some sweet Christmas holidays' memories

Our Q2 exams got over a week ago & I am enjoying Christmas holidays now. Thinking of Christmas holidays, I was reminded of one my most visited places during Christmas holidays during primary school days: Kapalli. That was the place where my dad's brother was residing during his tenure as a high school headmaster in that area. Click on this Google Map image to know where its located. This is a tiny village in the midst of Karnataka-Andhra Pradesh border, about 23 km from Chintamani, the taluq headquarter.




There were few private buses that went to this village, such as Balaji (with a distinctive yellow color), ATS (Akbar Transport Service, or something like that) and another simply called '8-single' (signifying that this bus plyed 8 times a day). These buses plyed between Chintamani & Gavunipalli or between Chintamani & Irgampalli. The buses were usually packed to the brink & it would be your lucky day if you secured a seat in the bus. The journey itself used to be a rocky one. The driver would play loud Telugu music (we were near Andhra border after all & yeah, Telugu movies was more popular than Kannada movies during those times) for passenger entertainment. An occasional drunkard used to provide more on-board entertainment. All said & done, if you were a well dressed kid from Bengaluru, you'd be in all probability the center of attraction. Someone would invariably ask me about my whereabouts and where I was heading to. "to Kapalli headmaster's house, I'm his nephew" used to be my standard reply. The bus would stop at Kapalli cross & it was a 2 km walk through the farms to the village. During my earlier childhood, there used to be fireflies in these farms that used emit fluorescent light through its tail. Trapping those insects used be my favorite time-passes. But as I grew up, these insects mysteriously disappeared.

My uncle's house was near the village entrance. A 150-200 yrs old stone arch stood at the entrance & it was now being used to tie-up cattle. The village also had some 8-10 gobar gas units that was supposed to generate cooking gas from cattle dung. But the project seemed to have flopped and most of these units had either become dumping grounds or were rusting.

The Hanuman temple at the center of the village was undoubtedly the cultural heart of the village. There was a large platform under the shade of a pepal tree that would be the place for lazy or old people to have a sieste or discuss about regional politics. A touring drama troupe would hold its night-long drama on the road opposite to the temple. An inter-village kabaddi contest would also be held under the blessings of Lord Hanuman.

Although most of main groceries were done from Chintamani or Guvanipalli, there were two small tuck shops. One was run by a single lady in her hut near the temple. Most of her wares were sweet meats, catering to small village kids. Finding a Coffee-Bite chocolate would be a rarity here, leave alone a Cadbury Five Star. Nobody knew how much she made, but I don't think she made much even though she had a near monopoly situation. Maybe she was happy with making her ends meet & wasn't caught up with expanding her business or increasing her gross margins, etc.

Needless to say, the village was surrounded by farms from all directions. One that reminds me the most was the betel leaves plantation of Subba Reddy that had a H-U-G-E well. This well was undoubtedly the largest I've ever seen & would be as large as a quarter football field. I remember going for a swim here once, only to find myself surrounded by snakes in all directions !! I've had nightmares about this well ever since.

Dairying also seemed to be a source of income for the villagers. Dairy co-operatives have been a huge success in Karnataka and have uplifted the lot of the farmer communities. The manager of the milk collection center, Venkatasubba Reddy was a very friendly person & would allow me to conduct milk purity tests & count the amount of milk brought in by each villager. Let me tell you this was quite a pristigious position & not many people would have got it.. :)

The best thing about this village was definitely its people. Everyone knew everyone else here, all of them had the innocence of the village & all of them were extremely friendly. I could write down few pages about each family & this would make this write-up so boring for you to read.

My uncle returned to my native village after he retired 10 yrs ago & my life had kept me so busy that I was barely in touch with this place or the people there. The last time I went to this village was to attend a marriage, I think 7 yrs ago. I've been to Chintamani quite a number of times in these 7 yrs, but never thought I'd miss this place so much. I've realized that there are somethings in life that you wouldn't realize how much you miss them until you are too much out-of-reach from them.

I've decided that during my next trip to Bengaluru, I'll be returing to this place that has been so much a part of me & its people who've partly shaped me to be what I am today. I'll surely make it a point to re-live some of those old memories & capture a few as a sweet remembrance of those childhood memories that I can no longer get back..& may be I'd do some not-for-profit consulting for the tuck shop lady to increase her profits.. :)

It's sometimes hard to imagine for people in big cities such as Toronto or Bengaluru or NYC that a place that doesn't even figure on the GoogleMaps can be such a lively entity. This I believe is the irony of today's world. Hope this little blog would put this tiny village: "Kapalli" on to the map of the Internet age.

Is telecom industry attractive?? - an analysis using Porter's framework

Background:
Telecom equipment industry is undergoing lot of changes. Many large companies have merged (NSN, ALU) and many others are selling off their key assets (Nortel selling its 3G portfolio and now contemplating about selling its MEN technology). What’s the reason behind these moves? Is it because the industry as a whole has become unattractive or because of bad decisions on part of the companies?
Lets use Porter’s five forces framework to analyze this industry & try to find how profitable this telecom equipment industry is. See Exhibit 1 for an overview of Porter’s framework.
Industry:
Telecom equipment manufacturing companies comprising of: wireless, data-networking, optical, access, NGN/IMS & s/w apps.
Main companies:
NSN, Nortel, Ericsson, ALU, Motorola, Cisco and Huawei. See Exhibit 2 for a brief overview of their financials.
Exhibit 3 clearly shows that performance of telecom vendors is much below S&P 500 signifying that this is a non-profitable industry.

