Eco Final Presented
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Transcript of Eco Final Presented
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Forecasting MarketDemand for
Mobile Services
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Introduction Factors affecting demand
Demand forecasting
Factors affecting supply
Market share
Pricing policy
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5th largest network in the world
2nd largest among emerging economies
Total Telephone subscriber base reaches 494.07
Million
Wireless subscription reaches 456.74 Million
15.08 Million new additions in wireless
Overall Tele-density reaches 42.27 Broadband connections reaches 6.8 Million
Telecom Subscription Data as on 31st August 2009
Indian telecom - Unleashed
Source: TRAI
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Potential of the Sector
BoomingKnowledge
Sector-majorglobal hub for IT
enabled services.
BurgeoningMiddle Class-100 MN addedbetween 1995-
2002
Rising IncomeLevels - 4th
largest economyafter USA, China& Japan (in terms
of PPP)
GrowingUrbanization -as infrastructuredevelops rural
India will becomeincreasinglydeveloped
YoungerPopulation-
51% populationbelow age of 35
High GDPGrowth - 6%p.a. in next 5-
10 years.
GROWTH
Factors affecting demandSource: COAI
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Potential of the Sector
Factors affecting demand
The young ones : The adopters of wireless
54% of the population, i.e. 555 million below 25 years age 45% of the population even below 19 years age
The Working Age Group : The Users of WirelessIndias working age population is steadily burgeoning
2001 59% of total 2006 62% of total 2011 63.4% of totalpeak representing 747million.more than entire population of Europe that year!!
The Professionals : The Heavy UsersIncreasing number of Professionals who are less price sensitiveand require hi-quality information as well as commerce &business services and applications
Source: COAI
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The Rising savings rate - expected to grow from 23% to about
30%, - will result in increased consumer spending
The Improving levels of affluence between 1995 and
2002, nearly 100 million people became part of the consuming and
rich class
Liberalization children driving consumer behaviour :
Consumption vs. saving, accessing credit vs. living within means,different rankings of necessities and luxuries
462 million people in the consuming and affluent classes by 2006-
07, with another 472 million as climbers
70.5% of population will be middle income in 2006-07 ascompared to 56.7% in 99-00
High income group will rise to 11.7% from 6.9%
Even at a 6% CAGR based on PPP, market size will rise from USD
1500 billion today to USD 2700 billion by 2010 and to USD 3400
by 2015 Factors affecting demandSource: COAI
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Feature Bundles: Customers view products as bundles of featuresor attributes, which together form the basis of their preferences for theproduct
Market Segments: Customers may differ in their needs, theirattitudes and their behaviours, in where, when and how they wish topurchase and use the product, and in their extent of available income andtheir responses to price levels and changes
Liberalizationof Long Distance Segment : Opening up and
simplification oflong distance licenses.
Permissionto Access Providers to offer internet telephony,broadband, etc.
Increasein FDI limit to 74% - Immediate benefits with theentry of reputed global giants like Vodafone and Maxis into the country.
Reductionof ADC & shift to Revenue Share Regime
Introductionof one tarifffor all National Long distance calls(India One)
Factors affecting demand
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Demand Forecasting
Determine potential demand for mobile services
The main objective of market sizing is to determinepotential demand
Ideally a large scale quantitative survey amongst arepresentative sample of the population provides the main
input into a forecast
In a questionnaire based survey demand is likely to beunderestimated - develop a questionnaire structure thatcompensates for this
Primary market research will underpin any assumptionsmade using economic analysis or benchmarks
Use a mixture of primary market research, economicanalysis, benchmarks and vision
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Demand Forecasting
Potential demand is a sub-set of the addressable
market.
Example of a developing country:
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Demand Forecasting
Propensity to adopt mobile by age - example from
Western European country: Age is an importantdiscriminator.
Source: www.coleago.com
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Demand Forecasting
Correlation between propensity to adopt mobile &
income - example high income country: Income doesnot matter.
Source: www.coleago.com
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Demand Forecasting
Correlation between propensity to adopt mobile &
income - example lower income country: Incomematters.
Source: www.coleago.com
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5 PsEach of these factors suggests a number of questionswhich companys marketers need to answer:
Product - What is the product or service and what are itsspecific features? Which features will comprise the coreproduct, and which supplementary or value-added products?
