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1 Introduction Ncell Private Ltd. stands as a privately owned GSM mobile operator in Nepal. It is the first

company to operate private GSM services in telecommunications sector of Nepal with the brand

name “MERO MOBILE,” which was re-branded as Ncell in 12 March 2010.It broke

the monopoly held by the state-owned telecommunications company, Nepal Telecom by building

a new arena in cellular telephony services. The company is now owned in 80% by

Swedish/Finnish TeliaSonera Holdings. Ncell is the largest ISP in Nepal by the subscriber base

of more than 1.9 million users.

Ncell Private Limited was previously known as Spice Nepal Private Ltd., established in the year

2004 with the license issued by Nepal Telecommunications Authority to operate GSM mobile

services, both Post-Paid and Pre-Paid in the country, and commercially launched its services on

September 17, 2005 in Kathmandu and its vicinity. Today, 75 out of the 75 districts of Nepal are

covered with Ncell. It was recently awarded 'network of the year' by the Duke of Poppington.

It is gradually expanding its network coverage in various urban, semi-urban and rural areas of the

country. In many places, Ncell has been providing services to the subscribers by installing and

using satellite equipments and network.

A company that started its service with basic services like Voice call & SMS service at the

launching phase, has one by one, introduced services like BlackBerry, 3G, Ncell Connect-

browsing internet through a data card, EDGE/GPRS, Call Waiting, Call Forwarding, Conference

Call, Voice Mail, Missed Calls Notification, SMS to e-mail, e-mail to SMS, USSD,

Mobile Internet (GPRS/EGDE), Multimedia Messaging Services (MMS), Personalized Ring

Back Tones (PRBT) and different types of Value added Services, Ncell has always planned and

adopted new technologies and services available in the international market and provided them

among its subscribers.

Most of the services were introduced for the first time in the Nepalese Telecommunication

market, which has re-defined Ncell as the most innovative, modern, accessible and popular brand

in Nepal with more than 10 million subscribers within the country.

2 Mission, vision and Corporate Social Responsibility

2.1 Mission

The fundamental purpose that sets the firm apart from other firms of its type and identifies the

scope of its operations in product and market terms is defined as mission.

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The mission of Ncell is as follows:

“Our mission is to connect all through our telecommunication services, create value for our

customers and render quality services at all times.”

Focus areas of Ncell

Build world class company service

Secure high quality in their networks

To have and efficient cost structure

2.2 Vision

'A vision statement presents the firm’s strategic intent that focuses the energies and resources o

the company in achieving desirable future

Ncell’s vision – “Be a world-class service company, recognized as an industry leader.

They are proud of being pioneers of the telecom industry, a position they have gained by being

innovative, reliable and customer friendly. Ncell further says “We are always striving to develop

our people according to their potentials. Our goal is to attract and retain our employees to

celebrate success together.” They contribute to a world with better opportunities

2.3 Declaration of attitude

“We have a team coming from different cultural backgrounds. We highly value the knowledge

and diversity of our employees. Team work has always been an integral part of our organization

and it is our people who make our service an experience for our customers.”

2.4 Corporate social responsibility

Ncell is actively involved in the CSR activities. It is been helping Gauri Shanker Children’s

Home. It do not get any help from government, thus operates on donations from private NGOs.

Nepal Children Organization provides about 40% of the expenses but remaining needs to be

raised by private and other donors. Since it does not have any such regular donors, it is in

financial crisis most of the times to meet the basic requirements. Ncell believes in contributing in

whatsoever manner possible for the society and currently Ncell has announced to double its on-

going corporate social responsibility (CSR) activities in 2012. Ncell is now to focus on education

sector. Under ´Adopt a School´ program, Ncell along with Save the Children, will contribute to

improving the quality of education in 11 different schools in eight districts of Nepal. Besides, the

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company is also setting up electronic libraries in collaboration with Help Nepal to provide easy

access to educational materials for underprivileged students.

3 External Environment analysis and forecasting

3.1 Political/Legal Environment:

Forces that allocate power and provide constraining and protecting laws and regulations.

Government of Nepal has initiated the involvement of the private sector in the development of

telecommunication services since December 25, 1995 A.D. To make this work more

systematic and regular; Telecommunication Act 2053 B.S. (1997 A.D.) and

Telecommunication Regulation 2054 B.S. (1998 A.D.) has been implemented as a legal

support.

Taking a charge of these regulations and acts, Nepal Telecom Authority (NTA) was hence

established in 1998. It regulates the telecom industry containing basic telecom, cellular and

internet sectors in it. NTA, performing on its duty, on 26 June 2007 (12 Asadh 2064 B.S.),

came up with quality of service parameters for basic telephone service based on WLL/Limited

Mobility and Mobile Telephone Services (Nepal Telecom Authority). Besides that, a total of

293 licenses had been issued by the regulator as at 14 August 2011, including three basic

telecommunications concessions, two for cellular mobile, nine network service provider, and

100 VSAT user licenses. On top of this the NTA had issued permits for internet

(48), GMPCS (three), rural telecom (two), limited mobility (108), international trunk telephone

(three), rural VSAT (nine) and rural ISP (six) services. (Tele Geography, 2011) These acts and

regulations on one hand benefits the consumer and protect their rights on quality, on the other

hand is proves to be a constraints to the industry suppliers.

3.2 Economic Environment:

The forces that regulate the exchange of materials, money, energy, information such as

economic growth, interest rates, exchange rates and the inflation rate. Economic growth in

Nepal is quite low. The GDP as per 2011 is only 4.5 %. With this pace of economy the level of

consumption low. But Ncell does not need to worry that much because telecommunication is a

lower middle-end product. Similarly if we look at the inflation rates, we can see that inflation

have been in an increasing trend. It is going up at the rate of 9.9 % according to the NRB

report. The rise in the prices of essential commodities for manufacturing, storage,

transportation and supply of goods will surely affect the prices of the product of Ncell. The

occurrence of rise in inflation rates will lead to additional rise in prices of the products.

