Comparison of Mobile Communications Service Industry: Finland vs
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Comparison of Mobile Communications Service Industry: Finland vs. China Ying Suorsa Thesis Seminar on Networking Technology Networking Laboratory, Helsinki University of Technology May 10 th , 2005 Supervisor: prof. Heikki Hämmäinen, TKK Instructor: prof. Heikki Hämmäinen, TKK
Transcript of Comparison of Mobile Communications Service Industry: Finland vs
Comparison of Mobile Communications Service Industry: Finland vs. China
Ying SuorsaThesis Seminar on Networking TechnologyNetworking Laboratory, Helsinki University of Technology
May 10th, 2005Supervisor: prof. Heikki Hämmäinen, TKKInstructor: prof. Heikki Hämmäinen, TKK
Agenda
➢ Background➢ Research Problem➢ Methodology➢ Mobile Service Market ➢ Five Forces Analysis➢ Value Network Analysis➢ Conclusions➢ Future Research
Research Problem How is the Finnish mobile communications service
industry differnet from the Chinese mobile communications service industry?
● What are the characteristics of the mobile service market?
● What is the current competitive situation of the mobile service market?
• How is the mobile value network changed?• What are the reshaping forces and the revenue
sharing model of the new mobile value network?
Methodology
Data Collection➢ extensive literature reviews and a series of
qualitative interviews
Research Approach➢ The deductive approach was seclected.➢ Two theoretical models: Porter's Five Forces,
Value Network
Porter's Five Forces Model Threat of new entrants Bargaining power Bargaining power of suppliers of buyers Threat of substitutes
Suppliers Industry competitors Rivary among the existing players
Buyers
Substitutes
Entrants
A value network example
Actor 1
Actor 5 Actor 3
Actor 2
Actor 4
Actor 6
Mobile Service Market in Finland (1/5)
Mobile subscriber numbers and penetration in Finland
0102030405060708090
100
1985 1990 1995 2000
Pene
tratio
n [%
]
00.511.522.533.544.55
Milli
ons
Subs
crib
ers
Mobile Service Market in Finland (2/5)
MINISTRY OF TANSPORT AND COMMUNICATIONS
FINNISH COMMUNICATIONS REGULATORY AUTHORITY
OPERATORS
Technical regulation, etc.
Policies and development
Licensing for mobile networks
Registration of operators
Telecom regulation
COUNCIL OF STATE
FINNISH COMPETITION AUTHORITY
Competition supervision
Regulatory Restructuring
Mobile Service Market in Finland (3/5)
Price Regulation➢ Tariff structure➢ Tariff setting principles➢ Regulation of individual tariffs
Billing Models➢ Postpaid & Calling Party Pays (CPP)
Unbundling of mobile phones and subscriptionsMobile Number Portability (MNP)
3G Licensing➢ Beauty contest
Mobile Service Market in Finland (4/5)
The Finnish mobile service market share, in March 2004 (Kiiski & Hämmäinen, 2004)
Sonera Mobile Networks Elisa Mobile Networks
Saunalahti
ACN
Finnetcom
Terraflex
Globetel
Tele2
Cubio
Finnet Verkot
Fujitsu
PGOne
Wireless Maingate
Teliasonera
Elisa
DNA
The landscape of Finnish mobile operators
DNA 15%
Elisa28%
TeliaSonera49%
Others 8%
Mobile Service Market in Finland (5/5)
40
50
60
70
80
90
100
110
1994 1996 1998 2000 2002 2004
Price index
The price changes of mobile calls during 1995 – 2003 in Finland. The price changes have been calculated using the price index (1995=100).
The affordability of the mobile services in Finland.
Average income in Finland (2002) 2223euro/month (source: statistics Finland) Mobile charge 3.99euro monthly charge + 0.13euro/min
(source: TeliaSonera One’s voice charge, see Appendix 1)
Total time = Average income/mobile charge
(2223-3.99)/0.13 = 17069 minutes = 284hours
Mobile Service Market in China (1/6)
Mobile subscriber numbers and penetration in China
0
5
10
15
20
25
30
1999 2000 2001 2002 2003 2004
Pen
etra
tion
[%]
0
50
100
150
200
250
300
350
Mill
ions
Sub
scrib
ers
0
10
20
30
40
50
East Central West
Pe
netr
atio
n [%
]
Distribution of the mobile penetration
Mobile Service Market in China (2/6)
COUNCIL OF STATE
CITY TELECOMMUNICATIONS ADMINISTRATIONS
STATE DEVELOPMENT AND REFORM COMMISSION
MINISTRY OF INFORMATION INDUSTRY
OPERATORS
PREFECTURAL TELECOMMUNICATIONS ADMINISTRATIONS
Hierarchical telecommunications regulatory framework in China
Mobile Service Market in China (3/6)Price Regulation
Billing Models➢ Prepaid & Calling Party Pays (RPP)
Bundling of CDMA mobile phones and subscriptions
Mobile Number Portability (MNP)
3G Licensing➢ WCDMA, CDMA 2000, TD-SCDMA
Table 4: Mobile Voice Charges in China by the MII (RMB Yuan) China Mobile China Unicom Monthly Charge 50 (= 4.6€) 45 (= 4.14€) Communications 0.40/min (= 0.0368€/min) 0.36/min (=0.0331€/min)
Mobile Service Market in China (4/6)
China Mobile70%
China Unicom30%
The market Share of China Mobile and China Unicom in 2003
Mobile Service Market in China (5/6)
Average income in China (2002) 134euro/month (source: The People’s Bank of China)
Mobile charge 4.6euro monthly charge + 0.0368euro/min (Source: China Mobile’s voice charge, see Appendix 3)
Total time = Average income/mobile charge
(134-4.6)/0.0368 = 3516 minutes = 58.6 hours
The affordability of mobile services in China.
