321WELCOME

DYNAMICS SHAPING THE MOBILE TELECOM

INDUSTRY(A comparative case study on Bangladesh and the Netherlands)

byAmit Biswas (Bangladesh)

Maastricht School of ManagementMBA28

PRESENTATION OUTLINE

WHY ?

HOW ?

WHAT ?

MOTIVATIONPROBLEM DEFINITIONLITERATURE REVIEW

RESEARCH QUESTIONS

SIGNIFICANCECONCEPTUAL FRAMEWORKRESEARCH

METHODOLOGYMETHODS OF DATA

COLLECTION & ANALYSIS

RELIABILITY OF DATA

FINDINGS & DISCUSSION

1

PRESENTATION OUTLINE

WHY ?

HOW ?

WHAT ?CONCLUSION, RECOMMENDATIONS

AND FUTURE RESEARCH

2

WHY THIS RESEARCH ?

Motivation

Trends & Challenges

New International expansion

Work experience

Slowed revenue growth

Understand market dynamics

3

Literature Review – Mobile Telecom Sector

BANGLADESHSix mobile operators with 93.788 mn active

subscribers

On average 8% growth in new customers every month

Slowed revenue growth in mobile telecom industry

High SIM tax & Ambiguity in regulative authority

Shift towards value-added-service (e.g. 3G, data services)

Source: AT Capital Research, 2010; BTRC, 2012; Cellular-news, 2012

4

Literature Review – Mobile Telecom Sector

NETHERLANDSThree mobile operators with 20.1 mn active

subscribers

Slowed new customer acquisition in mobile telecom industry

Slowed revenue growth in mobile telecom industry

Liberal rules and regulations in mobile telecom sector

Strategic partnership with VOIP service providers

Source: OECD, 1999; Totel Pty Ltd, 2012; Wireless Intelligence, 2012, Morris, 2012

5

Literature Review - Proposed strategies

Source: AT Capital Research, 2010; The Economist Intelligence Unit, 2010; The Economist Newspaper, 2006 6

Innovative marketing andproduct & service offering

Removal of SIM Tax

Consolidation

Adaption of new techniques

Focus on M-Commerce &Data related services

Fair, Transparent renewal

policies

Innovative product & service

Smart piping

Consolidation

Efficient piping

Partnering with VOIP

New revenue generatingopportunities

For Bangladesh For Netherlands

Literature Review – Similar Study

PORTER FIVE FORCES MODEL FOR MOBILE VIRTUAL NETOWRK OPERATORS IN INDONESIA

by Sirat et al.Telecommunication Regulation Research Center, Indonesia

Competition

Profit LOW

7

HIGH

Problem Definition

May

-07

Aug-0

7

Nov-0

7

Feb-

08

May

-08

Aug-0

8

Nov-0

8

Feb-

09

May

-09

Aug-0

9

Nov-0

9

Feb-

10

May

-10

Aug-1

0

Nov-1

0

Feb-

11

May

-11

Aug-1

1

Nov-1

1

Feb-

12

May

-12

0102030405060708090

100

Subscriber growth Trend - Bangladesh Mobile telecom sector (in mn)

Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012€ 0.00

€ 0.50

€ 1.00

€ 1.50

€ 2.00

€ 2.50

€ 2.00€ 1.86 € 1.87 € 1.77 € 1.69 € 1.65

Decline slowed ARPU – Bangladesh (in Euro)

Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 201218.8

19.0

19.2

19.4

19.6

19.8

20.0

20.2

19.319.4

19.8

20.019.9

19.9

New Subscriber Growth Trend – Netherlands (in mn)

Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 201220

22

24

26

28

30

3229.66

28.14 28.72 28.1527.85

24.07

Declining ARPU – The Netherlands (in Euro)

Source: Wireless Intelligence, 2012

Forces behind slowed revenue growth in the mobile telecom Industry in the respective countries“

”8

Major Research Questions

Explain & Compare the dynamics shaping

mobile telecom industry in both Bangladesh

and the Netherlands.