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3.3 Socio-cultural Environment:

The forces that regulate the values, morals and customs of the society. These factors include

the cultural aspects and include health consciousness, population growth rate, age distribution,

career attitudes and emphasis on safety. Trends in social factors affect the demand for Ncell's

products and how the company operates. For example: an increase in the workforce of the

nation or increase in literacy rate may mean that people are now aware of advance

technologies. They might feel the need of calling abroad or need to access internet service in

their cell phones. Thus, the culture of carrying easily available cell phones as a daily accessory

may show Ncell various market opportunities.

3.4 Technological Environment:

The forces include technological aspects such as R&D activity, automation, technology

incentives and the rate of technological change. They can determine barriers to entry, minimum

efficient production level and influence outsourcing decisions. Furthermore, technological shifts

can affect costs, quality, and lead to innovation. For a company like Ncell, technological factors

are very significant to its existence in the competitive market. As the competition and needs of

the consumers change, a company must be able to develop and introduce new products. In the

competitive and technology-driven telecom industry, new products are launched quite fast. As a

result, Ncell has to be able to keep up with the competition and rate developing of new products

as a high priority issue. Another way of moving ahead in the competition is bringing automation

in business processes. In order to attain total quality management, Ncell should also take into

consideration- business process automation.

4 Assessment of industry attractiveness competitive environment

4.1 Porters 5 forces model

The 5 fundamental competitive forces for the telecommunication industry are given below:

1. Entry of Competitors: ( How easy or difficult it is for new entrants to start to compete, which

barriers do exist.)

a. Huge investment required / Capital requirements:

Since investment in physical infrastructure and IT infrastructure is very high with high capital

requirement, there is an entry barrier in this industry.

b. Government regulation:

On December 25, 1995 the telecom sector included private sectors; previously Nepal Telecom

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(NT) was the only state owned firm in the sector. Ncell (previously known as Spice Nepal Ptv.

Ltd. / Mero Mobile) and UTL came into existence after the privatization regulation and follows

telecommunication acts and policies developed by MOST (Ministry of Science And Technology)

and NTA. NT held monopoly in the telecommunication market for almost 30 years. As an

example, license for international gateway had been granted to Ncell/SNPL after almost one year

of its application.

The application process and government formalities required for acquiring license for a new

service is also complex and slow. The reasons are

* Bureaucratic government process makes the application and acquiring process cumbersome

and slow.

* Convincing the personnel in the government for bringing new service or technology itself is

difficult as the understanding and technology literacy is low at the level.

The growth of telecommunication has been restricted by NTA.

* In the entry itself for new and emerging services

* By imposing conditions that are not conducive through taxes, time consuming bureaucratic

practice etc. (Telecom service tax is 10 percent plus VAT 13 percentage makes the service

provider bear expensive tariff costs).

According to the interview conducted with the personnel of Ncell, the reasons for the restriction

in proliferation is because of unprepared technical expertise for the usage of new services and

lack of awareness about technology amongst the executives and government bureaucrats.

c. Brand identity:

At present industry scenario is different; today almost equal number of customers using Ncell

compared to NTC with Ncell having 42% of the market share. Since there is neck to neck

competition between the two major brands, it will cost very high for new players to gain the

attraction of customers.

d. Switching costs:

Telecommunication industry is an IT dependent industry. The technologies need to be updated

frequently to maintain pace with the business demand. To switch from the technologies being

used to the new technologies bear a huge cost. This high switching cost also acts as the element

causing the barriers to entry. The customer base of NT is still larger than any other firms and

hence the interconnection costs are higher. Hence the customers are reluctant to switch to other

service providers.

e. Access to Distribution:

The access of distribution of the present players is more concentrated to the urban population and

is also occupied by the dominant player like Nepal Telecom. Lack of easy access and country’s

poor infrastructure in the rural areas has caused the absence of telecommunications services in

rural areas. This difficulty in access to distribution to the new areas has created barrier to entry.

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2. Bargaining Power of Buyers: (How strong is the position of buyers, can they work together

to order large volumes.)

Bargaining power of buyers refer to the strength of the buyer’s position. In context of the

telecommunication Industry, buyers / customers are the individuals or organizations using the

services provided by the telecommunication companies. Buyers are weak because they do not

have significant influence over product and the price. The oligopolies industry (there are only

three firms) offers lesser options for the customer. There are no direct web based purchases for

the SIM cards as well as the purchases have to be made through the companies or few local

agents and hence customers are more dependent.

3. Bargaining Power of Suppliers: (How strong is the position of sellers, are there many or

only few potential suppliers, and is there a monopoly.)

The Suppliers in the telecommunication industry for the mobile operation are the firms

manufacturing and distributing SIM cards, recharge cards, CDMA handsets and technologies for

activating and providing the service. Ncell and NT select the suppliers from global bidding

process. UTL’s handsets and chipsets are supplied by LG, Korea. The power of the companies to

select the suppliers shows that the suppliers are weak. On the other hand, the availability of few

suppliers forces the companies to have a limited choice and act as the strength of the suppliers.

4. Rivalry among the Existing Players: (Is there a strong competition between the existing

players, is one player very dominant or all equal in strength/size.)

