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Benchmarking Japan and Korea Benchmarking Japan and Korea Telecommunication Business for 3G in Telecommunication Business for 3G in
ChinaChina
Author: Jiannan ZhaoSupervisor: Prof. Patric ÖstergårdInstructor: Vesa Riihimäki, M.Sc. (Tech)
Master Thesis SeminarMaster Thesis Seminar
Communications Laboratory, HUT ,Finland
2005-06-02
AgendaAgenda
Thesis StructureThesis Structure
Japan and Korea Telecom BusinessJapan and Korea Telecom Business
China Telecom IndustryChina Telecom Industry
Questions and AnswersQuestions and Answers
Communications Laboratory, HUT ,Finland
2005-06-02
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Thesis StructureThesis Structure
• INTRODUCTIONINTRODUCTION
• TELECOMMUNICATION SYSTEMS AND 3G SERVICESTELECOMMUNICATION SYSTEMS AND 3G SERVICES
• TELECOM BUSINESS IN JAPAN & KOREATELECOM BUSINESS IN JAPAN & KOREA
• THE DEVELOPMENT OF CHINESE TELECOMMUNICATON THE DEVELOPMENT OF CHINESE TELECOMMUNICATON INDUSTRY INDUSTRY
• CONCLUSIONSCONCLUSIONS
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2005-06-02
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Why Japan and Korea ?Why Japan and Korea ?
Industry Criterion -- ARPU
Average Revenue Per User
•Markets are saturating
between 70-90% of
population
•Also saturation in high
to mid-value customers
in developing markets
•Prepay growth is
driving down ARPU
•Prepay revenues
third or less of
contract revenues
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Their telecom industries are
MATURE !
Reason for why Japan and Korea Reason for why Japan and Korea
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What maturity means...What maturity means...
In developing countries, a two-speed market – Saturation in mid-to-high
end– Growth in low end users– Pressure on
margins/ARPU/network Shift in management focus
– Customer retention - not acquisition
– Segmentation Regulation
– Mobile termination, USO, 3G rollout
Bundling by full service operators - squeeze mobile only players
Prepare for industry consolidation – Most countries will only
sustain 2 to 3 mobile operators per market
Focus on high-profit customers– Growing “wallet share”
rather than market shareMaintain opex and capex
disciplineScale critical
– Limited scope for differentiation
Increased volume traffic – but revenues don’t grow
at the same pace
The Challenge Requires a new approach
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Japan and Korea Telecom Japan and Korea Telecom BusinessBusiness - Japan Telecom Industry and Key Player- Japan Telecom Industry and Key Player
Industry situationIndustry situation
• The exploiter and leader in terms of telecom The exploiter and leader in terms of telecom business business • Both W-CDMA and CDMA2000 networks are Both W-CDMA and CDMA2000 networks are supported supported • 3G first mover – NTT DoCoMo3G first mover – NTT DoCoMoCore Business and Strategies of NTT DoCoMo Core Business and Strategies of NTT DoCoMo
• i-mode and FOMAi-mode and FOMA• RegulationsRegulations• Cooperation Cooperation • Value chain managementValue chain management• Service innovationService innovation• Pricing systemPricing system Communications Laboratory,
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1.1. RegulationRegulation
Establish industrial association Establish industrial association
Laws Laws
2.2. CooperationCooperation
NTT DoCoMo has built a strong competitive NTT DoCoMo has built a strong competitive advantage through forging close relationships advantage through forging close relationships with a wide range of companies. with a wide range of companies. Synchronization makes DoCoMo’s stakeholders Synchronization makes DoCoMo’s stakeholders having their interests aligned with the end-having their interests aligned with the end-customer and committing in maximizing value customer and committing in maximizing value and continually upgrading the quality of all and continually upgrading the quality of all services and products services and products
Japan and Korea Telecom Japan and Korea Telecom BusinessBusiness - Japan Telecom Industry and Key Player- Japan Telecom Industry and Key Player
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3.3. Value chain managementValue chain management
NTT DoCoMo manages the value chain by closely NTT DoCoMo manages the value chain by closely collaborate with other telecom actors, enabling collaborate with other telecom actors, enabling all parties involved in the value chain all parties involved in the value chain
4.4. Service content innovation Service content innovation
All contents are continually developed and All contents are continually developed and authorized by itself, kept as comprehensive as authorized by itself, kept as comprehensive as possible, and designed for maximum clarity and possible, and designed for maximum clarity and attractiveness attractiveness
Japan and Korea Telecom Japan and Korea Telecom BusinessBusiness - Japan Telecom Industry and Key Player- Japan Telecom Industry and Key Player
Communications Laboratory, HUT ,Finland
2005-06-02
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5.5. Appropriate pricing systemAppropriate pricing system
NTT DoCoMo tailors its services with suitable cost NTT DoCoMo tailors its services with suitable cost then offers high quality services at optimum price then offers high quality services at optimum price
These usage charges are based on the volume of These usage charges are based on the volume of data sent/received rather than on time spent data sent/received rather than on time spent connected connected
DoCoMo is charged by each content provider based DoCoMo is charged by each content provider based on users’ utilization but all the billing issues are on users’ utilization but all the billing issues are under DoCoMo’s control under DoCoMo’s control
Japan and Korea Telecom Japan and Korea Telecom BusinessBusiness - Japan Telecom Industry and Key Player- Japan Telecom Industry and Key Player
Communications Laboratory, HUT ,Finland
2005-06-02
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Japan and Korea Telecom Japan and Korea Telecom BusinessBusiness - Korea Telecom Industry and Key Player- Korea Telecom Industry and Key Player
Industry situationIndustry situation
• The exploiter and leader in terms of telecom The exploiter and leader in terms of telecom business business • Concentrates on CDMA2000 but also supports Concentrates on CDMA2000 but also supports W-CDMA W-CDMA • Leading player - SKTLeading player - SKTCore business and core competence of SKTCore business and core competence of SKT
• SKT main services: Ting/ TTL/ June/ NATE etc. SKT main services: Ting/ TTL/ June/ NATE etc. • Core Competence Core Competence
- - brand brand equity equity - - technology technology pioneer pioneer - - cooperationcooperation Communications Laboratory,
HUT ,Finland 2005-06-02
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trade-off ?