9

Minor Research QuestionsWhat are the forces that influence this industry in the respective countries?

Why both the country’s mobile telecom sectors is experiencing slowed revenue growth?

What are the challenges faced by the mobile operators in the respective countries?

Are the existing regulations favourable towards growth?

What are the changing trends in the mobile telecom sector in respective countries?

What are the complementary industries in the mobile telecom sector in respective countries?

How the prevailing challenges faced by mobile operators in the respective countries can be resolved?

10

Significance of the Research

Understand forces influencing respective countries

Tackle prevailing challenges

Formulate future strategies

Formulate reciprocal strategies for expansion in international territories

Stepping stone for future studies

11

HOW WAS THE RESEARCHCONDUCTED ?

Conceptual framework

Bargaining power of Supplier

Bargaining power of Buyers

Threat of Substitutes

Complementors

Threat of New Entrants

Adapted model of Porter: Porter’s Six Forces Model12

Why Porter’s Six Forces Model ?

COMPLEMENTORS

DVD DVD PLAYER

Sales

Sales

Source: Prof. Adam Brandenburger and Barry Nalebuff

Shows most common sources of local environmental threats

Defines and characterizes the degree of threat and determines the competitive

environment

Forecasts the average level of performance of the firms

For evaluating industries which relies on technology

Source: Hesterly, 201213

Research Methods

QualitativeQuantitativ

eMixed

approachArticles

Recent publications by

telecom research agencies

Reports by mobile

operators

Reports by government regulatory authorities

E-interview

Data from Wireless

Intelligence

Annual and Quarterly reports of

mobile operators

Both Deductive

&InductiveResearch methods

14

Reliability & Validity of the data

QualitativeQuantitativ

eMixed

approach

Data will be collected from

credible sources governing

mobile telecom industry

Structured e-interview of experts from

mobile telecom industry will be

collected.

Wireless Intelligence is the definitive

source of mobile operator data, analysis and

forecasts, delivering the most accurate and complete set of industry

metrics available.

15 I Pages

WHAT WERE THE FINDINGS ?

Demographic Comparison

Info Bangladesh NetherlandsCompariso

nArea 143,998 sq km 41,543 sq km 3.5

Population 161,083,804 16,730,632 9.6

Info Bangladesh Netherlands

Age Structure

0-14 years: 34.3% 0-14 years: 17%15-64 years: 61.1% 15-64 years: 67.4%

65 years and over: 4.7% 65 years and over: 15.6%Median Age 23.3 years 41.1 yearsPopulation growth rate

1.579% (2011 est.) 0.452% (2011 est.)

Literacy 56.80% 99%Unemployme

nt rate 9.30% 7%

Source: www.cia.gov

80

38

20

80

55

14

60 53

4044

Source: www.geert-hofstede.com

16

Threat of New Entrants

THREAT OF NEW ENTRANTS

Bangladesh The Netherlands

LEVEL:High

LowLEVEL:

High

Low

High SIM TaxHigh Licence renewal fees

Limited spectrum availability

Rules and regulations are favourable towards new

entrantsSpectrum auction

17

Bargaining power of the buyers

BARGAINING POWER OF BUYERS

Bangladesh The Netherlands

LEVEL:High

LowLEVEL:

High

Low

Similar products and services

Lower switching costMultiple SIM syndrome

Similar products and services

Affordable switching cost

18

Rivalry among the competitors

RIVALRY AMONG EXISTING COMPETITORS

19

Between Bangladesh and the Netherlands

Source: BTRC, 2012Source: Wireless Intelligence, 2012

Herfindahl-Hirschman

Index

Q1 2011

Q2 2011

Q3 2011

Q4 2011

Q1 2012

Q2 2012

Bangladesh2,936.0

02,948.00 2,928.00 2,885.00 2,869.00

2,856.00

The Netherlands

3,737.00

3,729.00 3,707.00 3,703.00 3,703.003,690.0

0

Effective Call Rate (in Euro)

