In the assignment below telecommunication industry is critically analyzed by studying its characteristics, identifying and analyzing its key areas and its current position and how it is affected by micro and macro environmental factors. All these analysis is done by using analytical tools like Porter’s Five Forces framework, PESTEL analysis, Industry Life-Cycle analysis, drivers of change within the industry, etc
The telecommunication industry can be divided into two fixed and wireless. In this assignment the wireless telecommunication industry of Singapore is analysed. Also, one most likely situation has been identified, with relevant reasons, which the industry will most likely to face in the future.
Last two decades, telecom industry has grown and evolved and changed the way people interact. fixed line is still the most penetrated telecom segment and wireless or mobile segment is catching up and has contributed over the last decade, offering a wide range of opportunities to provider and services to customers. There are more than 4 billion mobile phone users worldwide and the number is increasing to 5 billion in coming years. Now there is a shift of revenue from fixed to mobile and from voice to data is accelerating. Apart from social and cultural impact on modern society, telecom industry is one of the major contributors of world economy with an estimated 3% of the global GDP. Driven by strong mobile and broadband penetration in emerging markets and substantial economic recovery in developed markets, the global telecom industry will hit double digit growth over the next four to five years.
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Singapore has a strong telecommunications sector. The island country is built as a competitive telecoms market over the past few decades, helped by its geographical location and its excellent infrastructure. It was one of the first countries in the world to have a fully digital telephone network (Broadband, n.d.). In 2009 the World Economic Forum (WEF) described Singapore as ‘Asia’s most connected country; it is the leader in the region in terms of ICT development. In early 2010 mobile penetration has passed 140%, with 3G customers accounting 47% of the total mobile subscriber base. Singapore’s mobile operators are now looking forward at the Long Term Evolution (LTE) platform for providing faster mobile broadband Internet access into the future. ( (BuddComm, n.d.)) Singapore has one of the most advanced telecoms infrastructures in the world with one of the lowest prices in the world The country’s small size, high national income and government commitment to developing the country into a premier telecoms and broadcasting hub in the region have all helped to make Singapore a leader among the South-east Asian countries. The industry ranges from niche players to full service providers. Available telecoms services include public switched telephone network (PSTN), voice over Internet protocol (VoIP; used by consumers willing to accept slightly lower quality in exchange for cheaper calls), leased lines, frame relay, asynchronous transfer mode (ATM), integrated services digital network (ISDN), Internet-based virtual private networks (VPN), broadband and wireless access (Limited, 2006).
There are three telecommunication service providers in Singapore. The three main players according to the market share are listed below:-
Singapore Telecommunications (SingTel) is the largest communications group in Singapore with operations and investments in more than 20 countries and territories. The group has a strong market position. The group is the largest telecom player in Asia excluding China. ((SingTel), 2009)
M1 offers services like mobile voice- and data-communication over its 2G/3G/3.5G network, including international-call services to both fixed-line andmobile customers. These include SMS, WAP, MMS, 3G GPRS, and more recently, 3.5G. M1 also offers pre-paid mobile services under its M Card brand (M1 limited, n.d.).
Limited is the sole cable television operator in Singapore. Its top four direct shareholders are STT Communications, Qatar Telecom, NTT Investment Singapore and MediaCorp. It operates Singapore’s fastest two-way 3.5G mobile network. It is a Pioneer in ‘hubbing’ which is the ability to deliver unique integrated and converged services to all its customers (Copyright StarHub 2009, n.d.).
Porter’s five forces
Intensity of Rivalry
It’s the degree of competition existing in the sector based on which the potential of industry can be determined. Competition is inflexible as the Singaporean market is either mature or saturated. This shows that M1’s competitiveness with SingTel and StarHub is intense as they conduct more advertising campaigns, launching of new call plans and increased quality of customer services.
Bargain Power of Buyers
The advancement of mobile phone service industry has led the customer to become more complicated than before; especially in Singapore’s mobile service market has saturated and customers are fewer prices sensitive. The non price aspects resulted in a high bargaining power of customer, because customers would want to have the best quality service (due to higher spending power of Singapore) regardless of how much they would have to pay. So this resulted in aggressive competition amongst companies, as well as reduced prices and higher quality.
Bargaining Power of Supplier
As a provider of mobile phone services, the signal tower is very crucial, the raw material required for producing signal towers is mainly steel and therefore here is a need for reliable, good quality steel manufacturers. Other than signal towers, capital and investment, which requires the co-operation of shareholders.
Rivalry among existing competitors leads to tactics such as aggressive pricing and promotion, battles for customers or channels or increased service level. (T.Have et al. 2003, p. 46). The competition is inflexible as the Singaporean market is either mature or saturated. This means that the competition is intense as they conduct more advertising campaigns, launching of new call plans and increased quality of customer services
Threat of New Entrants
Barriers to entry benefit companies already operating in an industry as they protect an established company’s revenues and profits from being whittled away by new competitors”. (Dictionary.com n.d) (singapore, n.d.) Current practices of long contract and hefty termination penalties make it difficult for new entries to the market so for a firm to enter a Singapore’s telecommunication industry, the firm will need to pass the following barriers of entry, which are amount of capital needed, technology, and skilled labours. The most difficult part for firms to enter an existing market is acquiring the capital, and most of the time it is a huge sum of money. Apart from large investments, it also takes a long period of time to establish in a telecommunication industry. This was clearly demonstrated by M1 where they broke in to monopolized market by SingTel. It took M1 around a year to obtain a license to operate mobile phone services and radio paging service.