NT was only player in the telecommunication industry for almost 30 years. The monopoly of NT

ended with the entry of Ncell and UTL. There are 4 players in the telecommunication industry

with NT being the dominant player. Nepal Telecom is the leader in the market with maximum

number of services and capturing the maximum market share. Ncell, though a leader in ISP, it

has its major stake in GSM mobile service and UTL is limited with CDMA service. The huge

gap between the services offered by the companies and control of NT over the

Telecommunication Industry depicts a week rivalry among the existing players.

However, we cannot neglect the fact that Ncell has a competitive edge in providing value added

services as well as by using price strategies to attract larger customer base.

5. Threat of Substitutes: (How easy can product or service be substituted, especially cheaper.)

The threat of substitute products occurs when the demand of a product is affected by the price or

service provided by the substitute product changes. The cheaper price and easy availability of

SIM cards of Ncell and value added services and schemes like one hour free talk-time, free SMS

etc… has attracted the mobile users. But simultaneously, the expensive call tariff is another

blockade for the extensive growth of business of Ncell. The lowered / cheap interconnection-call

tariff if provided by Ncell would act as a threat of substitute for the Nepal Telecom.

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4.2 Strategy Group Map

A strategy group is a concept used in strategic management that groups companies within an

industry that have similar business models or similar combinations of strategies. There are many

ways to analyze competitors within network operators industry. One way is strategy group map.

Strategy Group Map

UTL

NTC

Ncell

The first process in designing strategy group map is identifying the two top competitive factors

in market. Thus the first variable we consider is price and second is service quality. Price and

quality of service plays very important role in shaping the total revenue, customer perception,

branding, positioning etc. In general, these two variables determine the survival and growth in

any industry, more in network operator industry.

In second phase of strategy group map, we have selected our two nearest competitors and they

are Nepal Telecom, and United Telecom Limited.

In third phase, we need to assess each competitor’s strengths and weaknesses against the

competitive factors.

Price

Service Quality

Low

High

High

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The first variable Price includes

a) The cost incurred to buy new SIM cards (voice SIM and data SIM) in market

b) The call tariff for prepaid and postpaid GSM.

c) The tariff for other secondary facilities like MMS, 3G, internet charges, CRBT/PBRT,

SMS

The second variable service quality includes

a) Ease of availability of new SIM cards in market

b) Perception of customers regarding quality of call

c) Ease of payment and settlement process

d) The outreach of services

e) The level of frequent network interruption

f) The quality of customer support services via call centre

While considering above two variables and their components, we found that Ncell has

remarkable service quality as its new SIM cards are available in each and every retail store

mostly in communication centre, cyber cafes, book store, grocery store, travel agencies etc Even

though the overall cost involved in using services of Ncell is a bit expensive than NTC, the

company operates with very nominal level of network interruption, the recharging and settlement

process is also easy with compare to other network operators in Nepal.

Even though the new SIM card for prepaid and post paid is higher than of Ncell, the average

tariff rate in GSM prepaid and post paid voice calls is lower than of Ncell. Talking about quality

of service, NTC comes in the second position. On the basis of various articles published in

national newspapers, and feedback of customers of NTC, we found that the quality of service of

Nepal Telecom is very unreliable because the service is very unpredictable. Sometimes the call

quality is very worse that we listen what we are speaking to others, when we dial particular

people other SIM card holder picks the phone etc.

Besides this common issues, the level of network interruption is very high and the resulting

consequences is weak or No Signal. Talking about call centre, in Ncell, a customer can ask any

query by dialing 9005. The staffs at call centre at Ncell are very smart and knowledgeable that

they are trained and empowered enough to solve any customer query within short span of time if

possible and practicable, but in contrast, it has been only a few months that call centre of Nepal

telecom is delivering continuous service through its call centre which can be assessed by dialing

1489. Even though the company has launched call centre, the staffs are not empowered enough

to solve customer query. If customers query could not be solved then the call centre shall be

better closed or there is no option besides improvement of services. The last firm in we have

included is UTL. The geographical outreach of company is low in comparison to Nepal Telecom

and Ncell. The average tariff of UTL which includes GSM prepaid, postpaid and data charges is

higher than of other 2 companies. The service quality is lower than of Ncell and NTC. Ncell

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should reduce price of its many services to reach even larger population in Nepal. They have

services but now many SIM cards are in people's purse not in mobile set, they use Ncell SIM as

backup not as primary number.

Thus in above figure of strategy group map, the ranking of companies on the basis of price and

service quality can be clearly identified.

5 Internal Assessment

5.1 Resource based view of Ncell

A method of analyzing and identifying firm strategic advantages based on examining its distinct

combination of assets, skills, capabilities, and intangibles as an organization. This view claims

that different performances of companies are due to the uniqueness of their resources. Generally,

these key resources refer to the permanent assets including tangible and intangible assets that a

company owns.

Assessment of Ncell resources which prove them as a having their distinct competencies:

Tangible assets:

They are the physical and financial means a company uses to provide to its customers.

Physical Resources

Size, location, technical sophistication, land and building

Financial Resources

Internal fund generation

Firm’s borrowing capacity

Capacity for Investment

Intangible assets:

Assets that you cannot touch or see but that are very often critical in creating competitive

advantage.

Technological Resources

o Revenue from licensing, patents and copyright

o Technical and scientific employees

Reputation

o Brand recognition

o Brand Equity

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o Reputation of company with suppliers, with government , government agencies

and with community

Organizational Capabilities:

Skills that a company uses to transform inputs into outputs.

Ncell’s customer service

Multimarket offerings

Understanding the local customer needs and conditions.