Stranded with 3G strategiesStranded with 3G strategies
Low credibility Limited access to capital No compelling reason to
buy
Mass marketmultimedia
Mass marketmultimedia
Capacityrelief
Capacityrelief
Better business case Coverage requirements No cheap, simple 3G
phones
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• Regulation is always is Regulation is always is leading factor – Show leading factor – Show the direction the direction
• VValue Chain Management – Maximum the opportunity of every player getting money
• Cooperation
• Competition
• R&D
• Economics
IndustryIndustry
EnvironmentEnvironment
RegulationRegulation
Technology Technology innovationinnovation
Eco
nom
ic
Eco
nom
ic
Com
petition
Coo
pera
tion
Coo
pera
tion
Valu
e Chain
Valu
e Chain
Telecom BusinessTelecom Business DevelopmentDevelopment
Telecom Business DevelopmentTelecom Business Development
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Chinese Telecom Industry Chinese Telecom Industry - - Market AttractivenessMarket Attractiveness
Massive population Continuous
deregulatory reforms of industry
Booming economics Coverage
requirements Daily technical
innovation
World Most Attractive Market
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China’s TD-SCDMA Standard Opportunities & Challenge
Chinese Telecom Industry Chinese Telecom Industry - - TD-SCDMA, China 3G standardTD-SCDMA, China 3G standard
TD-SCDMA was proposed by the China Wireless Technology Standard (CWTS) Group in 1998, approved by ITU in May 2000, and joined 3GPP in March 2001, as one of the three 3G transmission standards
• Opportunities1. Own property right
2. Support from big players
3. Technical advantages
• Challenge1. Short history, less experience
2. Poor quality of handsets by operators and manufacturers, loose cooperation
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Chinese Telecom Industry Chinese Telecom Industry - difference from Japan & Korea - difference from Japan & Korea
1. Different protocols
3.3. Telecom industry development history Telecom industry development history
4.4. Regulatory policyRegulatory policy
5.5. Economic and demographic situation Economic and demographic situation
6.6. Industrial operation modelIndustrial operation model
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Key players on the value chainKey players on the value chain
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Competition in the handset market– Putting extreme pressure on margins
Building a business case for 3G– Coverage matched with low-end handsets?– Thin rollout in urban areas for high-value
markets? Multiple networks
– Managing platforms, applications, interoperability across W-CDMA, EV-DO, TD-SCDMA networks
Developing a low-end, voice only 3G handset– It represents a market opportunity
Chinese Telecom Industry Chinese Telecom Industry - - Challenges in ChinaChallenges in China
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Steady growth in handset Steady growth in handset shipmentsshipments
At last some serious drivers
– Colour is good
– MMS services launched
– Multimedia portals
Replacement rate has risen
– More attractive product at high end …
– … and at the low end
By 2004 China/India has 18% of global handset shipments
0
20,000
40,000
60,000
80,000
100,000
120,000
2002 2003 2004 2005 2006 2007
'Feature' phones
Voice-centricphones
2004
17%
22%
18%
21%
8%
7%7% North America
Western Europe
China/India
Asia-Pacif ic
Easter Europe
Latin America
Middle East & Africa
Source: ovum
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Mobile gaming Mobile financial
services Mobile commerce Mobile learning Traffic
management Mobile health care
services
Chinese Telecom Industry Chinese Telecom Industry
- - Marketing Projection of China's 3G ServicesMarketing Projection of China's 3G Services
01,000
2,0003,0004,000
5,0006,0007,000
8,0009,000
2002 2003 2004 2005 2006 2007
Rev
enu
es (
$US
mill
ion
s)
Basic text Next-generation text
Multimedia messaging Information
Entertainment M-Commerce
Source: ovum
Communications Laboratory, HUT ,Finland
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CONCLUSIONSCONCLUSIONS
Regulatory policies development neededLeading role on the value chainFair competition is a prerequestTechnology innovationClose cooperation with handsets manufacturersOperators increasingly want customised devices– Proven success in Japan and Korea– Point of differentiation in a mature market– Allows for a better market segmentation strategy
– provides more device cost controlService portfolio development
Communications Laboratory, HUT ,Finland
2005-06-02
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Questions and Questions and Comments ?Comments ?
Communications Laboratory, HUT ,Finland
2005-06-02
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Thanks for your attention and being here !Thanks for your attention and being here !
Welcome to China !Welcome to China !
Communications Laboratory, HUT ,Finland
2005-06-02