Eco Final Presented

8/8/2019 Eco Final Presented

1/38

Forecasting MarketDemand for

Mobile Services


2/38

Introduction Factors affecting demand

Demand forecasting

Factors affecting supply

Market share

Pricing policy


3/38

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


4/38

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


5/38

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


6/38

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


7/38

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


8/38

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


9/38

Demand Forecasting

Potential demand is a sub-set of the addressable

market.

Example of a developing country:


10/38

Demand Forecasting

Propensity to adopt mobile by age - example from

Western European country: Age is an importantdiscriminator.

Source: www.coleago.com


11/38

Demand Forecasting

Correlation between propensity to adopt mobile &

income - example high income country: Income doesnot matter.



12/38

Demand Forecasting

Correlation between propensity to adopt mobile &

income - example lower income country: Incomematters.



13/38

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


14/38


15/38

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


16/38


17/38


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


18/38


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


19/38

-

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



20/38

-

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


21/38

-

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


22/38

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


23/38

Market Structure

Source: TRAI


24/38

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


25/38

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


26/38

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


27/38

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


28/38

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


29/38

Pricing Strategy

Key Performance Indicators

Airtel Average Revenue Per User as on Sep 09Source: TRAI


30/38

Pricing Strategy


Airtel Average Minutes of Usage Per User as on Sep 09Source: TRAI


31/38

Pricing Strategy


Airtel Gross Service Revenue Break up as on Sep 09Source: TRAI


32/38

Pricing Strategy


Airtel VAS Service Breakup as on Sep 09Source: TRAI


33/38

Pricing Strategy


Airtel Customers Percentage as on Sep 09Source: TRAI


34/38


35/38

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


36/38

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.


37/38

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


38/38

Thank You

Nameeta S Mulgund

Sandford J PereiraKashif T Khan

Vidya Durai

Anil Shetty

Eco Final Presented

Documents

Transcript of Eco Final Presented