Trained human resources

Ongoing training or recruiting programs

Innovative promotional campaigns

5.2 Internal Audit

1. Management functions audit

TeliaSonera owns 80 percent of the shares and votes in Spice Nepal, the second largest

mobile operator in Nepal. Spice Nepal launched its operations in September 2005 and is

the second largest mobile operator in Nepal, with around 1.8 million subscriptions and an

estimated market share of approximately 41 percent, as of August 2008. Spice Nepal’s

net sales in 2007 and for the first six months of 2008 were 27.4 million Euro and 22,7

million Euro, respectively, and EBITDA, excluding non-recurring items, was 12,6

million euro and 12,1 million Euro, respectively. Mobile penetration in Nepal, whose

population is 28.4 million, is approximately 13 percent. Also in mid March 2010 Mero

Mobile was merged with TeliaSonera and rebranded as Ncell.

Since the company is managed by TeliaSonera AB is the dominant telephone

company and mobile network operator in Sweden and Finland. The company has

operations in other countries in Northern, Eastern Europe, Central Asia and Spain, with a

total of 150 million mobile customers (2010). It is headquartered in Stockholm and its

stocks are traded on the Stockholm Stock Exchange and on the Helsinki Stock Exchange.

Since it’s managed by the reputed and large giant of network operator in the world, it

delivers its products and services with expert management team, with the help of

innovative marketing strategy and sophisticated technology with huge financial

availability to invest.

2. Marketing capabilities audit

Ncell has been spending significant proportion of fund in promotional campaigns. The

last two years has been remarkable for TeliaSonera and Ncell in Nepal. Not only it

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increased its subscriber base from 1.5 million to 3.7 million, but it also launched various

services, both- premium and mass based. This year, while on the one hand it launched the

luxurious BlackBerry handsets for the corporate world, it introduced the cheapest

handsets at Rs 999 for the rural Nepal on the other.

Witnessing the growing market potential in data service like in other parts of the world,

Ncell had launched the 3G service in mid-September and Ncell Connect, one of the

fastest data services on September 30.

Some of Ncell’s latest promotional campaigns are described below:

a. Ncell SLC Promotion offer

With advertising slogan of “Ncell stay Together, Forever Just @ Rs 50. This year’s SLC

students can get Ncell SIM at just Rs. 50 and get balance worth Rs. 75 ( Main balance:

Rs. 50 and Bonus balance: Rs. 25) and attractive gift along with it. Also get 500 MB data

worth Rs. 399 free with the purchase of Ncell Connect Data SIM.

b. Ncell Connect data card at Rs 1

The first Nepali private mobile operator Ncell has been offering “Ncell Connect Data

card”at one rupee.

In this offer, “Customers can get Ncell data card at 1.13 rupees (including VAT). For

this customer need to buy Ncell SIM at 99 rupees and 1000 MB data package, which

costs 789.87 rupees. Overall customer will get 1000 MB data with Ncell Data card at

890 rupees (including vat).”

3. Finance/accounting audit

7.1 million subscriptions today

Revenues doubled in Q3 2011 y-o-y

EBITDA margin above 50%

Ncell pays more than 50% taxes and other tax type fees of the total revenue

Ncell, the country’s first private GSM operator, announced that it would be spending US

$ 100 million (Rs 7.15 billion) in 2011.

Through aggressive marketing promotion and innovative service, Ncell is now aiming to

become the No. 1 player in GSM mobile telephony in Nepal. According to TeliaSonera’s

Interim Report (January-September 2010), in the Eurasia region, growth was the

strongest in Nepal and Kazakhstan with a rise of 1.6 million and 1.3 million subscriptions

to 3.4 million and 8.4 million, respectively. Nepal has recorded the highest growth in the

region with a subscriber base increasing by 0.7 million in third quarters. “The strong

growth trend is a result of a successful launch of a new tariff plan with the same price to

all networks and the improved customer perception of Ncell since the successful

rebranding,” the report says.

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TeliaSonera had decided to increase investment in Nepal in voice and data service. The

fact that Ncell has been adding an average of 200,000 subscribers every month justifies

its decision to come to Nepal. Nyberg’s third visit to Nepal in the last 18 months shows

Nepal is on TeliaSonera’s high priority list.

4. Production/operation audit

a. Analyzing the basic business models employed by Ncell and NTC; both

companies earn by sales of SIM cards, the call charges and nowadays even

through bandwidth usages. The concept of value added services for mobile

devices has still not matured and the same can be said about caller-tunes and other

entertainment services. In addition to this, the emerging popularity of Smartphone

has provided opportunity to give a variety of services to the end-users. In a

competitive market, consumer research report shows that the adoption rate of

telecom services is heavily influenced by the service satisfaction, which means a

continuous to and fro communication between customer and business. This means

a constant presence -- physically and virtually. People are continuously looking

for information and support. This is why, online presence is so important.

b. If we compare NCELL and NTC, you will immediately notice where each one is.

NCELL has been heavily adopting latest technology and business models to gain

users base, whereas NTC is still in rudimentary stages.

c. Ncell, the first private mobile operator in Nepal, has become the largest ISP

(Internet Service Provider) of Nepal after becoming the largest GSM-based

telecom operator with 1.9 million subscribers. This large user base subscriber

makes Ncell the largest ISP, but still not in terms of infrastructures. According to

Nepal Telecommunication Authority (NTA), Nepal Telecom (NT) has become

the 2nd largest ISP by subscriber base of 1.13 million users

5. MIS audit

Ncell operates with latest CRM (Customer Relationship Management) and ERP

(Enterprise Resource Planning) system. Each and every information of customers and

employees performance will be processed via these systems and hence management

could get the snapshot and detail figure of what exactly is going in customers and

employees mind.

