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MAXIS, KING OF THE RINGTONES

Extracts from this document...

Introduction

Acknowledgement I would like to thank my professor, Dr James Nayagam for his guidance, comments and suggestions. I also gratefully acknowledge research support from Maxis website, Ministry of Energy, Communication & Multimedia, Malaysian Communication and Multimedia Commissions, and Statistics Department. EXECUTIVE SUMMARY Maxis Communications Berhad (Maxis) is a mobile focused telecom service provider with fixed line and IDD businesses to support its wireless operations. It is the number one cellular service provider in Malaysia by quality and quantity of subscribers as well as profitability. The major part of my research on Maxis will focus on its mobile division because this currently comprises the bulk (over 90% of the total revenue) of the company's operations. The company is well placed within an expanding and stable Malaysian telecommunication market, which should support continued fundamental expansion off an already impressive base. Given what Maxis has already achieved, the company will likely remain one of the foremost Southeast Asian operators. MAXIS, KING OF THE RINGTONES INTRODUCTION This paper reviews the performance of Maxis Communications Berhad (Maxis), a mobile focused telecom service provider with fixed line and IDD business to support its wireless operations. It is the number one cellular service provider in Malaysia by quality and quantity of subscribers as well as profitability. The major part of my research on maxis will focus on its mobile division because this currently comprises the bulk of the company's operations (over 90% of total revenue). The review period covers 5 years from 1998 to 2002. I have organised this paper into three sections to provide a better understanding of Maxis's survival and its competitive edge in the telecommunication market. The first section explains Michael Potter's theory on Competitive Strategy. As for the second section, I will analysis the telecommunication industry and the third section will be an analysis on the company's performance. DATA The data for this review is obtained from various sources. ...read more.

Middle

Refer to the chart below for details. Source: The Malaysian Communication and Multimedia Commission From just 18% in 1997, Maxis's market share has risen to 31% in 2001. Maxis has posted the largest gains compared against its competitors. Also notable is Maxis's track record in achieving a leadership position in both post-paid and pre-paid services with a market share of 38% and 32% respectively. Unlike operators such as Digi, which are skewed largely towards one segment of the market, Maxis's base is strong on both fronts. Highest quality subscriber base Even more impressive than the sheer market share numbers that Maxis has acquired is the high quality of subscriber base it has garnered. In most markets, rapid expansion of market share has involved a sacrifice of subscriber quality and increased price-cutting, but not in Maxis'a case. That was the case when the Malaysian mobile sector was completely liberalised in August 2000. In the immediate aftermath, there was significant price undercutting by industry laggards such as Time and Telekom in a bid to improve market share. Rather than compete on pricing, Maxis retaliated with innovative competitive strategies and subscriber incentives. It focused on segmenting the market and rewarding greater usage. Furthermore, I believe that Maxis's successful avoidance of direct price competition has had beneficial impact on the market as a whole by limiting and thus minimising the impact of price competition. Maxis's provisioning for bad debts (about 1.6% of the company's revenue) is the lowest among the operators in Malaysia, reflecting its high quality subscriber's base. Profitability The combination of top market share, higher revenue generating customer base and high operational standards has meant that Maxis has done extremely well in profitability. Moving from loss of over RM300 million in 1998, Maxis's earnings are now starting to reflect management's prudence during the Asian financial crisis. As revenue picked up and efficiencies started from a greater economic scale; its net profit rose 173% in 2000 to RM358 million. ...read more.

Conclusion

2 Overall Best Managed Company. * Best Newly listed company in Malaysia * Best IPO - Finance Asia * Voted as the Best IPO deal * Equity Capital Markets Poll Best Asia Pacific IPO * Leader in Corporate Governance Malaysia * Malaysia Equity Issue of the Year * Equity Deal of the Year * Best Equity Deal CONCLUSION Maxis provide an excellent example through its continuous improvement in the face of extensive local and global competition. Staying ahead of the field means the company can never afford to stand still. In the case of Maxis, it never stopped planning its next strategy (which is quite evident from the company's achievements in the last 5 years). The company achieved its leading position through a clear strategy of developing premium brands, emphasising high network quality and customer services, and introducing innovative services and products. With its recent acquisition of TIMECel and its strategic alliances with the major regional telecommunication players, Maxis will continue to gain the lion's share of the network market addition. This would also allow Maxis to compete more effectively in a consolidated industry as well as in the international arena and to deploy network capital expenditure more efficiently. REFERENCE Begg, D., Fischer, S. & Dornbusch, R. (1994), Economics, 4th edition, UK : Mc Graw-Hill Book Company, Chapter 10. Besanko, D., Dranave, D., Shanley, M. (2000), Economic of Strategy, Wiley & Sons, Canada, Chapters12 & 13. Ghemawat, P., (2001), Strategy and the Business Landscape, Prentice Hall, New Jersey. Maxis Communication Berhad., (2002), 'Prospectus on Initial Public Offering of Ordinary Shares' retrieved from http://www.maxis.com.my Maxis Communication Berhad., (2002), Annual Report for Financial Year Ending 13 December 2003, retrieved from http://www.maxis.com.my McConnell, C.R. & Brue, S.L. (1999), Economics, 14th edition, Irwin/McGraw-Hill, Chapters 25 & 26. McTaggart, D., Findlay, F. & Parkin., (2003), Economic, 4th edition, Addison Wesley, Chapters 11 to 13. Porter, M.E., (1980), Competitive Strategy, New, The Free Press, N.Y. Shrikant, (2003), 'World's First & largest Wireless Broadband Alliance', In Starhub, 20 March 2003, retrieved from http://www.starhub.net.sg. ECO - 501 ASSIGNMENT 2 NELSON PILAY 1 ...read more.

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