Question

Select an Recently announcement of the formation of ONE international strategic alliance in any industry. Predict its likely success or failure.

Answer 1

International strategic alliances was seen in India in Telecommunications sector where global giant Vodafone acquired Hutch in 2007 and then merged with Idea Cellular in 2017 to form Vodafone Idea Limited.

However sustainability is challenging as both companies sit together on debt to ebitda levels of 11x and high leverage with staggering losses due to oligopoly market structure along with lowest cost prices in industry.

Telecommunications industries summary

Telecommunications industry in India faces an Oligopolistic market structure with combined revenue potential of 30 billion Us dollars and taxation rate at 33 % with 4 large players of equal sizes namely BSNL, Vodafone Idea limited, Bharti Airtel, Reliance Jio. The industry has grown at stagnant rate from 3% to 4% however has been largest contributor to GDP at 11% and contributes 11,00,000 jobs yearly in India. However key challenges remain industrial prices set by Jio as rock bottom, heavy taxation and cumbersome merger acquisition regulations amd strong consumer pressure on low prices.

Industrial output has grown from 22billion dollars ro 30 billion dollars a sper GSMArena, TRAI data, DoT data. FDI in Telecommunications has increased however hummongously by 57%but the consumer demand for data and calls has grown enormously by 322% and so has the prices fallen to 5 Rupees per 1 GB data as compared to 250 rupees for 1 GB data in 2014. The Government has too allowed foreign investment and global players tobid for spectrum auction and hence net FDI is higher and dollar inflow and suprlus too is high.

The biggest drivers of growth pattern are changibg consumption preferences to higher usage plans, lower prices which drive higher affordability, 4G coverage and infrastructure sharing. The Demonetization in 2016 in India saw huge losses to telecoms sector and similarly the 2008 Recession also impactes financial health of 10 players existing erstwhile which led to substandard growth in Telecommunications sector in 2009 era.

Recommendations for expansion including heavy bid for spectrum auctions, cutting down 3G tower and adoption of mass bubdled plans across rural areas for widened coverage and tieups with smartphone vendors becomes the need of the hour.

By and large we conclude and infer that rising taxes and increasing compliance as well as competitive pressures from incumbents coupled with cheap dirt prices will keep industry revenues subdued for while and will only improve after 4 quarters as expected by Crisil and ICRA. With adevent of 5G, we expect the future to cross 100 billion dollar opportunities in India with tonnes of commercial use cases and techtonic changes in Technology which will see unprecedented growth as industry stabilises and consolidates itself leading to firm prices and saturated demand and wide scale adoption of 4G and 5G services.

PLEASE UPVOTE INCASE YOU LIKED THE ANSWER WILL BE ENCOURAGING FOR US THANKYOU VERY MUCH