6. Research and development audit

Ncell has started 3G or third generation service along with its Ncell Connect, a data

service in the Everest region. It successfully launched the service by setting up a base

station at the Everest base camp located at an altitude of 5,200 meters. There are seven

3G base stations in the region and the one established in the base camp is the highest 3G

station in the world.

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AIRCOM International, the leading independent network planning and optimization

solutions provider, has announced that Nepalese mobile network operator Ncell, part of

TeliaSonera Group, has selected its OPTIMA tool, part of the AIRCOM I-View

framework, for network performance management.

Ncell’s implementation of OPTIMA is part of its strategic focus on increasing the quality

of the network and service to cope with accelerated subscriber growth.

On the other side, Nepal Telecom has selected Xalted's Roaming Fraud Detection &

Analytics Solution, xNODE, as an integral technology in connection with the expansion

and upgrade of Nepal Telecom's GSM Roaming and NRTRDE System.

5.3 Value Chain Analysis

Support Activities:

General Administration:

Attractive and well managed infrastructure

ERP, MIS, CRM tools, networking equipment, telecom equipment for coverage and

signal strength, IT infrastructure

Engineering Department is an in-house facility designed for the care, maintenance, and

repair of instruments and equipments at Ncell. All administrative activities are conducted in

computer which is connected by MIS system run by latest software.

Human Resource Management:

Well functioning HR department.

IT skilled workforce, telecom engineers

SCM specialists

Young and energetic employees

Training and Development programs.

Technology

Conducting 3G services

Updated software

Research committee which has a managerial responsibility for decision making in regards

to all research conducted at the facility.

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Procurement

Established a SCM network to acquire networking and telecom tools

Maintaining a long term relation with suppliers to provide handsets and services.

Primary Activities:

R&D

Well functioning R&D department

Inbound Logistics:

Ncell Warehousing of SIM cards are in the Head-office

Ncell Activation process are done using computer software

Operations:

Headquarter at Krishna Tower, Baneshwor

Includes infrastructure development, network integration, competitive position, capable

supplier.

Inputs obtained from suppliers are processed by new technology and highly qualified

staffs for a better service delivery.

Outbound logistics

GSM services, broadband internet

Marketing and sales

New customer attracting schemes in every short period

Advertisement through hoarding boards, news papers, websites, TV & FM radios

Trend setters, market innovators.

Service:

Timely follow check ups

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Value chain analysis

Supporting

Activities

Primary Activities

5.4 Benchmarking

Benchmarking is the process of comparing one's business processes and performance metrics to

industry bests and/or best practices from other industries, dimensions typically measured are

quality, cost and service

Therefore, benchmarking of all the telecom industries is set by NTA ( Nepal

Telecommunications Authority) where, NTA set their benchmark standard according to ITU

(International Telecommunications Union) i.e. NTA monitor the performance of telecom

industries of Nepal according to the ITU. Telecom industries of Nepal (Ncell, NTC, UTL and

CDMA) services have found below the criteria set by International Telecommunications Union

(ITU) this was shown on a recent study on the quality of service. A telecom service is considered

General administration: Better corporate image and management

HRM: Training reward systems, employee motivation, satisfaction

Technology: 3G services, Updated software, Research committee

Procurement: Good long term relationship with suppliers

Operation

Appropriate

automation of

production

process

Marketing &

sales

Innovation in

sales

promotion and

advertising

Service

Promptness of

customer

feedback

Outbound

logistic

GSM

services,

broadband

internet

Inbound

logistic

Efficiency of

raw material

warehousing

activity

R&D

Well

functioning

R&D

department

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good if the operator’s call quality rate is 90 percent or above, according ITU, but these criteria

can’t be set by the Nepalese telecom industries.

The 2010 survey had also showed service quality of all three major operators below the

benchmark. Among GSM operators, Ncell has edge over others when it comes to call quality

rate. The report, released in December 2010, found Nepal Telecom landline’s call quality rate at

81.10 percent, GSM 69.60 percent and CDMA 76.10 percent. Ncell’s GSM mobile service

scored 84.50 percent and United Telecom’s CDMA received 80.80 percent.

Network performance, billing performance, enquiry service, supplementary service and

maintainability of service index were the parameters used to find out quality of service and

parameters like call setup success, call drop, point of interconnection (POI) congestion, call

quality index were considered for the finding of network performance of wireless service for

every telecom industry of Nepal.

Telecom Industries Weight(Cost, Quality & Service)

NCELL 0.6

NTC 0.6

CDMA 0.2

UTL 0.2

Below is the benchmark level set by the NTA, out of 1 Ncell and NTC is weighted as 0.6

compared to their competitors but when NTA published their annual quality survey they

mentioned in the newspaper that Ncell is getting best scores and they have room to improve.

Subscriber growth of Ncell has proved that customers are satisfied with their service compared to

other telecom industries. According to Ncell they have been improving their quality month by

month and they have actually meet NTA’s benchmark criteria already.

5.5 EFE matrix

Analysis utilizing an External Factor Evaluation Matrix can be used to determine the severity of

threats and opportunities of Ncell. By assigning weights to each threat and opportunity, we can

calculate an overall rating that signifies where the firm stands in the industry relative to the

factors analyzed. An EFE Matrix for Ncell is as follows:

Key factor Weight Rating Weight score

Opportunity

Large domestic market 0.15 3 0.45

Untapped Rural market 0.10 3 0.30

Diversification 0.10 2 0.20

Threats

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High Competition 0.15 2 0.30

Changing Consumer Demands 0.20 4 0.80

Political Instability 0.15 4 0.60

New Entrants 0.15 2 0.30

Total 1 2.95

On the above matrix weight is given from 0.0 to 1.0 and rating is done from 0.0 to 4.00 and

finally the weighted score is obtained after multiplying weight with rating. The weighted

score exhibits the current situation of the firm. From the above matrix we can say that

opportunity is outweighed by the existing threat. So Ncell should be more focused to avoid

the threat by exploiting the existing opportunity.