Q1 2011

Q2 2011

Q3 2011

Q4 2011

Q1 2012

Grameenphone 0.01 0.01 0.01 0.01 0.01

Banglalink 0.01 0.01 0.01 0.01 0.01

Robi 0.01 0.01 0.01 0.01 0.01

Effective Call Rate (in Euro)

Q1 2011

Q2 2011

Q3 2011

Q4 2011

Q1 2012

KPN 0.20 0.20 0.19 0.19 0.18

T-Mobile 0.18 0.18 0.18 0.18 0.18

Vodafone 0.18 0.17 0.16 0.16 0.16

Source: Wireless Intelligence, 2012

Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 20121.5

1.551.6

1.651.7

1.751.8

1.851.9 1.86 1.87

1.77 1.69000000000

0011.65

ARPU Growth-Bangladesh

Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 201220

22

24

26

28

3028.14 28.72 28.15 27.85

24.07

ARPU Growth - Netherlands

LEVELHigh

Low

Source: Wireless Intelligence, 2012

Threat of substitutes

20

Free Calls and

Messaging

LEVELHigh

Low

Operators KPN T-Mobile VodafonePrepaid

SIM€ 10.00 € 7.95 € 7.50

Preloaded Amount

€ 10 Talktime, 200 MB

internet usage

70 units of SMS/MMS/Mins/

MB€ 10 Talktime,

Call Rate (BDT)

€ 0.30/mins to Mobile

€ 0.30/mins to fixed line

€ 0.30/mins to Mobile

€ 0.30/mins to Mobile

€ 0.30/mins to fixed line

OperatorsGrameenph

oneBanglalink Robi

Prepaid SIM BDT 149 BDT 149 BDT 138

Preloaded Amount

BDT 150 talk time, 150 SMS and 150MB internet

170 talk time, 500 free SMS

25 talk time, 500 free SMS, 20MB internet

Call Rate (BDT)

BDT 0.79/mins

BDT 0.89/mins

BDT 0.88/mins

Non-Conventional Substitutes

Bargaining power of suppliers

BARGAINING POWER OF SUPPLIERS

Between Bangladesh and the Netherlands

LEVELHigh

Low

“…… I really don’t think they are adversely affecting the operators’ performance….. doesn’t

have any significant impact on the market.”

- Raihan Islam, Former Head of Customer Acquisition,

Airtel Bangladesh Limited

“ The Ericsson, Nokia-Siemens, Alcatel-Lucent gave a profit warning. So, they are also under

severe pressure not only from their own industry, they also see the Chinese are coming

in. ..”- Mr. Anil Kutty, Innovation Management

Consultant

21

Influence of complementors

Bangladesh The Netherlands

LEVEL:Positive

NegativeLEVEL:

Positive

Negative

Content Provider & SmartphonesCall Centers

Mobile Banking

RFID Industry (SIM NFC)IT Industry (Cloud

Computing)Content Provider(Spotify,

Dizzler)

Influence of complementors

22

CONCLUSION

Forces Influencing mobile telecom industry (RQ-1)

23

Bangladesh The Netherlands

Government Policies

Power of the customers

High competition

Affordable substitute

Less challenge from new entrants

Positive influence of complementors

Government Policies

Power of the customers

High competition

Non-conventional substitutes

High threat from new entrants

Positive influence of complementors

Reasons behind slowed growth rate (RQ-2)Bangladesh The Netherlands

High SIM Tax

Multiple SIM Syndrome

Lack of set procedure for license renewal and fees

Undifferentiated P&S

Detrimental competition

Biased regulation

Lack of policies protecting existing mobile operators

Undifferentiated P&S

Intense competition

High level of threat from VOIP applications

24

Challenges faced by mobile operators (RQ-3)In Bangladesh In Netherlands

1. Rigid govt. regulations

2. Lowest effective call

rate3. Growing Churn rate

4. Declining ARPU

5. Intractability of the

customer

1. Biased regulation towards new entrants 2. High level of threat from VOIP

based applications

25

3. Declining effective call rate4. Growing Churn rate

5. Declining ARPU

Existing regulations and influence on growth (RQ-4)