Mobile Service Market in China (6/6)
0
5
10
15
20
25
30
35
40
45
1998 2000 2002 2004 2006
ARPU
[€]
TeliaSonera China Mobile
0
50
100
150
200
250
300
350
1999 2000 2001 2002 2003 2004 2005
MO
U [m
inut
es]
TeliaSonera China Mobile
ARPU & MOU in China Mobile vs. in TeliaSonera Finland
Five Forces Analysis (1/5)
Rivalry among the existing players
Finland➢Highly competitive➢Characteristics of a mature market➢Switching cost – MNP➢Government role
● Light-handed regulatory approach
High intensity
China➢ Strongest economy
grwoth in the world➢ Only two mobile
operators – CM and CU
➢ Different strategies ➢ Substitutability – Little
Smart service
Medium intensity
Five Forces Analysis (2/5)Threat of new entrantsFinland
MVNOs
Economies of scale
Regulatory support
High threat
ChinaEntry barriers from the government
Huge investment
The expected retaliation from CM and CU
Who is the new entrant?!
The threat of new domestic entrants is high, but the threat of new foreign entrants is low
Five Forces Analysis (3/5)Bargaining power of buyersFinland
Few buyers
Little or no switching cost for the buyers
Free choice
Market information
Value added servic
High bargaining power
ChinaMarket segment
High-end, middle-end, and low-end
Large volumes of buyers
The degree of undifferentiated mobile service
High switching cost
Intervention of the regulator
Medium bargaining power
Five Forces Analysis (4/5)Bargaining power of supplierFinland
More concentrated
No direct threat to cellular technologies
Close tie to mobile operators
Reduction in the size
3G launch
Medium bargaining power
ChinaHigh fragmented suppliers selling to extremely concentrated buyers
Low bargaining power
Five Forces Analysis (5/5)Threat of substitutesFinland
No direct threat
WLAN with fully developed VoIP
View WLAN as complementary to mobile technology
Low threat
ChinaLittle Smart – PAS
Pros
CheapCPP billing model
Cons
Lower mobilityPoor quality of service
Medium threat
Five forces Finland China Rivalry among the existing players High Medium Threat of new entrants High The threat of new
domestic entrants is high, but the threat of new foreign entrants is low.
Bargaining power of buyers High Medium
Bargaining power of suppliers Medium Low Threat of substitutes Low Medium
Value Network Analysis (1/5)
End user
Network infrastructure provider
Mobile device retailer
Mobile (network) operator
Software and Component provider
Mobile device manufacturer
The traditional mobile value network(1) All actors are shown as equally large, and (2) the distances between two actors are arbitrary.
Value Network Analysis (2/5)
Three main forces reshape the value network.➢ The changes in the roles of value network members,
which cause power shift within the traditional value network.
➢ The customer preference for personal customization.➢ The effect of convergence between different actors.
Value Network Analysis (3/5)
Content provider
Content aggregator /Mobile portal provider
Mobile vertual network operator (MVNO)
End user
Network infrastructure provider
Mobile network operator (MNO)
Mobile device manufacturer
Mobile device retailer
The current mobile value network of the core actors in Finland
Value Network Analysis (4/5)
End user Content provider
Mobile device retailer
Mobile device manufacturer
Network infrastructure producer
Content aggregator/ Mobile portal provider
Mobile operator
bundling Without bundling
The current mobile value network of the core actors in China
Value Network Analysis (5/5)
Soneral Zed
Content Content MVNO MNO Customer Provider Aggregator
Content
Mobile Portal
Non-voice Voice
Network
Mobile Device
Value
Sonera Zed revenue sharing model, modified from Helin, 2002
China Mobile China Mobile’s China Mobile’s Monternet subscription network
Content Content Service Network Customer Provider Aggregator Operator Operator
Content
Mobile Portal
Non-voice Voice
Network
Mobile Device
Value
China Mobile Monternet revenue sharing model
Conclusion
• The analyses find that a higher degree of competitiveness is displayed in the Finnish mobile communications service industry
• The change in the roles of the value network members is believed to be the most important force reshaping the current mobile value networks in both countries.
Future Research
An in-depth analysis of the 3G market dynamics inthese two countries in the near future should bedone as a further study.
