIRTEL. MTS took over the market of all the companies. How this will led to price war? Other companies introduced new plans with some attracting services added to that plans and reduces the charges for their services this creates a condition of price war in all the companies or we can say that in the whole telecom market.

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PREDATORY PRICING:

A merchant or a company having a healthy foot in the market may deliberately charges for new or existing products and services in attempt to topple the condition of the existing companies in the market. As per the survey of 2015 we can see that AIRTEL is in very strong condition because of having a customer base of 230 million and now a days there is a new internet plan is immerging i.e. 4G if they may charge the service with very less profit margin to gain more customers. On this action other companies have to reduces their charges as well otherwise they will be out of the race and all the customers will switch down to AIRTEL, this is a price war condition and from the perspective of AIRTEL, they have slowed down the market of the other companies and to gain the foam in the market they have to fight the price wars.

BANKRUPTCY:

This factor is very rare but may have very high influence on price war if a company is going in continuous loss and near to bankruptcy may be forced to decrease their charges for the services and products so as to increase the sale and hence may be able to recover the liquidity to survive. Till now, there is no such case of the bankruptcy in the telecom sector but there are several instances such as transfer of ownership, privatisation had marked pin points in the telecom sector, for e.g. when HUTCH gives its ownership to VODAFONE in mid of 2007 the latter was new in the market so they had to start from the toe, hence they started from very low value of their services influencing the whole market and creating a competition.

OLIGOPOLY:

This theory states that, if an industry structure is oligopolistic (few competitors but strong), than all the market players will observe each other’s prices, products and services very closely and be ready to respond to any price cuts, products and services. Likewise in Indian telecom market there are three strong companies namely AIRTEL, VODAFONE, IDEA and RELIANCE having a customer base which is varying day by day, if either of the company reduces its charges for any service other two will instantly do the same. All the three companies hold more than 60% of market share in the Indian telecom sector, which is large enough to dominate the market. As in the telecom market the services are homogeneous as well as differentiated. Telecom market has been influenced by few major players, and hence is perfect case of oligopoly. If AIRTEL reduces its price for the internet services instantly other companies will instantly do the same, this also a price war condition and why is it so? Because in an oligopoly the firms are consider the reaction of their rivals when choosing the price, sales target and other business policies. Since the number of the firms is small, changes in price or output (new service) by any firm can have a direct effect on another firm.

According to the subscriber chart of 2015 the *concentration ratio (a concentration ratio is a measure of the total output produced in an industry by a given number of firms in the industry) can be found easily,

CR (C4) = 21+19+16+14 = 70

Thus, it is very clear that few major players alone have very high market share and an indicator of the relative size of firms in relation to the industry as a whole. Although there is a

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cut throat competition in the telecom market, there are a several firms in the market, so the service providers are likely to concede their inter-dependence on each other. The similarity and the homogeneity of costs make them interdependent.

The telecom service provider industry is having a kinked demand curve (a model which predicts that the price and the quantity will insensitive to small cost changes but will respond if the change in cost is large) if we go down by reducing price, below a certain price level demand will be inelastic and so furthermore reducing the price will not increase the sales for the firms because at that level revenue per unit sold will be less and this makes firm to be unrecoverable of the production of cost, (Total revenue = Price × Quantity sold).This can be explained from the graph given below.

Price AR2

AR1

MR1

Output

MR2

Let us consider that the main goal of the firm is to maintain the share in the market while the rival firms are going to follow the price cut (Relatively inelastic demand) if the rivals do that so the decrease in the price will led to low total revenue of the firms and the firms are not stepping the increase in the price (Relatively elastic demand) will be a falling in the total revenue of the firm.

