role of competition in telecom sector

7/23/2019 Role of Competition in Telecom Sector

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Role of Competition in Growing Market : Telecom Sector

* Manisha P

ABSTRACT

This Paper concludes that price plays an important role in growing or emerging market like that in

the telecom sector. For telecom companies to survive, be competitive or even grow, they continu-

ously need to provide customers extra value added features, high quality service services at com-

petitive price, so that customers do not switch to other operators.

Although the companies are in a growth phase, they cannot afford to be complacent and need to

continuously innovate through aggressive pricing, attractive schemes and superior service to retain

and add more customers.

Key Words : Competition, Growing Market, Telecom Sector

*Faculty, VNSGU, Gujarat

INTRODUCTION

The emergence of marketing concept in respect of services is a recent phenomenon. Lets produce,

what the producer thinks, the market wants, the sales department will manage to sell. This was the

focus prior to the beginning of the marketing concept in the context of selling of services. The end of the

decade 1950's paved avenues for service marketing as users' satisfaction received due weightage. (Ms.

S. Revathi and Dr. S. Padmavathyin, 2005).Since the launch of the first cellular mobile service in August, 1995, the Indian Cellular industry has not

looked back. Despite several hurdles in terms of policy and regulatory challenges, despite being on the

verge of bankruptcy in 1998, the industry has maintained its vigorous growth (P. Chandran, 2005).

The number of mobile subscribers in 1995 was negligible. Today it is around 80 million. (TOI, 2005).

Can this industry be classified as being in the growth sector ? For that we need to understand the Theory

of Product Life Cycle.

The Product Life Cycle (PLC) is based upon the biological life cycle. For example, a seed is planted

(introduction); it begins to sprout (growth); it shoots out leaves and puts down roots as it becomes as

adult (maturity); after a long period as an adult the plant begins to shrink and die out (decline).

In theory it's the same for a product. After a period of development it is introduced or launched into the

market; it gains more and more customers as it grows; eventually the market stabilizes and the product

becomes mature; then after a period of time the product is overtaken by development and the introduction

of superior competitors, it goes into decline and is eventually withdrawn. However, most products fail in

the introduction phase. Others have a very cyclical maturity phase where declines see the product

promoted to regain customers.

According to market and environmental needs

Sales Rapidly Rising Sales

Costs Average cost per customer

Profits Rising Profits

Marketing Objectives Maximize market share

Product Offer Product extensions, service, warrantyPrice Price to penetrate market

Distribution Build intensive Distribution

Advertising Build awareness and interest in the mass market


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In the growth stage, industry sales grow quickly - but industry profits rise and then start falling. The

innovator begins to make big profits as more and more customers buy. But competitors see the opportunity

and enter the market. Some just copy the most successful product, or try to improve it go compete

better. Others try to refine their offerings to do a better job of appealing to some target markets. The new

entries result in much product variety.

This is the stage where industry profits are largest, but it is also when industry profits begin to decline

as increased competition creates downward pressure on prices. (Kotler, Philip, 2002).

The following table and chart give an idea as to where the mobile service provider industry lies.

Then and Now.

1995 2000 2005

No. of mobile operators 18 17 11

No. of mobile subscribers * Negligible 1.9 60.3

Teledensity (per 100) 0.8 2.7 9.7

Mobile Tariffs (in Rs.)** 14.5 6 0.4

(1=1995, 2=1999, 3=2001, 4=2003, 5-2005)

As can be seen from the table and chart, the number of subscribers is increasing, the prices are

falling, and the line graph is same as that of the line graph in the product life cycle graph. Thus one can

conclude that this industry is in the late growth stage in its Produce (Service) Life Cycle.

The major operators are Bharti Tele Ventures, BSNL, Vodafone, Reliance Infocomm and Tata Tele

Services.

HOW THEY COMPARE

Operator Presence Mobile Subscribers (million)

Bharti Tele-Ventures 25 circles 17

BSNL 21 circles 15

Vodafone 13 circles 10

Reliance Infocomm 21 circles 14

Tata Teleservices 20 circles 04

CHALLENGERS AND FOLLOWERS

Vodafone initially known as Orange was the undisputed leader in some regions and circles, so was

Airtel but after relaxation of norms both these giants have been Challengers to each other's position.

Reliance on the other hand has been a leader in the CDMA segment but it is following the footsteps of

Vodafone now to enter prepaid market segment.

COMPANY PROFILE

AIRTEL


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Basic, Internet and recently introduced National Long Distance. Bharat also manufactures and exports

telephone terminals and cordless phones.

