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Telecom Pakistan Industry
Transcript of Telecom Pakistan Industry
Firm Strategy, Structure & Rivalry
Related and Supporting Industries
Porter's Five Forces
Conclusion F Flow of Presentation History 14,000 landlines at the time of independence. There are over 94million mobile phone connections
The telecom base was put primarily to serve the administrative purpose
The 1980s saw heavy capital investment to develop the telephone sector, which eventually resulted in the formation of Pakistan Telecommunication Corporation Limited (PTCL)
Introduction of cellular mobile services in the 1990s
Pakistan Telecommunication Authority (PTA) was established in January 1997 to regulate establishment
The Pakistan Mobile communications Ltd started its operations in 1994
Wireless Local Loop services were introduced in Pakistan after deregulation of local loop sector in 2004
According to estimates of ISPAK (Association of Pakistani ISPs), currently there are about 3.5 million internet subscribers all across in Pakistan whereas total users crossed 17million marks Significance “Despite economic downturn, the telecom sector of Pakistan displayed ample resilience and registered positive growth in all of its Key Performance Indicators (KPIs)”
Chairman PTA Foreign
Investment Mobile sector has generated about 743,025 employment opportunities which include direct, indirect and induced employment in linked sectors of the economy. 260,000 employment opportunities have been generated by other segments of telecom sector including WLL,LDI and card payphones And... TAXES There has been a decline in the contribution overall.
During last five years, over Rs.500 billion poured into the national kitty in lieu of taxes and duties.
PTA has collected over Rs.13.56 billion in the FY 2009-10 as initial license fee, USF and R&D contribution. Areas of Significance Employment Contribution
Exchequer Pakistan's telecom sector remained the largest recipient of the FDI during the last few years capturing more than one fourth of total FDI.
During the last 5 years, Pakistan attracted over US$ 19billion FDI, of which 34% was in telecom sector
In the current year, the telecom sector received over US$ 815 million FDI, which is 22% of the total FDI in Pakistan. Telecom sector has more than 93% share in total GST/FED collection from services sector.
During FY 2011 telecom companies contributed Rs.52.6 billion in the form of GST/FED, 20% more than Rs.44 billion contributed in FY 2010.
Pakistan has one of the highest tax burdens on mobile services in Asia Pacific Ranked amongst top 5 countries in terms of highest SMs traffic with 763 million sms during 2008-2009.
Telecommunication infrastructural investment can lead to economic growth in several ways: transaction costs of data collection, placing and receiving orders have greatly reduced due to the availability of advanced telecommunication infrastructure.
Direct contribution of Telecom Sector to GDP increased from almost negligible to more than 2% (2007).
Social and cultural benefits
Pakistan is on the verge of Telecom revolution Pakistan continues to be one of the fastest growing telecom markets in the world Is our industry Competitive?
What does Porter say... Factor Conditions
Estimated that almost 19000 cell sites have been installed by five mobile operators in different urban and rural areas of the Pakistan.
Network coverage along with value added services plays an important role for cellular operators to become market leaders.
According to Ministry of Information Technology Mobile cellular policy, Telco operators are bound to roll out at least 70% network coverage of tehsil headquarters in four years with minimum 10% tehsils in all provinces.
Problems occur due to erroneous RF planning, installation of cell sites & installations outsourcing. Cell sites are usually installed on the references basis hence, lack of proper consideration in RF planning and other aspects related to network quality Physical Resources
Large employment opportunity
Huge demand for trained and qualified employees
Offers best packages at the entry level
Also provides incentives
Usually based on examination
Different Examinations for different level of employees are conducted all over the country.
Training & Development
Mandatory for every employee to go through a training process within 2 years of their promotion.
Management training, technical training, accounts training etc.Special trainings.