5.6 IFE matrix

The Internal Factor Evaluation Matrix works similarly to the EFE Matrix. The IFE Matrix

measures the internal strengths and weaknesses of Ncell, again by assigning numerical ratings to

each factor. An IFE for Ncell is as follows:

Key factor Weight Rating Weighted score

Strength

Part of TeliaSonera 0.02 4 0.08

Strong Distribution Network 0.20 4 0.8

Brand Identity 0.2 3 0.6

Highly Skilled human resource 0.03 3 0.09

Largest market share 0.10 5 0.4

Innovation 0.15 3 0.45

Strong R&D 0.15 4 0.6

Weakness

High Advertising Costs 0.1 4 0.4

Difficulty in Understanding Local Culture 0.05 1 0.05

Total 1 2.59

On the above matrix weight is given from 0.0 to 1.0 and rating is done from 0.0 to 4.00 and

finally the weighted score is obtained after multiplying weight with rating. In the IFE

Matrix, the strengths are relative to the internal environment of the firm, whereas the

weaknesses are a reflection on how the firm interacts with the external environment. When

analyzing the above matrix we see that Ncell currently is in strong position. This can help

to cope up with the existing weakness and threats in the market.

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6 Strategic options

6.1 Generic strategies

Generic strategies are the core idea about how a firm can best compete in the marketplace. Today

communication services are an integral part of people’s daily lives. Since the arrival of

Smartphone and tablets, we rely increasingly on digital communication for social and business

interaction. Communication services have moved from being expensive and exclusive to being

available, affordable and personal.

In this competitive era one need to come up with various services and facilitates to survive in the

long run. To be competitive enough Ncell can be found following differentiation strategy.

Though it charges premium pricing but it has come up with providing various different product

attributes. Though it’s not an innovative service but in comparison to Nepal available

telecommunications Ncell has been always found to be the first one to come up with new

schemes i.e sasto tariff, ramailo tariff, fast internet, prbt, videocall, missed call notification etc.

6.2 Joint Venture

Spice Nepal Private Ltd. was established in 2004 as the first private mobile operator in Nepal

and launched its services under Mero Mobile brand in 2005. In October 2008, TeliaSonera

acquired controlling interest in Spice Nepal. As of the year-end 2009, Spice Nepal had some 2.2

million subscriptions and around USD 90 million in annual net sales. As of March 12, 2010,

Spice Nepal operates under the brand Ncell.

Spice Nepal/Ncell is part of TeliaSonera, the fifth largest telecommunication company in Europe

in terms of market value as of January 2010. Ncell is the joint venture with TeliaSonera.

6.3 Strategic alliance

A Strategic Alliance is a relationship between two or more parties to pursue a set of agreed upon

goals or to meet a critical business need while remaining independent organizations. Partners

may provide the strategic alliance with resources such as products, distribution channels,

manufacturing capability, project funding, capital equipment, knowledge, expertise, or

intellectual property.

Ncell is found to have a strategic alliance with BlackBerry. The BlackBerry solution brings

together Smartphone, software and services to allow easy wireless access to email, phone,

calendar, web, multimedia and other business and lifestyle applications.

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Another alliance is Ncell has select AIRCOM to improve network performance management.

AIRCOM International is the leading independent network planning and optimization solutions

provider.

6.4 Strategies adopted by Ncell

Ncell is profit organization which only competes with a limited product in one particular market

to the analysis of directional strategy and other strategies adopted by Ncell is discussed below:

6.4.1 Directional Strategy

Ncell aims to add to the variety of products in its product line and therefore has offered different

varieties of schemes like corporate SIM, SLC student SIM, RAMRO SIM, SAJILO SIM and

others, which are practically different schemes for the same product which would charge you

different rates according to your preferences; this aiding in the expansion of the active customer

base that it has. Moreover it aims to cut down on the number of inactive customers by bringing

out new schemes which motivate them to switch to Ncell.

6.4.2 Business Strategy

Ncell can be said to have followed differentiation strategy. Although it may seem very

improbably and unlikely that one organization would be able to do such a thing with the limited

products it has within its portfolio, Ncell has been able to do both due to the presence of a largely

inefficient telecom industry in Nepal. With regard to the competitive tactics, i.e. a specific

operating plan detailing how a strategy is to be implemented in terms of where and when it is to

be put into action, Ncell Pvt. Ltd. follows the following tactics:

6.4.3 Timing Tactics (when to compete)

Ncell although a not the pioneer in the telecom industry due to its entry just around seven years

ago can be said to be the innovator and also pioneer in several regards. With the introduction of

several schemes and products unavailable to the Nepalese market at the time of introduction it

has been able to do so. Having recognized the need of individuals, it brings out various plans and

offers to satisfy the needs of different consumer segments.

Market Location Tactics (where to compete)

Ncell although a late mover with regards to its entry in the market, is the second largest player. It

has throughout its lifespan aimed to become the market leader and so to achieve such a strong

hold in the market, it pursues an offensive strategy. Furthermore due to the market leader being

inefficient in its business, the company does not face much retaliation despite its offensive

ventures. The other market players most of the times are only likely to react to the business

strategies that Ncell implements.

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6.4.4 Functional Strategy

It is the approach a functional area takes to achieve corporate and business unit objectives and

strategies by maximizing resource productivity. It is concerned with developing and nurturing a

distinctive competence to provide a business unit with a competitive advantage.

