Project On Mobilink

Mobilink in Different Market Structures

History of Cellular

T

he need to increase the public safety was key to the genesis

of

today’s

rapidly

growing

wireless

communication industry. In1920s’ police departments in Detroit,

Michigan

and

Bayonne.

New

Jersey

and

the

Connecticut State Police were among the first who sought to use in their patrol cars, the technology that had improved the safety of oceangoing vessels – radiotelephone service. The United States involvement in World War 2 created an urgent need for FM technology to take the place of Amplitude Modulated (AM) technology for higher quality, two-way mobile radio communications on the battlefield.

Shaheed Zulfiqar Ali Bhutto Institute of Science & Technology, Islamabad

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Mobilink in Different Market Structures

The strategic value of wireless communication on the mobile and portable communication on the battlefield spurred companies like AT&T, Motorola and General Electric to focus on refining prominently among the products developed during the war years and carried over into peacetime use. Although there was a form of mobile telephone service available in the late 1940s, its capacity was limited – with few radio channels available to carry calls, and cities like New York limited to 12 simultaneous callers. In 1947, AT&T engineers decided to stretch the limited number of radio frequencies available for mobile service by scattering multiple low-power transmitters throughout a metropolitan area, and “handing off” calls from transmitter to transmitter as customers moved around in their vehicles. This was the birth of wireless technology. But there was ahead of its time. It took 20 years to develop sophisticated call “hand off” technology. In 1973, Motorola introduced its revolutionary new Dyna TAC mobile phone, a conveniently sized radiotelephone set. At the same time, European countries also started using cellular phones with different systems.

Shaheed Zulfiqar Ali Bhutto Institute of Science & Technology, Islamabad

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Mobilink in Different Market Structures

Today, wireless competition has accelerated to the point that more than 3 billion people can now choose between 339 service providers around the globe.

INTRODUCTION: Industrial development of a country is not possible without having a modern telecom infrastructure in place. Countries that have weaker telecom, infrastructure, using the latest technology can today quickly step in to the future. Recent industry figures confirm that cellular has become a primary tool not just for business everywhere, but also that it has become a mass-market service. There were over 200 million cellular phones in use worldwide by the end of 2000. Cellular service is soaring in Asia. By the end of 2005 there were more cellular phones in Asia than in Europe. Key thing is that wireless is easy to deploy and it is much more versatile and reliable for Pakistani business to compete in the world markets on equal footing, it is important to provide it with excellent coverage and dependable communication system. The number of fixed-line services in Pakistan has increased five fold since 1990. However, whilst the majority of working lines are in urban areas, 70% of Pakistan's population lives Shaheed Zulfiqar Ali Bhutto Institute of Science & Technology, Islamabad

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Mobilink in Different Market Structures

in rural areas. Efforts by the government of Pakistan to promote the development, modernization and diversification of its telephone infrastructure over the last decade have met with mixed success. Nevertheless, recent strong growth in the mobile market has created a much more positive general outlook in the industry. Mobile subscriber numbers have surged from less than 2 million at end-2002, to around 11 million by mid2005 and the growth has the feel of sustained development. Significantly, two new mobile operators were licensed in 2004, joining the existing four operators, to create a very busy market. There is still plenty of room for further expansion. Since the 1980s, considerable effort was made to upgrade Pakistan’s telecommunications system. The nation’s Sixth Five-Year Plan called for a public-sector investment of Rs10.1 billion to improve and expand the telephone and telex systems.

MOBILINK IN PAKISTAN: Pakistan Mobile Communication Limited (Mobilink) is the first GSM Operator in Pakistan and since the launch of its services in 1994, has Been at the fore front of Pakistan’s cellular service industry. With its Cutting edge technologies, Shaheed Zulfiqar Ali Bhutto Institute of Science & Technology, Islamabad

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Mobilink in Different Market Structures

national

infrastructure

and

superior

quality

Customer

service, Mobilink, a wholly owned subsidiary of Orascom Telecom, has achieved the status of “market leader” with a customer Base in excess of 31 million subscribers. To date, the company has invested over US$2.5 billion in its infrastructure, Network rollout and the largest franchise,

retail and customer services Network across the Nation. The company plans to invest an additional US $500 million in 2008, to meet the growing demands of its customers. Mobilink has also progressed from voice to carrier-class nationwide Services by completing its own 6,500-kilometer

fiber

optic

backbone

Network

across

Pakistan. It now plans to provide high-speed data Connectivity in Pakistan through WiMax services. During the last few Years, the company has aggressively expanded its coverage, achieving Cell sites in excess of 6,500, over 200,000 retail outlets and coverage in More than 8,000 cities, towns and villages. With a systematic roll-out Plan for the future, Mobilink is determined to maintain its market Leadership in all areas to ensure that it continues to reshape lives of Pakistanis everywhere by “connecting the unconnected”.