Based on seniority and performance
Up gradation of employees Performance Appraisal
Clerical level => Higher officials
From JTO => Personal CR
Adverse CR => No Promotion
Building supply chain of talented workforce
In-sourcing large number of employees with industry’s channel partners and associates
Establishing and implementing objective recruitment
Employee engagement and development
Offering ‘study while work’ programmes
Setting benchmarks in employee reward and recognition
Implementing employee friendly HR policies
Interacting with employees through open houses
Developing role competency matrix
Managing employees life cycle
Developing a strong ‘services’ community
Defining a clear growth path for all employees
Creating a uniform frontline sales/ service management structure
Creating and implementing effective processes to enhance productivity Human Resources Employee Service Assurance
Educating employees on organization's hr policies and processes
Complying with statutory regulations and company policies
Standardizing hygiene factors across various role holders
Conducting employee satisfaction surveys periodically for taking corrective actions. Knowledge Resources
There are various institutes in Pakistan offering a degree in telecommunication engineering as Michael Porter states that for a country to achieve competitiveness, in any industry, in its true sense the academic institutions of that country should have an advanced academic backbone in that particular industry too. The list of institutes offering professional education to enter the telecommunication sector of Pakistan is extensive. Pakistan has emerged as one of the leading markets in telecommunications, in the light of existing trends.
In the current telecom landscape of Pakistan and the tremendous growth that has been witnessed in the past, the industry experts believe that Pakistan’s wireless market has all the prerequisites for progressing to the next level which is connectivity to the Internet via high speed mobile broadband access.
The difficulties and high cost of deploying fixed line infrastructure do not justify the investments into fixed networks anymore. With very limited existing fixed line infrastructure, Pakistan is well poised to benefit from the developments in the wireless domain .
3G and 4G are wireless communication technology classifications by certain standards and benchmarks. 3G business in Pakistan will bring innovative communication experience for users, including faster speed; more customized choices, wider network coverage, and more abundant businesses, making information and communication more flexible and exiting.
3G has two renowned flavors: first one is CDMA and its evolution path with CDMA2000, 1x Advanced and EV-DO Rev A, Rev B and DO-Advanced for the data side. EV-DO Rev. B is the latest technology.
In Pakistan, 3G-enabled tablet 3G EVO Tab is based on the EV-DO Rev. B technology and has features of both a tablet and a GSM phone that will give wireless broadband internet on the go. Infrastructure and Technologies in the Telecommunication Sector The other 3G flavor is the WCDMA / UMTS evolution path where its data side is referred to as HSPA. HSPA+ R8 is the latest revision which is currently in deployment / commercialization phase in different parts of the world.
WCDMA is the most mature and well evolved standard. It provides faster transmission speed, larger system capacity, and better communication quality.
Based on the matured WCDMA network and business-supporting platform, Pakistani market could realize abundant 3G businesses, including wireless data card, mobile internet, mobile music, mobile TV, mobile searching, video phone, instant communication, mobile mailbox, and mobile newspaper.
The mobile operators in Pakistan have seen declining ARPUs over the last few years and have probably the lowest ARPU in the world. All of the mobile operators are using old technology.
There is a very high demand for broadband data connectivity in Pakistan. The data usage in GB / month on a per subscriber basis in Pakistan is more than double than in any other country in the world. Demand Conditions Telecommunications is the fastest growing sector in Pakistan and demand for telecom services has sky-rocketed in the past decade. The data above shows annual cellular subscribers in Pakistan. Cellular is the fastest booming sector in the telecommunication Industry. The total number of cellular subscribers has gone up from 5 million in 2003 to over 120 million in 2013. Cellular density has plateaued at 68% according to PTA.
In Pakistan 62 out of 100 people subscribe to cellular services, as compared to 72 in India and 106 (over subscription) in the United States. Firm Strategy, Structure and Rivalry Battle for supremacy
(market share) The market segments mobile companies are targeting include :
1. Tech-savvy youth
2. Business users (due to the their higher average revenue per users
3. First-time subscribers in remote and rural areas. Competitive rivalry
When the competition is fierce, obviously the competitive rivalry will beat the highest level.
