Wireless Service Providers
description
Transcript of Wireless Service Providers
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WIRELESS SERVICE PROVIDERS
Kasey HarbesElizabeth KelleyDylan HullZachary West
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WHY WIRELESS INDUSTRY? Access to communication services has
become a necessity in America Growing online business has increased
demand for wireless internet access Households with only wireless phones
doubled from 2007 to 2010 from 15.8% to 29.7%
Number of pricing plans available is incredibly high
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THE INDUSTRY Industry Description Industry Structure Markets Competition Key Success Factors Main Competitors HHI
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DEFINING THE INDUSTRY
SMS and MMS Wireless telecommunications
equipment rental Operation and maintenance of
switching and transmission facilities
Wireless internet services and other non-messaging data
Selling cell phones and other wireless devices
Wholesaling wireless infrastructure capacity to telecommunications resellers
Local, long distance and international calling
Main Segments Main Activities
Percent of Industry Revenue
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MAJOR MARKETS
Percent of Industry Revenue
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INDUSTRY STRUCTUREElementLife Cycle Stage Growth Revenue Volatility MediumCapital intensity HighIndustry Assistance NoneConcentration Level High
Regulation Level MediumTechnological Change HighBarriers to Entry HighIndustry Globalization LowCompetition Level High
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COMPETITIVE LANDSCAPE High competition with a steady trend
Internal competitionService BasedProduct innovationGeographic coverageExternal
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KEY SUCCESS FACTORS Developing close relationships in
complimentary industries Access to capital investment for funding Ability to quickly adapt to technology
changes Brand recognition Exclusive product sales contracts Economies of a scale
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MAJOR COMPETITORS
Market Share
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HHI Verizon: (36.5)2
AT&T: (32.1)2
Sprint Nextel Corporation: (15.4)2
T-Mobile: (10.7)2
Other: (5.3)2
1,332.25 + 1,030.41 + 237.16 + 114.49 + 28.09
= 2,742.4 = HHI Recall: HHI > 1,800 is a highly concentrated
market
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PRICING STRATEGIES Second Degree Pricing
Penetration Pricing
Locking-in
Tacit Collusion
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TWO PART TARIFF Service composed of two parts
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TWO MAIN PRICING MODELS
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SUBSIDY MODEL Mainly used by
major competitors
What factors influence subsidy?
Upgrade fees on subsidized phones
Source: http://www.verizonwireless.com and www.att.com
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TRANSPARENT COST (PREPAID) Serves a niche market Pay as you go or by days No contract commitments Savings roughly = subsidy
Verizon 2 Year Contract
GoPhone Prepaid
GoPhone Pay by
DayContract Savings
450 Min. $40 $50 n/a 240Unlimited $50* n/a 1.99/day 252.7
Source: www.verizonwireless.com
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OTHER PRICING STRATEGIES
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PENETRATION PRICING High fixed cost industry and heightened
barriers 2nd Tier firms can undercut competition Low variable costs
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UNLIMITED INDIVIDUAL PLANS Verizon - $120/month
(36.5%)
AT&T - $120/month (32.1%)
Sprint - $99.99/month (15.4%)
Virgin Mobile - $55/month (<5%)
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Lock – In Costs Verizon
AT&T Sprint Virgin Mobile
Termination Fee2- year contract
Standard Phone $175 $150 $200 $100 or $20/month
Advanced Phone $350 $325 $350 $100 or $20/month
LOCK IN COSTS
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Two firms agree to play a certain strategy without explicitly saying so.
TACIT COLLUSION
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IDENTICAL PRICING PLANSAT&T Verizon
Individual Plans450 minutes $39.99 $39.99900 minutes $59.99 $59.99Unlimited $69.99 $69.99
Family Plans700 minutes $69.99 $69.991400 minutes $89.99 $89.99Unlimited $119.99 $119.99
Messaging1000 Msgs $10.00 $10.00Unlimited $20.00 $20.00
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Offer many of the same devices
Similar contract agreements
Similar termination fees
TACIT COLLUSION CONTINUED
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Verizon – 36.5% Market Share AT&T – 32.1% Market Share Possible reasons:
Network externalitiesGeographic advantages
TACIT COLLUSION CONTINUED
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ANALYSIS & RECOMMENDATIONS
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INDUSTRY CURRENTLY Industry is thriving and experiencing fast
rates of growth
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INDUSTRY OUTLOOK Increased demand for wireless data services Wireless has started replacing land lines Expanding demand for wireless data services
will offset declining voice-only service demand
Tablet Computers E-Readers
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WIRELESS DATA SERVICES Verizon’s early adoption of LTE technology
will soon be followed by AT&T and Sprint Consumer experience dependent on several
factors Verizon’s upcoming mobile video network
may put strain on broadband data allocation
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INDUSTRY OUTLOOK Revenue outlook predicts continued growth
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ADVERTISING EXPENDITURES VS. MARKET SHARE
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INDUSTRY RECOMMENDATIONS Invest in data intensive infrastructure Bundle data plans across devices Worldwide plans via strategic alliances Move towards less costly mobile devices Partnerships with other companies?
Verizon Wireless and Time Warner Cable Potential Partnership
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QUESTIONS?