Apart from being the largest manufacturer of telephone instruments in India, it is also the first company

to export its products to the USA. Bharti is the leading cellular service provider, with an all India footprint

covering all 23 telecom circles of the country. It has over 17 million satisfied customers.

STRATEGIC INITIATIVES

DIFFRENTIATION Tipped as the largest cellular service provider in the country. Focused on the Value for money sector e.g. students, executives etc. A Brand that builds Enduring relationships, emotionally yours brand. Wide network coverage Number of Value attached value added services - Airtel LIVE. Host of Group Schemes e.g. Group Sms, Group talk all introduced by Airtel.

POSITIONING Brand for the SAVVY and OUTGOING Company image and Brand Equity Wide network coverage Tie up with Nokia for handsets Host of schemes and value added services E.g. caller tunes

Movies

Music

Cricket

Games Special SMS packs BRAND AMBASSADORS

SACHIN TENDULKAR, SHAHRUKH KHAN

KAREENA KAPOOR

VODAFONEVodafone is the brand name of Vodafone Essar. It established its presence in India in 1994 and was

one of the first cellular providers in the city of Mumbai. Over time it has expanded operations across the

country and is one of the most respected cellular service providers known for providing world class and

innovative class. Vodafone Essar Limited, with about 13 million * subscribers after the BPL Mobile

Cellular Limited acquisition, is one of the most reputed telecom companies in India. Over the years, it has

been named the 'Most Respected Telecom Company',

DIFFERENTIATION Focused on juicier market Matched competitors prices but has not really positioned itself on price plank. Large share of high paying users through value added services.

POSITIONING :- VODAFONEhas positioned itself as a Cellular service provider with :- A large network and coverage Variety of SMS schemes Value added services Simple and easy recharging processes and procedures (among prepaid) Brand ambassador - RAHUL DRAVID Accurate billings and payments recordings Variety of tariffs and pricing plans Customer care / helpline

PROBLEMS AND ISSUES IN THE TELECOM SECTOR

1)Increasing Competition : The increasing rivalry between AIRTEL, VODAFONE and RIM leading to

a Price war.2)Emerging markets :- Growing market, due to which the subscribers have a vast range of choices

from other service providers also So the challenge here is to give the customers a good low cost plan


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3) Retaining customers :- Due to growing competition existing customers might switch over to other

service providers leveraging costs and it the rates are increased or if rentals are increased.

4) Government regulations :- TRAI norms are stringent and one has to meet those norms as per

government regulars for all service providers.

5) Maintaining costs : The maintaining costs of hotline centers and staff are high.

RESEARCH METHODOLOGYOBJECTIVE

To study the impact of competition on developing markets in India. To study whether what the company is trying to communicate is what the consumer perceives to

combat competition. To understand the importance of value additions and pricing strategies.

HYPOTHESIS

We want to ascertain whether price plays any role in competing growing markets like that of the

telecom sector which we saw that is in a growth stage of product life cycle.

Null Hypothesis :

Price plays no role in competing growing market like the telecom sector

product life cycle.

Alternate Hypothesis

Price plays a role in competing growing market like the telecom sector

RESEARCH DESIGN

Conclusive research has been used, as our objective is to find out whether price actually has an

impact on subscribers. Conclusive research is meant to provide information that is useful in reaching

conclusive or decision making. Our research would reveal whether or not, a particular pricing strategy

has been positioned well enough in the minds of the subscriber. Accordingly a decision can be taken on

strengthening the current positioning or repositioning the pricing strategy.

PRIMARY DATA

Our first step was to gather information from the companies. This was done by visiting the centres of

VODAFONE, AIRTEL, RIM outlets. Then a questionnaire was prepared and individually administered to

gather data from the sample population.

SECONDARY DATA

Sources of secondary data include Marketing Journals, Trade Magazines, ICFAI publications, company

websites etc. All this helped in authenticating the kind of information we obtained from our primary sources

and thus helped us get a very objective view of the study.

SAMPLING METHOD

Convenience sampling method has been used because the selection of units from the population has

been based on easy availability and/or accessibility. The survey has been conducted at college campuses,

railway stations, shopping malls etc. so as to cover a reasonable cross section of persons who fall intothe target group.

SAMPLE

100 persons between the age group of 20-25 who use cellular networks of one of the service providers

in consideration since last 6 months.

SAMPLE AREA

We have chosen Central Suburbs, Western Suburbs and South Mumbai as our sample area so as to

include the right mix of people from different income brackets and backgrounds. This helped us obtain a

more representative sample for our study.