Price- What price structures and levels will be adopted? What
discounts, if any, will be provided, when and to whom?
Promotion- How will the new service be advertised andpromoted?
Place - Where and how will the service be sold?
Permission - Most telecommunications services in mostcountries are regulated, to a greater or lesser extent, bytelecommunications-specific laws and agencies.
Demand
Forecasting
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Linear Trend Analysis
It is represented as Y=a+bx
Where
Y = DemandX = Time Period
a & b are constants
For calculation of Y for any value of X requires the values of a & b
These are given by:
Y=na +b X
XY=a X + bX
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Linear Trend Analysis
Month X Y X XY
April 1 76271996.00 1 76271996
May 2 77624242.00 4 155248484
June 3 102367881.00 9 307103643
July 4 105177635.00 16 420710540
August 5 107996533.00 25 539982665
September 6 110511416.00 36 663068496
Total 21 579949703.00 91 2162385824
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Linear Trend Analysis
Substituting the values in the equation
Y=na +b X -------- (i)
XY=a X + bX ---- (ii)
579949703.00= 6a + 21b ----- (iii)
2162385824.00 = 21a+91b ----- (iv)
(iii) X 7 & (iv) X 2
4059647921= 42a + 147b --------- (v)4324771648 = 42a + 182b ----------(vi)
Solving (v) & (vi)
a=70145911.13
b= 7574963.63
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Substituting value of a and b in the main equation
Y=a+bx
Trend Equation:
x = 9 (End of 3rd quarter)
Y December = 70145911.13 + 7574963.63(9)
Y December = 138320583.8
Linear Trend Analysis
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Supply - Factors
Government Regulations
In the case of new telecommunications services, operating permits are
usually necessary before service can be provided, and regulatory agencies
often need to be persuaded that a sufficiently large potential market exists
before they will award the necessary licences for new services.
Resource Prices-
Different Licence Fees
Land
Labour
SIM Cards, Recharges, Marketing Materials
Technology-
Availability of Next generation technology
Availability of owned or shared communication towers
Flexibility and scalability of operators back office systems
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Supply - Factors
Other Prices-Competitors pricing
Land lines and other substitutes
Expectations-
Next generation servicesFuture price expectations due to govt. regulations
Festive Seasons
Special Events
Goals of the Service provider-To maintain steady average profit per user
To increase the subscriber base by offering competitive tariff
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Market Structure
0
100
200
300
400
500
9 10 11 12 13 14 15 16
China COAI Projections Actual
Year 9 10 11 12 13 14 15 16
India 2003 2004 2005 2006 2007 2008 2009 2010
Sub (Mn) 28 48 76 125 200 290 377 471
China 1996 1997 1998 1999 2000 2001 2002 2003
Subs (Mn) 6.8 13.2 24 43 85 145 207 279
YearEnded December
Milli
on
Future Subscriber Growth Source: COAI
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Market Structure
Source: TRAI
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Market StructureAll India GSM Cellular Subscriber base ason Sep 09
Industry added record highest number of 70 Million GSM subscribers duringlast 10 months.India recorded the highest monthly mobile subscriber addition of over 8.5 Million.