All means of attracting new and potential switching customers are being used by the competitors.Exit barriers, industry growth, product differences, brand identity, and diversity of rivals are the main reasons of very high competitive rivalry in this case. Major Competitors Related and Supporting Industries PTA serves as a major support tool for the development of the telecommunication sector. Through various forums organized in collaboration with the local industry; PTA seeks feedback from experts and academics for elevating its performance to higher standards. Telecomm is the main tool for connectivity and this directly translates into the ability to make money for the industries related to it, everything is "automatic" because of telecommunications. Overall, the telecommunications industry has the highest spin-off effects in construction, restaurant, health care, housing, wholesale trade, and retail industries.
This is just the obvious tip of the iceberg, but the power provided by the telecomm folks to "everyday people" is easily seen. The answer is that Everybody Needs
Telecommunication! Michael Porter
The Five Forces Model Presence and easy availability of substituted products is a great threat for the successful survival of any organization since it can enforce the company to cut the price of its product.
For the cellular products, substitutes are VoIP (Voice over Internet Protocol), fixed line and wireless.
VoIP commonly refers to the communication protocols, technologies, methodologies, and transmission techniques involved in the delivery of voice communications and multimedia sessions over Internet Protocol (IP) networks, such as the Internet Skype.
(Source: http://www.teliqo.com/voip/) Three factors under ‘Threat of Substitutes’ 1. Buyer’s Propensity to Substitute: Mobile penetration of 68.5% Vs. Internet Penetration of 15.3%. 2. Relative Prices: Cost Free VoIP & PTCL’S Packages Vs. Cheapest possible cellular packages. 3. Performance of Substitutes: Voice Quality & Convenience. Threat of New Entrants Profitable markets that yield high returns will attract new firms. This results in many new entrants, which eventually will decrease profitability for all firms in the industry. Unless the entry of new firms can be blocked by incumbents, the abnormal profit rate will trend towards zero. (Source: Porter, M.E. (1979) How Competitive Forces Shape Strategy, Harvard Business Review, March/April 1979)
Two Major Factors:
Capital Requirements & Sunk Costs: Being a capital intensive service sector, it requires sizeable investment in telecommunications equipment and network installations. Large sunk costs makes the telecommunication sector's switching costs higher (i.e., the exit barrier is significant).
2. The more profitable the industry the more attractive it will be to new competitors. Pakistan’s cellular market has been performing well in terms of Average Revenue per User (ARPU). During FY2012, ARPU in Pakistani rupees was Rs.217 and has been on a positive trend since the past 4 years. (Source: http://www.pta.gov.pk). The Intensity of Competitive Rivalry
At the top is Mobilink, the Pakistani unit of Egypt-based telecom company Orascom. It has been operating in Pakistan since 1994.
Ufone, a wholly owned subsidiary of Pakistan Telecommunication Co. Ltd (PTCL), is nowunder the control of Etisalat group of UAE.
Warid owned by the Abu Dhabi group of the United Arab Emirates and sister of Wateen groupis another cell phone service provider in the industry.
Norway’s Telenor, a recent entrant with about a billion US dollar investment in Pakistan has been doing well, based on its recent earning report. Telenor stock is listed in the Oslo stock market (TEL) and in US.
Zong, formerly Paktel, was the latest target of foreign acquisition. After it got acquired by China Mobile it was rebranded as Zong and launched one of the most successful and aggressive campaigns.
Increased viability for the operators to expand to semi-urban and rural markets. Hence, competition in this market would increase even further. As the sector is moving closer to maturity, further consolidation is a reality and this will lead to the survival of more profitable players in this segment. Bargaining Power Bargaining Power of Customers:
Product differentiation: Similar prices for similar products, buyers have the option to switch over.
Competition between buyers: The individual buyers don’t have any competition among themselves but recently devised marketing strategies can be seen creating a divide.