DATA COLLECTION METHODS

We have used the questionnaire method of data collection to obtain information from the sampleproduction. We have also conducted face-to-face and telephonic interviews to obtain valuable insights

from the company representatives


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ANALYSIS OF THE QUESTIONNAIRE

The survey was taken for the age group falling in the bracket of 21-24

% of Respondents Age28% 21

49% 22

8% 23

15% 24

Sex Profile

The number of male respondents was 66 and number of female respondents was 27. The number of

male and female respondents was chosen randomly.

Sex Number of Respondents

Male 66

Female 34


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"Number of Respondents owning a mobile phone

Out of 100 Respondents who were surveyed 93 owned a cell phone whereas 7 did not own a cell

phone. 7 respondents who did not own or use a cell phone, their questionnaire was terminated

Own a Cell Phone Number of RespondentsYes 93

No 7

Services used by the respondents

Services UsedNumber of Respondents

Talktime 100

Sms 86

Gprs 34

Mms 40Fax 7

These are some of the basic and common services used by the respondents. Every respondent uses

Talktime for which they own a mobile phone followed by Sms, Gprs, Mms and Fax.


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Operator Number of Respondents

Vodafone 33

Airtel 28

RIM 32

There was a close call between the operators that the Respondent's preferred. As one can observe

it is equally distributed with 33 respondents using Vodafone, 28 using Airtel and 32 using Reliance India

Mobile. Type of Customer (post paid or prepaid)

Type Number of Respondents

Pre Paid 28

Post Paid 65

28 respondents used prepaid services while 65 respondents used post paid services. Switched between operators

Switched Number of Respondents

Yes 73

No 20

in the past, while only 20 have stayed with their operators since they started using mobile phones. Reasons for switching operators


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Reasons for Switch

Cost 54

Poor network 45

Poor services 60

Others 46

The main reason for switch from one operator to another was cost or price at which services were

provided, poor services provided by the operators and poor network reception at places where therespondents' often used their mobile phone.

Gender and type of customers

Gender / Type Prepaid Postpaid

Male 21 45

Female 7 20

28 respondents used prepaid services while 65 respondents used postpaid services. Out of 28

respondents using prepaid services 21 were male while 7 were female. On the other hand out of 65

Respondents using postpaid services 45 were male while 20 were female respondents. Income v/s Number of users

Income/User

1 2 3 4

< 1 Lac 7 0 0 0

1-3 Lac 13 7 6 7

3-5 Lac 0 39 7 0

> 5 Lac 0 0 7 0

The interesting thing to note here is that when income of a family is between 3 to 5 lakhs, number of

mobile users in the family is very high. In this case its 39 out of 93 respondents using a mobile phone.


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Testing of hypothesis

Number of respondents : 100

Number of respondents switched : 73

Number of respondents switched because of low price offered by other operators : 54

Confidence level: 10%

Since 54 falls under the rejection area that means we need to reject the null hypothesis which means

that price plays an important role in the growing market like telecom sector and subscribers switch one

operator to another because of better price offered.

MANAGERIAL IMPLICATIONS

1) If a company is operating in a competitive market then it needs to have an aggressive pricingstrategy.

2) Pricing strategy should be such that it attracts more customers as well as retains present

customers.

3) Company cannot only command market leadership based on quality product, it has to be matched

with attractive pricing.

LIMITATIONS

1)The research has been restricted to Mumbai hence, the sample size as mentioned is restricted and

is not a true representative of the whole study as the market for cellular operators is much bigger

and has a vast scope outside Mumbai.

2)The data collected has more of student respondents and only 20 working class respondents. This

sample can be diversified further to get more accurate hypothesis resulting research.3)One more limitation would be the sample size is too small to come to any conclusion and there may

be discrepancies in data due to this.

CONCLUSION

From the research we can conclude that price plays an important role in growing or emerging market

like that in the telecom sector. For telecom companies to survive, be competitive or even grow, they

continuously need to provide customers extra value added features, high quality service services at

competitive price, so that customers do not switch to other operators.

Although the companies are in a growth phase, they cannot afford to be complacent and need to

continuously innovate through aggressive pricing, attractive schemes and superior service to retain and

add more customers.

BIBLIOGRAPHY

1. Preferences in cellular service providers in the post liberalization era by Ms. S. Revathi and

Dr. S. Padmavathyin : Indian Journal of Marketing, Feb. 2005, pg. No. 6).

2. Product Life Cycle in Cellular Telecom Industry by P. Chandran in the Indian Journal of marketing,

Nov. 2005, Pg. 26).

3. The Times News Network, Wednesday, February 8, 2006)

4. Kotler, Philip, 2002, 11th Edition "Marketing Management", Page No. 328, Pearsons Education)

5. Business Today September, 2005.11


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role of competition in telecom sector

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