The functional strategies of Ncell Pvt. Ltd are as follows:

6.4.5 Marketing Strategy

Ncell can be said to primarily pursuing a push strategy with the presence of extensive promotion

and a wide and well structured distribution channel. It is the organization with the largest

promotional activity in Nepal and through the presence of different schemes, which appear to be

very lucrative, want to push products into the markets.

* Pricing: The costs associated with the telecom industry are widely fixed in nature and

realizing this Ncell from the outset set to grab a large customer base and provide its products at a

range which is highly affordable.

6.4.6 R&D Strategy

Ncell does not invest much in research and development of new products as it borrows from the

research and development practices of its parent company, TeliaSonera. However market

research regarding the performance of its products in the eyes of the consumer and other

feedback activities are undertaken at very regular intervals.

6.4.7 Operations Strategy

At Ncell the product which is a service is constantly produced and in a high number. The

operation would primarily comprise of repair and maintenance and installation of new

infrastructure to enhance the quality and availability of the service.

6.4.8 Purchasing Strategy

Ncell purchases its products from different low cost providers primarily from China as is the

case of the other competitors. The major purchases are in the form on technology and

infrastructure.

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6.4.9 HRM Strategy

Workers at Ncell are divided into several functional groups and no temporary workers are hired.

However, there is a presence of interns when there is a gap between the manpower requirement

and the availability.

7 Strategic analysis and choice

7.1 SWOT matrix

Strength

Part of TeliaSonera

Largest market share

Strong Distribution Network

Brand Identity

Highly Skilled human resource

Innovation

Strong R&D

Weakness

High Advertising Costs

Difficulty in Understanding Local

Culture

Opportunity

Large domestic market

Untapped Rural Market

Diversification

Threats

High Competition

Changing Consumer Demands

Political Instability

New Entrants

Strength

1. Part of TeliaSonera

TeliaSonera holds about 80% shares of Ncell. It is a strong and competitive group, which has

high pool of resources. Ncell gains a lot of advantage from the parent company in terms of

knowledge/technology sharing, fully leveraging benefits of scale and synergy through business

strategy and network building techniques.

2. Largest market share

Ncell is the largest telecom service provider (GSM), having 43% market share, besides that it is a

leading ISP in Nepal.

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3. Strong Distribution Network

It has a subscriber base of more than 7 million users and reaches customers throughout 75

districts of Nepal.

4. Brand Identity Strong advertisements and promotions of Ncell are one of its biggest strength.

It has ample resources to invest in its branding. Every new scheme it offers increases the sales of

Ncell. Thus, it is a strong brand identity. Today, from a 10-year-old child to 70-year-old grand-

papa; everyone is aware of the brand “Ncell”.

5. Highly Skilled human resource

The ability to attract the best talent in the market & to retain it has become one of the key factors

of Ncell’s success. Currently Ncell have an efficient manpower of more than 500 employees.

6. Innovation

Innovation is another strong aspect of Ncell. It has been growing itself and always succeeded to

bring new and innovative product to the markets for its consumers. Ncell connect is once such

innovative product introduced by Ncell.

7. Strong R&D

Ncell has built on its R&D under TeliaSonera. R&D technology centers of TeliaSonera in

various parts of the world have highly qualified scientists and technologists. With the strong

support from TeliaSonera R&D as well as the brand development capabilities, the company is

well placed to meet the challenges arising from the increased competition intensity.

Weakness

1. High Advertising Costs

Ncell is been paying high cost for its advertising agency. There is a significant increase in the

advertising budget.

2. Difficulty in Understanding Local Culture

TeliaSonera is an international company with a global strategy. Though, it operates to act as a

local company, it cannot understand the local culture as well as other locally established

companies such as NTC and UTL can do.

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Opportunities

1. Large domestic market

There is huge market development opportunity in urban region of Nepal. At present, it only has a

market share of 43%; it can expand it to being a market leader.

2. Untapped Rural Market

With the presence of 81.4% of the total population living in the villages of Nepal, the Nepalese

rural telecom market is something of high importance for Ncell.

3. Diversification

Though Ncell has entered into internet service sector, it has much more scope in other segments

as well. It can diversify itself within the industry or in any other related industry such as cell

phones.

Threats

1. High competition

Ncell is facing high competition mainly from NTC and other companies such as UTL. NTC and

Ncell have entered into a price war, as NTC is giving tough competition to Ncell SIM cards and

internet services.

2. Changing Consumer Demands

The trends in the demands of telecom services are changing. Consumers today are more aware of

product and services available. They demand for more quality at low prices. Similarly, the

demand of variety of services and new discount schemes is widely in demand.

3. Political Instability

Politics has a high influence in the way companies run in Nepal. We have frequently changing

ministries and un-amended regulations. Nepalese government is still delaying the formulation of

Constitution of Nepal. In such a condition, it is a severe threat to Ncell; no one knows when there

is another major change in the politics and power having an impact on regulations, taxations and

so on.

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4. New Entrants

Since the market is less exploited and there is a high scope and market untapped, there are

probable chances of new entrants.

7.2 Grand strategy selection matrix

Concentrated growth

Concentrated growth is a grand strategy in which a firm directs its resources to the profitable

growth of a single product, in a single market, with a single dominant technology. This strategy

involves focusing on increasing market share in existing markets. Concentration may involve

increasing the rate of use of a product by current customers; attracting competitor's customers;

and/or attracting nonusers/ new customers.

Ncell is a joint venture between private investors and Sweden based telecom Teliasonera. Mero

mobile has been rebranding as Ncell. The rebranding comes as part of the company’s strategy to

further strengthen its position on Nepal’s mobile telecommunication services market. During

2009, Ncell more than doubled its mobile network which now covers more than 60 percent of

III

Maximize strength

Internal

(redirected

resources within

the firm)

External

(acquisition or

merger for

resource

capability

Overcome weakness

I

IV Concentrated growth

Market development

Product development

Innovation

II

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Nepal's population. As a result, Ncell has today the best mobile network quality in Nepal,

according to customer and technical surveys.