Source: TRAI
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Market Structure
Oligopoly
kinkCompetition among few
Few sellers in the market
Interdependence among rival firms
Possibility of Collusion
Price rigidity
Barriers to entry
High Advertising and Selling Costs
Equilibrium Price and Quantity is indeterminateKinky Demand Curve
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Market Structure
Sr. No Operators Aug 2009 Sep 2009 Monthly
Addition
% Growth
overprevious
month
1 Bharti Airtel 107996533 110511416 2514883 2.33 %
2 Vodafone Essar 80874460 82846046 1971586 2.44 %
3 BSNL 52056417 53358992 1302575 2.5 %
4 IDEA 50058471 51454402 1395931 2.79 %
5 Aircel 24415514 25728633 1313119 5.38 %
6 Reliance Telecom 13723380 13723380 0 0.00 %
7 MTNL 7352781 4369502 16721 0.38 %
8 Loop Mobile 2417446 2495087 77641 3.21 %
Degree of competition
GSM Subscribers as on Sep 09Source: COAI
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Pricing Strategy
Influences on pricing strategy options:
Customer willingness to pay
Segment-based pricing
Price elasticity of demand
Competitive posture
Cost levels
Competitor pricing
Regulatory environment
International environment
Network or service-based pricing
Shareholder expectations
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Pricing Strategy
Telecommunication Tariff Orders
Maximum permissible per unit charges for calls irrespective of tariff planswould be
Rs. 1.40 for outgoing Local callsRs. 2.40 for outgoing Local callsRs. 1.75 for incoming calls (In roaming)
At any given point of time not more than 25 tariff plans shall be on offer by an
Access service provider. This includes both post paid and pre paid tariff plans. One
or more of the following features, shall be counted as tariff plan:
i.Title
ii.Rental/Fixed Fee
iii.Billing Cycle/Validityiv.Free Call Allowance/Talk time
v.Local Call
vi.STD
vii.ISD
viii.SMS
ix.National roaming
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Pricing Strategy
Key Performance Indicators
Airtel Average Revenue Per User as on Sep 09Source: TRAI
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Pricing Strategy
Key Performance Indicators
Airtel Average Minutes of Usage Per User as on Sep 09Source: TRAI
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Pricing Strategy
Key Performance Indicators
Airtel Gross Service Revenue Break up as on Sep 09Source: TRAI
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Pricing Strategy
Key Performance Indicators
Airtel VAS Service Breakup as on Sep 09Source: TRAI
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Pricing Strategy
Key Performance Indicators
Airtel Customers Percentage as on Sep 09Source: TRAI
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Pricing Strategy
Market Segmentation
1. Airtel Value Plan(Airtel/MH/GSM/11)2. Airtel Retail Plan(Airtel/MH/GSM/7)3. Airtel ALEX 350 PLAN(Airtel/MH/GSM/6)4. Airtel Retail 5 F & F 249 Plan(Airtel/MH/GSM/4)5. Airtel Value 899 Plan-Adv Rental (Airtel/TN incl Chn/GSM/10)6. Special 5-249 (Airtel/MH/GSM/15 )7. Airtel Family CUG plan (Airtel/MPCG/GSM/023)8. Airtel Freedom 349 Plan (Airtel/MPCG/GSM/024)9. Airtel Freedom 549 plan (Airtel/MPCG/GSM/025)
10.Group Talk-249 (Airtel/MH/GSM/13)
1. Airtel 449 Talkathon2. Airtel Starter 1493. Airtel 299 Power Plan4. Airtel Talk 249 Plan5. Airtel 499 Super Value Plan6. 399 Voice Data Combo Plan-Airtel/KT/GSM/14
7. Airtel 349 Talkathon-Airtel/KT/GSM/048. Airtel Family CUG plan (Airtel/KT/GSM/08)9. New AES 248 Plan -Airtel/KT/GSM/1210.Airtel Freedom 349 Plan (Airtel/KT/GSM/09)11.349 Landline CUG Plan-Airtel/KT/GSM/1312.AirTel Talk 199-Airtel/KT/GSM/0513.Airtel Value 899 Plan-Adv Rental (Airtel/KT/GSM/15)14.Airtel Freedom 549 plan (Airtel/KT/GSM/10)15.Airtel 199 Talkathon_Airtel/KT/GSM/06
Post paid plans Maharashtra
Post paid plansKarnataka
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Pricing War
Bharti Airtel joins mobile tariff war with per second
billingThis move comes after Tata Teleservices reported highest number of
monthly net addition of mobile users for two consecutive months. Tata
Tele was the first operator to launch seconds-based billing in the country
due to which it has added close to seven million new mobile users in two
months.
Bharti Airtel has launched the Freedom Plan, wherein customers
will be charged one paise per second for all local and STD calls to Airtel
numbers and 1.20 paise per second for local and STD calls to other
network.
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Bibliography
http://www.airtel.inhttp://www.trai.gov.in/
http://www.coai.com/
http://www.coleago.com
http://www.thehindubusinessline.comhttp://www.yourbillbuddy.com
Forecasting Market Demand for New Telecommunications Services: An
Introduction
byPeter McBurney and Simon Parsons
Department of Computer Science
University of Liverpool
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Thank You
Nameeta S Mulgund
Sandford J PereiraKashif T Khan
Vidya Durai
Anil Shetty