1) Value creation
a. Buyer power: Buyer consists mainly of mobile service providers such as AT&T, Vodafone, Bell-Canada, etc; large companies such as IBM, Walmart, Shell for Enterprise Applications and governments such as the Chinese & Indian governments for optical and wire-line solutions. As we can see, these are very large entities compared to equipment companies.
These companies buy in large volumes and equipment costs form a significant part of their expenditure (except the governments). Hence they involve in negotiating good bargains.
Mobile service provider companies also have power to direct which technology is to be introduced to the market. For example, vendors perceived VOIP to be a substitute for mobile communication and did a huge investment in developing this technology. But service providers see VOIP as a major threat to their revenue generation model since VOIP is drastically cheaper compared to the existing mobile service thereby substantially impacting their revenues. Hence adoption rate for VOIP products is low among service providers due to which vendors are struggling to recover their initial fixed costs. The same is true with slow adoption of high-speed evolutions such as 3G & 4G among end-users. Vendors have spent huge amounts in developing these technologies but are not able to recover their initial sunk costs.
As mentioned above, vendors have high fixed costs (for initial R&D) and minimal incremental costs. Hence they would like to keep their sales volume high in-order to recover as much fixed cost as possible.
There is very little differentiation among the products and switching costs are low due the existence of standardizing committees such as ITU, 3GPP, WiMAX forum, etc.
Due to all these reasons we can conclude that buyer power is high in this industry.

b. Supplier power: The main suppliers to this industry are silicon chip manufacturers (for processors, memory chips, etc), sub-contractors and employees.
Due to heavy competition among chip manufacturers, their bargaining power is low. But there is medium switching cost for telecom vendors since changing their hardware would lead to additional cost in modifying their architecture.
Employees don’t have much supplier power since the required talent is widely available and companies can easily lay-off redundant work-force.
Sub-contractors also don’t have much power due to heavy competition among themselves and their relative smaller size compared to vendors. Telecom vendors make sure to outsource their work to a wide range of companies so as to not become completely reliant on a single sub-contractor.
Overall, power of suppliers is medium to low.

c. Threat of substitutes: There are not many substitutes for the products developed by these companies. Mobile services are considered a strong substitute to wire-line services. Today, mobile n/w equipment forms a major part of telecom vendors’ portfolio. Vendors have even taken a further step to understand possible future threats such as VOIP and have incorporated it into their portfolio.
Hence, threat of substitutes is low for this industry.

2. Value capture
a. Threat of entry: It’s not uncommon for some employees to join hands, take a funding from an angel investor or put in their own savings and start a company, competing against the parent company. But the products developed by these companies are piece-meal and cater to a very small set of customer requirements. Hence they may not have very strong preference among service providers; unless they offer a superior product at lesser cost. These startups neither have financial strength nor the kind of connections to bid a formidable threat against the larger incumbents.
Hence threat of entry is low.

b. Threat of rivals: Rivals are roughly equal in size and power and they cater to roughly the same customer base. They produce nearly identical products. Hence their best way to attract customers is by cutting prices. This is where Chinese firms such as Huawei are making inroads due to their low manufacturing costs and Western competitors are trying to minimize their overhead by cost cutting redundant expenses.
Another way to differentiate is by displaying to the customers the company’s technological prowess so as to assure its customers that their product is the best in the industry. This encourages companies to bet and invest more on future technologies even though they may not generate revenues in near future which in turn leads to low profit margins.
Therefore we can conclude that threat rivalry is high.


Conclusion
From the above analysis we found that buyer power and threat of rivalry is high. Both these factors are formidable. This could be reason of non-profitability and consolidation in the industry. Companies try to reduce threat of rivalry by merging or buying out rival companies.
Our overall analysis show that telecom vendor industry is not an attractive industry.

Exhibit 1: Porter's 5 forces framework


Exhibit 2: Main competitor's financials

*There was a goodwill impairment of $1,1142 mm due to EN & MEN business units
**Taken from Nokia’s consolidated statements
***Quarterly finance information not available


Exhibit 3: performance of S&P 500 and all telecom companies

ಎಲ್ಲಾದರೂ ಇರು, ಎಂತಾದರು ಇರು..(wherever u r, however u r..)

Dear friend,
Its been more than a month since Kannada Rajyotsava (formation day of my state: Karnataka that's celebrated on Nov 1st), but in keeping with true traditions of K R Puram (which had been my home since birth), I am wishing a warm belated Rajyotsava wishes now. Just remembered that last year we had Rajyotsava celebrations in early December. Even our Sasken Rajyotsava celebrations were in late November.

Now that I am in Toronto & so involved in studies, I barely get time to do these things. But here's a beautiful pearl of a song I unearthed from Youtube. I've missed the count of number of times I've seen it since & I'm sure even you'd love it..



This song has probably the two best Kannadigas ever. Hats off to our Rashtrakavi Kuvempu & one & only Annavru Dr. Raj..

ಕನ್ನಡವೇ ಸತ್ಯ, ಕನ್ನಡವೇ ನಿತ್ಯ..