PRICE LEADERSHIP:

Price leadership means a pricing strategy in which the firm or the company in an oligopoly industry follows the price set up by the leading firm or the company. It is one of the collusion under an oligopoly in which there is no formal or tacit agreement. The telecom sector may have the “DOMINANT PRICE LEADERSHIP” in which the largest firm may dominate the overall industry, the reason for this is because the leader which is a large firm is able to keep the costs low. Moreover, if the leading firm is larger and economically stronger, is able to forecast market conditions accurately hence, the dominant firm can act as a monopoly, the firm can sets its price value to maximize the profits and so the other firms will have to set the price same level. If the product is homogeneous, the other firm will adjust their outputs so that the marginal cost is equal to the leader’s price. If AIRTEL sets up a price for the internet service with a normal profit margin to gain the subscriber base in the market, than other companies will also bring the charges of their services at the same level as AIRTEL’s, to have the subscriber base with them.

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GAME THEORY:

Game theory states that, a study of conflicts of mathematical models and the agreement between rational decision makers of any corporation. This theory is used in various disciplines like economics, political science and psychology. In economics the theory has some different applications, basically it is a method used to determine the competing behaviours of the interacting agents (firms) of an industry. The theory has mainly two branches: cooperative and non-cooperative game theory. Non cooperative theory tells us that how rationally and intelligently a particular interact with others to make out their own targets. Cooperative game theory states that how intelligently and rationally any firm is changing its marketing strategy against its competitors in the industry. The Indian telecommunication sector a perfect example of oligopoly, has witnessed an indicative price reduction within a decade. The reason behind this price war is the game theory of the dominating companies. The *ARPU (it is defined as Average revenue per user that the company is getting from the subscriber per month) has decreased to 128.25 INR which was 370 INR in 2005. This scenario tells us that either the call rates have been fallen over the period or there is a decrease in the number of mobile phone users. But the main motto of the companies behind this decrement is to gain the subscriber base in Indian telecom market at any cost. And the companies are applying game theory. Let us analyse the game theory of AIRTEL, VODAFONE and IDEA that, what are these company doing?

Currently, AIRTEL, VODAFONE and IDEA ruling more than 60% of the total subscriber base in the Indian telecom market.

YEAR AIRTEL VODAFONE IDEAARPU SUBSCRIBER ARPU SUBSCRIBER ARPU SUBSCRIBER

2010 260 144 MILLION 227 109 MILLION 215 94 MILLION2011 200 160 MILLION 170 131 MILLION 172 103 MILLION2012 153 195 MILLION 130 149 MILLION 127 121 MILLION2013 136 210 MILLION 117 168 MILLION 114 139 MILLION2014 123 230 MILLION 121 185 MILLION 107 157 MILLION

The table above shows the subscriber base (million) and ARPU (INR) of the companies over the past 5 years. There is a decrease in the ARPU for all the companies but there is one more aspect in the strategy as well that the subscriber base of all the three companies is consistently over the period. This is the “DUAL ASPECT” property of the game theory, likewise in the case if the telecom companies that they are losing their ARPU value but however they are getting increment in the number of subscribers but still they are able to maintain their profit margin. Let us take the example of AIRTEL:

For year 2010, ARPU = 260 and subscriber = 144 million

So, the total revenue from all the user in one month = 260 × 144 = 37,440 million INR

Similarly, for year 2011 it becomes = 32,000 million INR

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Clearly, we can see that there is decrease in the revenue of the company because of the price war between the companies, although there is an increase in the subscriber base of the companies but the customers also switched down to the different companies as well.

So, the companies are applying game theory to retain their subscriber with them accordingly they are giving attracting services to the customers at very cheap price and hence there ARPU is decreasing and one more reason behind the decreasing of the revenue is the new market players. In, 2008 AIRTEL was having a market share of 43%, VODAFONE was having a market share of 31% and IDEA was having a market share of 20% and now the companies has reached to 21%, 19% and 16%. The scenario tells us that the company which didn’t reduce the price to retain the subscriber base in those years would have lost its subscriber base.

SITUATION V REDUCES RATES

V DOESN’T REDUCES

RATES

I REDUCES RATES

I DOESN’T REDUCES

RATESA REDUCES RATES

A and V retain market share

V loses market share

A and I retain market share

I loses market share

A DOESN’T REDUCES RATES

A loses market share

A and V retain market share

A loses market share

A and V retain market share

The aspects in the game theory were used in the market by the companies that are to slow down there competitors market growth, attract new customers by giving them affordable services and retain the subscriber base. And the main theory the companies are applying that is the price they are reducing to gain the customer attention to their service, whether the companies are reducing the price but they may get subscriber enough to get a green revenue.