In Bangladesh mobile telecom industry

“..Many a times it becomes an impediment to the growth of the Industry…”

- Raihan Islam, Former Head of Acquisition, Airtel

Bangladesh Limited

“..the current regulations are mostly unfavorable to mobile operators”

- Omar Rasman Nizam, -Manager – Segments & Regional Planning,

Robi

In The Netherlands mobile telecom industry“In general, European Commission and OPTA have

been quite strong…..on that perspective the regulation has been unfavorable”

- Anil Kutty, Innovation Management Consultant

“The regulation is really a disadvantage for the existing mobile operators because they favor the

new entrants”

- Karan Oberoi, Product Innovation Manager, T-Mobile

26

Emerging Trends (RQ-5)

Smart Phones

Increase Data usages

Outsourcing

Mobile banking

Network sharing

VOIP applications

Smart phones

Advanced mobile banking

Chinese suppliers

Tie-up with advanced contentProvidersIn-house app development

27

Complementors (RQ-6)Bangladesh The Netherlands

Mobile manufacturing industry

Digital Content Industry

Call Center Industry

M-Commerce Industry

RFID Industry

IT Industry

Music streaming serviceindustry

28

Comparison of dynamics shaping mobile telecom industry (Major RQ)

BangladeshThe

NetherlandsPorter’s Six Forces

THREAT OF NEW ENTRANTS

BARGAINING POWER OF BUYERS

BARGAINING POWER OF SUPPLIERS

THREAT OF SUBSTITUTES

RIVALRY AMONG EXISTING COMPETITORS

INFLUENCE OF COMPLEMENTORS

EXPECTED OF COMPETITIVENESS

EXPECTED LEVEL OF PROFIT

LOW

LOW LOW

HIGH

HIGH HIGH

HIGH HIGH

HIGH HIGH

POSITIVE POSITIVE

MIXED MIXED

AVERAGE AVERAGE

29

RECOMMENDATIONS

Recommendations (RQ-7)

Challenges Strategies

1. Rigid government regulation

Government should consider removing SIM Tax.Transparent and participatory renewal process with nominal feesGovernment should focus developing long term plans in order to encourage operators to invest more.

2. Lowest effective call rate Consolidation among the existing playersInnovative customer engagement & win-back campaignsNetwork infrastructure sharing among the rivalsAdaptation of future technologies (e.g. 3G, LTE, DTH etc)Zonal based pricing strategyDevelopment VAS eco-system with content providerTie-up with non-conventional competitors

3. Growing Churn rate

4. Declining ARPU

5. Intractability of customers

Government should take initiative upgrade existing national identification system

In Bangladesh mobile telecom industry

31

Recommendations (RQ-7)In The Netherlands mobile telecom industry

Challenges Strategies

1. Biased regulation towards new entrants

Government should try to protect the existing players to ensure ROI while encouraging new entrants to enter the market

2. High level of threat from VOIP based applications

Partnering with VOIP based internet telephony companies to offer innovative servicesDevelop in-house applications and platform using own IT & network capabilities Partnering with handset manufacturer to offer innovative & unique services

3. Declining effective call rate

Invest on new technologies such 4G, LTE in order to offer bouquet of services, instead of traditional voice, SMS based servicesTarget the right segment (high ARPU customers) in order to ensure sustainable profitabilityInnovative product and service offerings while ensuring optimal network usageNetwork infrastructure sharing among the rivalsConsolidation among the existing playersExplore new revenue streams utilizing existing IT capabilities.Converge with content providers

4. Increasing Churn rate

5. Declining ARPU

30

Theoretical recommendations

Industry specific model development

Include “Complementors” in Porter’s original model

Incorporate PESTEL model

Incorporate model for internal analysis (e.g. VRIO )

Redesign for analyzing dynamic market

32

Future Research

Further refinement by incorporating other models

Porter’s national diamond model for international expansion.

Research on complementary industries.

On benefits of partnering with non-conventional competitors

On formulation of most suitable regulations for Respective countries.

33

34

Summing up….

35

THANK YOU !!