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Threat of substitute products
The appearance of the internet can be posed as a substitute especially VOIP to mobile phone services. As internet services booms, more and more people are turning towards the internet for means of communication. This also allows customers to spend less or nothing at all, internet can serve multiple purposes, such as entertainment and different types of communication, such as talking to more than one person at a time. Software like Skype, (a popular programs used to communicate verbally), is very successful due to its ability to carry clear voice messages to anyone in the world, even to those with slow connection.
This poses great threat to mobile phone companies, since they are convenient for those who use dial-up connection for internet as they are still able to make calls to people through online calling programs and not through normal telephone line. Thus, such calling programs would be a threat to 3G services on mobile, where customers’ are being charged to make a video calls; whereas it can be used for free on the internet. Fixed line telephones, traditional mail and postcard delivery also pose a threat.
PESTEL Analysis of Telecommunication Industry
Singapore continues to be investor friendly market with little political risk. Singapore is ranked second in the world for having a very low risk of political instability. Singapore enjoys political independence in 1965 and due to one party government system; there has been little disruption of policy implementation. Which has helped in creating a well organized institutions such as IDA, TAS these bodies have been able to create a strong with regulations and guidelines to create a secure environment. Singapore faces some political weaknesses; the public believe that the Singaporean Government always wants to introduce new methods and new approaches to earn more from the public.
It been a while since the release of first 3G phone, but before the success of Apple’s phone, a lot of people did not know what does 3G do more and more people started to use 3G service, which is much more profitable than traditional 2G GSM GPRS service.
3g technology has gained a lot of market share in 2009 with 6.58 million mobile users and a penetration rate of 136%, compared with 6.22 million mobile users and a penetration rate of 129% in 2008. Youth markets in Singapore are most likely to be highly receptive to new 3G technology telecom companies conduct internet sales on hand phones, telephony and accessories such as batteries, chargers, headsets, memory cards etc.
Singapore has various Free Trade Agreements (FTAs) with its trading partners, bringing about some changes to the country’s legal environment. Various restrictions which were on indirect and direct foreign ownership within the telecom sector have been lifted, which has created a progressive commercial environment, over 97% of homes have fixed-line telephone connections. Singapore-based companies enjoy benefits in services, such as enhanced access to important service sectors like telecommunications in the FTA markets. (Broadband, n.d.)
Technology has helped by increasing capacity, lowering costs and making possible to deliver innovative applications over non-traditional media. For example Internet telephony. The high convergence of telecommunications, broadcasting and computing technologies has created intelligent networks with very high speeds that can carry large volumes of voice, video, text, data, images and full-motion video. (singapore, n.d.)!IDA unveiled a new ten-year information and communications (infocomm) master plan, dubbed Intelligent Nation 2015 (iN2015), its fifth and most significant infocomm road map to date. The new technology will seek to identify opportunities arising in key technology areas, such as info command nano- and bio-technologies (Limited, 2006) Mobile One’s (M1) 4G-branded Long Term Evolution (LTE) network is expected to be ready by the first quarter of next year (CHEE, 2010)
The youth market is definitely growing from all over the world; Singaporean youth are number exception to this trend, this combined with their higher spending power make them a profitable market to cater to. The youth market in Singapore is also considered tech savvy, which are very enthusiastic about technology related products. And youth markets are early phone adapters. Survey by AC Neilson shows us that such people from the 15-29 age groups formed a 32 percent of the total market in Singapore. According to research Singaporean youths are very particular about current lifestyle trends. StarHub formed an affiliation with MTV Asia, since MTV is very influential towards youth’s current trends.
More Technology driven
Youth markets are expected to be highly receptive to 3G (3rd generation services). As mentioned earlier youths are the fastest of all age groups to adapt to new Technology. However, WAP(wireless application protocol) was launched before Wi-Fi and 3G, although there were drawbacks to WAP, such as it is usually very slow, and does not contain all information which can be usually be located on the internet. Moreover, one latest development for M1 is focused on using the mobile phone to make payments for mundane transactions such as parking fees, movie tickets, groceries, phone bills and the like. This development is most probably suitable for businessman or career woman. For example, this can attract the attention of customers that used to flight for business purposes.
4. Growth of 3G network
The country has grown both in its mobile subscriber base (143%) penetration as well as its value-added data services. After the launch in 2005 the initial pick up was slow as the technology was new. Subsequently, however, there has been a strong upsurge in demand. This has been helped by the wider availability of more affordable, high feature handsets (newsroom, n.d.). By early 2010, there were more than 3.2 million 3G subscribers in a country where the total mobile market was 6.9 million. This means that 3G subscribers represent 47% of the total subscriber base as 3G rapidly approaches to become the ‘normal’ mobile service in the country. With increasing competition in the sector, and increasing Smartphone penetration rates the use of mobile data services and applications over the next few years will increase, positively impacting the 3G market.
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