Analysis of the telecommunications industry

This report will provide an analysis of the telecommunications industry. In doing so it will look at the industry structure, identify sub-sectors and major players within them and look at the services they provide. This report will focus on mobile services operators and particularly the mobile voice and data (SMS) services they provide. In the end it will look at one major player, identify service operation issues and give recommendations on how to enhance the service. This report will also look at trends in marketing environment using DRETS analysis which will help to identify opportunities and threats for the industry.

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Then it will look at forces that drive industry development using Porter’s 5 Forces module. Continuing with commonalities and differensis in operation of major players Commonalities and differences between the industry’s major players will also be given consideration. 1. Introduction The telecommunications industry is one of the most competitive, changeable and complicated in the UK. It is highly driven by technological development and by its increasing importance for the world’s economy and for society. 2. Industry Structure

“The term ‘telecommunications’ describes the communication of voice, data, and images over long distance. “1 The Telecommunications industry “offers a wide range of services including cellular, paging, Internet, cable, voice and data communications, and local and long-distance services. “2 Telecommunications industry has sub-sectors Based on the medium over which the network provider services it can be divided into sub sectors. (Sub sectors then would be television, radio, fixed and mobile services and the internet for example).

The industry is becoming more complex however, as services like television and mobile telephony merge. 3 3. DRETS analysis 3. 1 Demographic 3. 1. 1 Aging population An aging population is the major demograhic change that will have an influence on all existing market sectors. Regarding the mobile telecommunications industry this means services will have to be adapted to the needs of elderly people. 4 3. 2 Regulatory Althought the mobile telecommunications industry was privatised and liberalised and therefore became more competitive, there are demands to make it even more competitive.

For instance Ofcom (the regulatory body for the telecommunications industry) insists on abolishing charges for contract termination. 5 Furthermore Ofcom pressures MNOs (mobile network operators) to reduce the costs for calls from one MNO to another. And the EU regulatory commision for telecommunications insisted on cutting costs for international calls. 6 3. 3 Economic The current economic crisis has had an impact on the mobile telecommunications industry as well.

Customers are not so confident about their financial prospects any more and are more likely to delay “upgrading to potentially more expensive contracts if they can”7 However, the fact that many telecommunications users are early adopters and are keen on always owning the latest technology and model will remain a driving force for sales. 8 It is expected that technological developments such as improved web browsing speed and navigation and GPS integration will increase handset functionality in 2010 and that because of this more people will want to trade up their phones.

This should keep the growth of handsets stable. ” According to Mintel at the end of 2008, the number of mobile connections again exceeded the number of people living in the UK with 126 for every 100 people. The absolute number of mobile phone connections is approximately 75 millions. It is forecasted that the growth of mobile telecommunications should reach 22% between 2008 and 2013 and in current price terms, rise to i?? 1. 8bn9 3. 4 Technological The trend in the technological environment are new mobile services like Mobile TV, IPTV and video telephony.

They developed out of the fusion of different telecommunications services, as, for instance, digital television and mobile telephony. These new services became available with the launch of the third generation mobile services, which combine high-speed mobile access with internet protocol (IP), based services. 3G allows faster data transmission over mobile handsets. Although new services (Mobile TV, IPTV, video telephony) are emerging there are no direct subsidies to basic voice and data services.

Table shows that mobile voice and mobile SMS services, which this report focuses on, are in their maturity stage. 10 Online presence gives a chance to companies to operate, inform and provide services (purchasing) and create awareness about their services globally. Customers in their turn got a chance to be informed about new offers and get a chance to compare prices. 3. 5 Social It is estimated that “the use of mobile phones for voice calls has not risen significantly in recent years, whereas there has been a sharp rise in their use for data and other non-voice calls.

“11 The most recent introduction is SIM-only contract packages, which allow consumers to purchase a SIM card for use in any handset capable of accessing the relevant network. Consumers sign up to relatively short (starting with one month) rolling contracts. 12 4. Opportunities and Threats Based on trends for the mobile telecommunication sector that have been identified in the previous section, this report will proceed with discussing opportunities and threats for major players in the industry.

An aging population can be seen as a threat and an opportunity as on the one hand elderly people are not technologically driven customers as young people are. The market introduction of the latest module of handset for them will not be a reason for contract upgrading for instance. 13 The adaptation has to be done carefully however, as the upcoming generation of pensioners will also be more technologically wise, (the modern job market just requires the use of new technologies). Although they might not always want the newest “gadget”, they will probably not be satisfied with just basic services either.

With the development of the next mobile generation, (4G) speed and quality of services will increase and drive new technological innovations and new services can be launched. However, those services need to be available for customers in all areas. The third mobile phone generation services are available almost everywhere now so there is an opportunity to increase the network coverage in order to gain more customers for more customer gaining.

Currently third generation (3G) mobile phone services are available in half (46. 5%) of all postal districts however “90.5% of postal districts had such coverage by at least one operator. “14 Although the emergence of new technologies is in many ways positive, it will be also be a threat as it might give opportunities for such technologies as Skype to enter the mobile communications market. 15 Another threat is coming from MVNOs (Mobile Virtual Network Operators) which are operating in a niche market and are offering cheaper international calls. Another threat is coming from regulatory bodies, most seriously from OFCOM as its regulations are obligatory.

For instance, Ofcom forced to cut the cost for calls from one network to another and to abolish charges for contract termination. These cuts consequently lead to profit losses. 16 5. Porter’s 5 Forces analysis “Cellular or mobile service providers in this industry are subject to several driving forces. These driving forces include regulatory agencies, technological innovation, the threat of new entrants, and competition and mergers amongst existing companies”. 17 5. 1 Power of buyers Customer leverage is relatively high in the telecommunications market.

This is due to the information about packages available on the internet and elsewhere. However their influence is rather weak when it comes to terminating contract packages as fees for that are high and advanced notice is required. 18 Marketing for mobile services is intense. Frequent telemarketing, TV advertising, celebrity endorsements, billboards, radio and bulk mail inform consumers of the various long-distance rates and services that are available. Although consumers possess significant leverage, mobile service providers are fortunate in that the product they offer is virtually a necessity.

Usage may vary but every developed area will employ these services regardless of the cost. This is why the government is so involved in protecting the consumer. Additionally, long-distance providers have an extremely large pool of consumers to target. The impact of loosing a few clients is relatively insignificant, considering the billions they still have the opportunity to acquire. According to the Ofcom report more than 50% of consumers of mobile services prefer pre-paid services, as it is easier to switch network suppliers. 19 5. 2 Power of suppliers

The value chain in mobile communications has considerably changed with the inclusion of services other than basic voice and data services. In the past providers of mobile telecommunications services also were network providers. Technological and software infrastructure was naturally already integrated into the network. Therefore service providers did not have to work with a lot of other suppliers and were in a relatively strong negotiating position towards suppliers of application devices and systems integration for example. However nowadays we typically see an expanded value chain that includes a wide range of suppliers.

For instance the delivery of a music download via mobile device involves the record publisher which typically holds and controls the content rights of music delivered and thus becomes a part of the value chain. The application necessary to access the content via a mobile phone comes from an application service provider like Virgin Mobile. 20 Moreover, mobile virtual network operators (MVNOs) such as Virgin Mobile that do not have their own infrastructure deliver their service platform involving another supplier platform as T-Mobile.