ECONOMIC IMPACT OF TELECOMMUNICATION

MICRO-ECONOMICS:

The micro-economic scale states that, the firms are using telecommunications facilities like computer networks and PSTN to rise up their global business empires. Like in the case of Amzon.com which is axiomatic but, Edward lenart says that, Wal-Mart which is an ordinary retailer has benefitted through the telecommunication and build up a strong infrastructure and rationally competing with its competitors. In all over the world, throughout the cities everyone is telecommunication from pizza delivery to shopping. Even the relatively poor people are using telecommunication services for their advantage. In India’s Narshingdi district (Maharashtra), an isolated village in which the villagers use cell phones to deal with wholesalers and to arrange a best price for the products. There is a city namely Côte d'Ivoire, in which the farmers of coffee used to share information through mobile phones regarding the periodic variations in rates of coffee and to sell the coffee at the best price.

MACROECONOMICS

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At the macroeconomic level, Leonard Waver and Lars-Hendricks Roller suggested an informal link between economic growth and good telecommunication infrastructure. Few dispute the existence of a correlation although some argue it is wrong to view the relationship as causal.

A better telecommunication infrastructure increases the economic benefits also, there is increasing worry about the inequitable access to telecommunication services amongst various countries of the world, and this is known as the digital divide. A 2003 survey by the International Telecommunication Union (ITU) revealed that roughly a third of countries have less than one mobile subscription for every 20 people and one-third of countries have less than one land-line telephone subscription for every 20 people. In terms of Internet access, roughly half of all countries have fewer than one out of 20 people with Internet access. From this information, as well as educational data, the ITU was able to compile an index that measures the overall ability of citizens to access and use information and communication technologies. Using this measure, Sweden, Denmark and Iceland received the highest ranking while the African countries Nigeria, Burkina Faso and Mali received the lowest.

CONCLUSION:

As a customer, everyone wants the services which is quite good at very affordable rates and what the companies are doing the price war, they are trying to attract the customers on the basis of the game theory by giving the services at cheaper rates. Telecom companies are fighting to gain the subscriber base but as we seen in the game theory analysis, the companies are losing the ARPU is decreasing and as well the companies are not getting the profit margin in the positive approach. This will threaten their existence in the telecom market because at level when the total number of subscriber will reach up to the total population, than there will be no further increase in the subscriber base it means that there profit margin will fixed at some extent what will the companies do? As the market is now oligopoly what will happen if it becomes monopolistic competition? And if new entrants will come to the market?

Again the companies will have a price war and this time the war will be not to gain the subscriber base but it will be to retain the subscriber with them with a cut throat competition. This will led to the companies to the loss and may lead to extinction of several companies those who will not applied the game theory. So, what the companies have to do?

They should not go for the price war instead to this they should have differentiate their products by giving some attractive additional services and offers on the main service. May be this action, is not to be so appropriate but somehow it will stop the drastic decrement in the ARPU and hence boost up the total revenue through a small extent. In Indian telecom sector we have seen that AIRTEL, VOADFONE and IDEA are the price dominant leaders and all the other firms a rely on their services as well because at whatever will be the cost they are providing the same service others will have to bring their price at that level. But that should not be done because the company are fighting for the same service instead of this if the companies will distinguish their services and this will help to customers as well they will have a lot choices and they can go for different prices.

If they companies will do so the might faces the problem of their extinction.

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REFERENCES:

ONLINE REFERENCES:

Harvardgame.com

Managementstudyguide.com

Moeycontrol.com

Oup.com

Styudymode.com

Telecomindia.com

Wikipedia.org

OFFLINE REFERNCES:

Lohia, Sanjeev “A Case of Game Theory – Indian Telecom Sector” The Times of India November 2014.

Vengedasalam, Deviga “Principle of Economics” Third Edition

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