Additionally,

the

positive

role

of

Shaheed Zulfiqar Ali Bhutto Institute of Science & Technology, Islamabad

the 5

Mobilink in Different Market Structures

Government has been a catalyst in The phenomenal growth of the cellular market in Pakistan. The Phenomenal growth and the success of the mobile sector in 2006 – 07 Can be seen with the estimated revenue figures of Rs 133 billion in the Industry growing by a soaring 48% from 2005 - 06, with Mobilink Contributing nearly fifty percent to it. OT took over management control of the company in April 2001 and changed the overall market dynamics through its aggressive marketing strategy and expertise. In less than two years time Mobilink achieved an exceptional growth of almost 672% and attained market leadership. Mobilink was the first mobile service provider in Pakistan to operate a 100% GSM technology as both existing operators employed AMPS technology.

MONOPOLY OF MOBILINK: Before Mobilink there were two companies already in the market but with different technology. Prior launching of GSM service in Pakistan, Mobilink obtain the assurance from Govt of Pakistan that no further GSM licenses will be granted for the period of ten years in order to get the maximum time to yield the benefits of penetration, stability, infrastructure and monopoly.

Shaheed Zulfiqar Ali Bhutto Institute of Science & Technology, Islamabad

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Mobilink in Different Market Structures

CELLULAR SUBSCRIBERS IN PAKISTAN YEAR

INSTA

MOBILINK

PAKTEL

TOTAL

GROWTH %

1995-96 1996-97 1997-98 1998-99 1999-2000

20,950 43,029 53,184 108,058 112,000

16,385 52,600 82,912 87,556 114,272

30,703 39,398 60000 70000 80,221

68,038 135,027 196,096 265,612 306,493

… 98.4 45.2 35.4 15.4

Mobilink’s monopoly were from 1994 to 2000, In this period Mobilink’s

growth

is

increased

in

1st

five years

then

decresced because of political instability, war with India in 1999, and Atomic explosions in 1998. In the period of 199899 the Mobilink’s growth were decrease to record 20%.

Shaheed Zulfiqar Ali Bhutto Institute of Science & Technology, Islamabad

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Mobilink in Different Market Structures

TECHNOLOGY DIFFERENCE: Meaning of AMPS – "Advanced Mobile Phone Service", is an analog technology that uses an 800MHz cellular band. Developed at Bell Labs and transferred to the regional Bell operating companies at the time of the divestiture in 1984, AMPS was put on the market in the 1980’s and is the worldwide cellular standard. (By: Diane Shired) The GSM was formed in 1982, to discuss how to make wireless Meaning

technology of

GSM

work is

across

"Global

geographic System

for

borders. Mobile

Communications", it a digital cellular phone technology based on a specified standard for how data is sent over a Shaheed Zulfiqar Ali Bhutto Institute of Science & Technology, Islamabad

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Mobilink in Different Market Structures

wireless network. Mobilink is the first cellular company with GSM technology in Pakistan.

MONOPOLISTIC STRUCTURE: Pakistan' has gone through a monopolistic telecom & IT vendor's age. Overall, the thrust of market strategies for 2004 was on acquisitions. Three factors contributed to this:

1. The upfront cost of acquiring a connection went down significantly - opening up a whole new segment of the market. The cost of acquiring a cellular connection went down from Rs. 3000 to Rs. 1000

2. Mobilink increased its coverage to several new cities

across Pakistan – once again opening up new regions with pent-up demand. The share of the top-5 city gross sales in Mobilink sales went down from 67% to 61%1 1

Shaheed Zulfiqar Ali Bhutto Institute of Science & Technology, Islamabad

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Mobilink in Different Market Structures

3. There was a sense of urgency to capitalize on these opportunities as the operators with newly awarded licenses geared up to start operations. There was a clear imperative to grab customer base – to sweep the market – before the new players enter the field. Both Mobilink and Ufone pursued this strategy with varying degrees of success. For Mobilink this meant going from 2 Million subscribers at the end of 2003 to a projected 4.5 Million subscribes at the end of 2004.

Mobilink’s consolidated revenues, however, averaged around $934.6 million, an increase from $921.5 million in the yearago quarter. Average revenue per user (ARPU) declined to $2.8 for the third quarter from $3.5 for the same period last year. The company spent $406 million for the first nine months of 2008, up from $353 million in the same period of last year. Similarly, the company’s market share dropped to 34.8%, it was 36.4% last year.

TOTAL REVENUES BY CELLULAR COMPANIES (Rs. MILLIONS)

Shaheed Zulfiqar Ali Bhutto Institute of Science & Technology, Islamabad

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Mobilink in Different Market Structures

Company Mobilink Ufone CM Pak InstaPhone Telenor Warid Telecom Total

2004-05 34,456 8,599 2,400 2,693 565 168

2005-06 54,065 16,098 3,329 1,539 6,338 8,527

2006-07 64,654 21,867 2,897 472 22,837 20,405

2007-08 79,936 27,455.2 25,85.3 259.7 45,081.2 26,804.7

48,881

89,896

133,132

182,080.9

MARKET SHARE: In this fiercely competitive arena, Mobilink set itself the target of reaching 7 Million subscribers and retaining a market share of 54% by the end of 2005. While the market share target is lower than current share of 61%, the share of each competitor in the market will remain relatively small – since that there are more players to go around. Taking Mobilink’s share as a given, there are two possibilities for the competitive field: Either all four players will manage similar levels of acquisitions, or one clear competitor

will

emerge

taking

the

lion’s

share

of

competition’s acquisitions. Shaheed Zulfiqar Ali Bhutto Institute of Science & Technology, Islamabad