After founding that large chunk of youth, especially college level population is not using NTC

service. Ncell decided to target youth segment. They run many campaign such as rock concert,

street festivals targeting youth where they distributed free SIM. They also ran special offer for

SLC pass-out students. Ncell become successful, and now, they claim to be number 1 in Nepal,

having 7 million subscriptions. This way Ncell has been found concentrating towards the single

market.

7.3 Grand strategy clusters

According to Grand strategy cluster matrix, it can be concluded that Ncell lies in the 1st

quadrant where Ncell is considered to have an excellent strategic position. The strategies which

Ncell have applied to be in the quadrant 1st are concentrated growth and forward integration.

This is because customers are seen to be more satisfied with the firm’s current strategy,

shifting notably from it would endanger the firm’s established competitive advantages. As

Ncell is using various promotional campaigns and different services in order to attract

customer’s base i.e. increasing use of present products in present market.

Rapid Market Growth

Weak

Competitive

position

Strong

Competitive

Position IV III

II I

Slow Market Growth

Concentrated growth

Vertical integration

(forward integration)

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In the same way it’s have also been using the forward integration strategy in order to protect its

profit margins and market share by ensuring better access to consumers or material inputs, also

to diminish the risk associated with a narrow product or service line. Ncell have taken direct

control over the distribution channel i.e. now it distributes the sim card by their retail store

rather than any intermediaries which save the cost and can gain more profit, as now they don’t

have to give some percent of profit to the intermediaries.

8 Conclusion

From establishment to current scenario, Ncell Nepal has made great contribution to uplift the

situation of Nepalese telecommunication industry. Before some decades, only one network

operator i.e. Nepal telecommunication used to operate in monopoly market. During monopoly,

companies used to set price according to their own policy rather than customers willingness and

value addition.

When government allowed other telecommunication companies to operate in Nepalese market,

then the market became competitive. Spice Nepal, UTL, Satellite Nepal and other small

companies came into existence. Ncell Nepal took a vision to be a world class service company,

recognized as an industry leader by connecting all Nepalese people by the tools of value and

quality.

Looking at recent actions adopted by Ncell, we could say that its programs and policies are

consistent with its Mission and Vision. If we analyze value chain activities of Ncell, then each

activities are consistent with country strategy and corporate strategy.

Ncell Nepal has always been the pioneering network operator to offer innovative promotional

campaigns for customers in comparison with other companies. The company is aggressively

spending to expand large pie of customer base and to improve favorable customer experience.

When Nepalese business environment was not considered as attractive place for investment,

Ncell Nepal invested aggressively, created enormous job opportunities, became a largest tax

payer and more importantly made remarkable contribution to uplift living standard of Nepal

besides its major role take Nepalese communication into new height.

Even though the average tariff of company is a bit higher than of NTC, customer are highly

satisfied with companies services and product offering.

In sum and substance, the company has been able to formulate competent strategy considering

the real scenario of Nepalese business environment. Moreover, it has been able to implement its

strategy with its innovative promotional campaigns, up to date technology, trained and customer

friendly employees, and sophisticated customer feedback management system.

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Contents

1 Introduction .........................................................................................................................1

2 Mission, vision and Corporate Social Responsibility ............................................................1

2.1 Mission .........................................................................................................................1

2.2 Vision ...........................................................................................................................2

2.3 Declaration of attitude ...................................................................................................2

2.4 Corporate social responsibility ......................................................................................2

3 External Environment analysis and forecasting ....................................................................3

3.1 Political/Legal Environment: .........................................................................................3

3.2 Economic Environment: ................................................................................................3

3.3 Socio-cultural Environment: .........................................................................................4

3.4 Technological Environment: .........................................................................................4

4 Assessment of industry attractiveness competitive environment ...........................................4

4.1 Porters 5 forces model ...................................................................................................4

4.2 Strategy Group Map ......................................................................................................7

5 Internal Assessment .............................................................................................................9

5.1 Resource based view of Ncell .......................................................................................9

5.2 Internal Audit .............................................................................................................. 10

5.3 Value Chain Analysis .................................................................................................. 13

5.4 Benchmarking ............................................................................................................. 15

5.5 EFE matrix.................................................................................................................. 16

5.6 IFE matrix ................................................................................................................... 17

6 Strategic options ................................................................................................................ 18

6.1 Generic strategies ........................................................................................................ 18

6.2 Joint Venture............................................................................................................... 18

6.3 Strategic alliance ......................................................................................................... 18

6.4 Strategies adopted by Ncell ......................................................................................... 19

6.4.1 Directional Strategy ............................................................................................. 19

6.4.2 Business Strategy ............................................................................................... 19

6.4.3 Timing Tactics ..................................................................................................... 19

6.4.4 Functional Strategy .............................................................................................. 20

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6.4.5 Marketing Strategy............................................................................................... 20

6.4.6 R&D Strategy ...................................................................................................... 20

6.4.7 Operations Strategy .............................................................................................. 20

6.4.8 Purchasing Strategy ............................................................................................. 20

6.4.9 HRM Strategy ...................................................................................................... 21

7 Strategic analysis and choice .............................................................................................. 21

7.1 SWOT matrix ............................................................................................................. 21

7.2 Grand strategy selection matrix ................................................................................... 24

7.3 Grand strategy clusters ................................................................................................ 25

8 Conclusion ......................................................................................................................... 26