Buyers’ switching cost – Low switching cost. Low new connection cost. With prepaid connections subscribers are not expected to pay more than Rs.200. Low switching cost means high buyer power.
Brand loyalty and almost same pricing- buyer’s don’t generally want to switch but there exist factors like above which give buyer’s a moderate power. Bargaining Power of Suppliers
There is a price war happening between the different mobile operators, so even the suppliers are chosen carefully so that they do not drag down the profitability of the company .In short, the suppliers have less bargaining power in this industry.
SIM Card Manufacturers – SIM card for the mobile operators are mostly imported. – The mobile operators don’t always procure the SIM card from a single supplier to avoid any delays. The Bargaining power of suppliers is less or there is little or no threat of forward integration. S O W T Analysis Exponential growth.
Skilled Human Resource at low-cost.
Access to Infrastructure - optical network and satellite links.
Favorable policies (to some extent) and regulator.
Strong international brand names Quality of Service.
Low revenue per user (ARPU).
No clear strategic direction.
Poor organizational structure.
No research and development programs.
Employee skill inconsistency.
Very low employee morale. Huge market size.
Local handset manufacturing.
Making technology accessible to all (e.g. broadband).
Adopt latest technologies.
Removal of international trade barriers.
Adopting MVNO Recession in economy.
Inconsistent and adhoc decisions from regulatory authorities.
Political Instability - Security issues.
Adverse shifts in trade policies of government.
Churn in OPEX.
Grey traffic PEST Economic Factors
Worsening economic stability
Increasing unemployment and poverty Political
Not enough progress in terms of economic growth
Rapid changes in Government’s policy
Price regulation limits the firms. Socio-Cultural
95% of Pakistan’s population is Muslim and therefore religious
Dislike for anything new
The English and bilingual phenomenon
Career in telecom sector Technological
Most of the technology is imported
R&D ignored at firm level
Introduction of new products like 3G
MMS, SMS, VPN,WAP AND Voice Mail are provided by every mobile company. Government
Policy Regulatory measures
Consumer protection by Government
The present Government of Pakistan (GOP) has accorded a very high priority to the development of telecom sector in Pakistan and declared telecom as a priority area for the provision of employment and reduction in poverty.
Government decided to deregulate and introduce competition in the sector two years back, which resulted in massive licensing Comparative * Source: CIA World Factbook. Empirical Work Employee training and recruitment.
EVO, EVO Tab.
Idea (Marketing and other inputs)
Viability and capital budgeting
Post-launch audit. Relationship of PTCL with cellular service providers.
Assembling of machinery and towers.
Contracts and outsourcing.
Huawei and SIEMENS
Repairs and operational work. Saturation. How to keep the revenue rolling?
Local Hand set Manufacturing.
Research and Development.
Targets. How important are they?
Research and development
Impact of recent service blockages.
Bargaining power of enterprise customers.
Customer Confusion and frustration. Recommendations Focus R & D on technological processes rather than marketing.
Set ‘Better’ targets for the departments.
Better training for line-men and operational staff.
Expanding horizons: International Service. Sequence1.mp4 Subsector analysis Cellular Industry
This date shows annual cellular subscribers in Pakistan.
Cellular is the fastest booming sector in the telecommunication Industry.
The total number of cellular subscribers has gone up from 5 million in 2003 to over 120 million in 2013. Fixed Land Line The number in fixed land line declined to almost half in one decade due to the introduction of new technologies. Broadband There has been a boom in the demand and usage of Broadband in Pakistan.
From just over 25000 subscribers in 2005, the numbers have reached over 2 million in 2013. Telecom Revenue Cellular has proven to be the most profitable sub-sector of the Telecomm Industry. Its revenues are many folds greater than others and have continued to increase over the past years. Investment in Telecomm Investments in the sector have declined. This is a dangerous trend, however it may also indicate towards firms being established after initial high investment periods. Threat of Substitutes