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Mobilink in Different Market Structures

From

our

perspective,

the

former

scenario

is

clearly

preferable, since in this scenario all the competition will neutralize each other to some extent and they will have to fight on multiple fronts. In this scenario no one will gain a share

large

enough

to

threaten

Mobilink’s

leadership

position. Given that U-fone and Paktel have a head start with established brands, distribution, and coverage in more cities, they are likely to acquire more subscribers than Warid and Telenor. On the other hand these last two will be more

aggressive in their strategies but will be hampered by the fact that their operations will roll-out in Q2 and their initial coverage will necessarily be limited to major cities. Given this, and given the current base Ufone already has, we see the end-2005 market position as looking like this:

Shaheed Zulfiqar Ali Bhutto Institute of Science & Technology, Islamabad

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Mobilink in Different Market Structures

Shaheed Zulfiqar Ali Bhutto Institute of Science & Technology, Islamabad

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Mobilink in Different Market Structures

Shaheed Zulfiqar Ali Bhutto Institute of Science & Technology, Islamabad

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Mobilink in Different Market Structures

Shaheed Zulfiqar Ali Bhutto Institute of Science & Technology, Islamabad

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Mobilink in Different Market Structures

PEOPLE RESPONSE TO MOBILINK’S INCENTIVES: “People respond to incentives. The rest is commentary” Mobilink has launched two products i.e. JAZZ and INDIGO (prepaid and postpaid). In monopolistic competition mobilink introduce many packages in the market. Some of the packages are;  Jazz octane

Shaheed Zulfiqar Ali Bhutto Institute of Science & Technology, Islamabad

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Mobilink in Different Market Structures

 SMS package  Ladies first  Free connections  Free balances  Low calls Rates nationwide  Low calls rate on international roaming  Urdu Power tools

 Mobilink Pco An amazing prepaid service with two pre-paid packages i.e. Jazz Easy, Jazz Max. The benefits of pre-paid products are: • No daily charges • Low outgoing rates • 180 days validity of Jazz scratch cards

FEATURES OF JAZZ Shaheed Zulfiqar Ali Bhutto Institute of Science & Technology, Islamabad

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Mobilink in Different Market Structures

Outgoing calls (24 hours) Incoming Calls Sms to any mobilink number (per sms)

Rs. 3.50 Free Rs.1.00

outgoing Sms to any other network (per sms)

Rs.1.50

outgoing International Sms (per sms) outgoing Voice mail and CLI Daily charges

Rs. 5.00 Free Free

ANALYSIS: Demand of mobile phones has been increased during the past four years rapidly. In 2004-05 the total number

Shaheed Zulfiqar Ali Bhutto Institute of Science & Technology, Islamabad

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Mobilink in Different Market Structures

subscribers were 12.7 million which increased to 34.4 millions in 2005-06 and similarly in 2006-07 36.45 million as compared to 0.3 millions in year 1999-2000. The reason for this increase advent of new mobile companies in Pakistan which create competition in Telecom industry. When we compare the figures of Mobilink year 1999-2000 with 2006-07 we will find that the mobilink had monopoly due to certain reasons; (provided other factors remain constant such as expensive mobile sets, lack of information) Being

a

only

GSM

company

having

protection

from

government. It has a high price rate per minute. High subscriber’s identification module (SIM) rates (i.e. Rs. 3000 minimum in 2002). Both caller and receiver had to pay for a call. Roaming charges. High taxes imposed by the government. Similarly high rates of other services i.e. sms, etc. Above reasons shows that mobilink was not providing services to its efficient scales as compare with today it mean moblink had created dead weight loss. After monopoly, After the expiry of patent Pakistan mobile phone industry

Shaheed Zulfiqar Ali Bhutto Institute of Science & Technology, Islamabad

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Mobilink in Different Market Structures

Was open for new entrant and many farms arrived such as Ufone in 2001, Telenor & Warid in 2004 and CMPAK in 2007 which created competition in the mobile market and because of this competition prices (for their services) goes down drastically during past five years , every company started to provide free roaming services and SIMs rate also declined . Due to this competition number of subscribers raised 4.4 million (provided other factor remains constant such as mobile sets decreases their rates and

rise of media

campaigns )

Market Power: In spite of this competition Mobilink’s price is slightly higher than other connections. Due to following reasons 1. Vast Network throughout the Pakistan. 2. Signal Quality 3. Fashion, Trend 4. HUM

BOLAY

MOHABBAT

KE

ZABAN

(Different

languages)

Shaheed Zulfiqar Ali Bhutto Institute of Science & Technology, Islamabad

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