Analysis of the telecommunications industry

Online presence gives a chance to companies to operate, inform and provide services (purchasing) and create awareness about their services globally. Customers in their turn got a chance to be informed about new offers and get a chance to compare prices.

5. Social

It is estimated that “the use of mobile phones for voice calls has not risen significantly in recent years, whereas there has been a sharp rise in their use for data and other non-voice calls.”

The most recent introduction is SIM-only contract packages, which allow consumers to purchase a SIM card for use in any handset capable of accessing the relevant network. Consumers sign up to relatively short (starting with one month) rolling contracts. 

4. Opportunities and Threats

Based on trends for the mobile telecommunication sector that have been identified in the previous section, this report will proceed with discussing opportunities and threats for major players in the industry.

An aging population can be seen as a threat and an opportunity as on the one hand elderly people are not technologically driven customers as young people are. The market introduction of the latest module of handset for them will not be a reason for contract upgrading for instance.

The adaptation has to be done carefully however, as the upcoming generation of pensioners will also be more technologically wise, (the modern job market just requires the use of new technologies). Although they might not always want the newest “gadget”, they will probably not be satisfied with just basic services either.

With the development of the next mobile generation, (4G) speed and quality of services will increase and drive new technological innovations and new services can be launched. However, those services need to be available for customers in all areas. The third mobile phone generation services are available almost everywhere now so there is an opportunity to increase the network coverage in order to gain more customers for more customer gaining.

Currently third generation (3G) mobile phone services are available in half (46.5%) of all postal districts however “90.5% of postal districts had such coverage by at least one operator.” 

Although the emergence of new technologies is in many ways positive, it will be also be a threat as it might give opportunities for such technologies as Skype to enter the mobile communications market. Another threat is coming from MVNOs (Mobile Virtual Network Operators) which are operating in a niche market and are offering cheaper international calls.

Another threat is coming from regulatory bodies, most seriously from OFCOM as its regulations are obligatory. For instance, Ofcom forced to cut the cost for calls from one network to another and to abolish charges for contract termination. These cuts consequently lead to profit losses. 

5. Porter’s 5 Forces analysis

“Cellular or mobile service providers in this industry are subject to several driving forces. These driving forces include regulatory agencies, technological innovation, the threat of new entrants, and competition and mergers amongst existing companies”.  

5.1 Power of buyers

Customer leverage is relatively high in the telecommunications market. This is due to the information about packages available on the internet and elsewhere. However their influence is rather weak when it comes to terminating contract packages as fees for that are high and advanced notice is required.   

Marketing for mobile services is intense. Frequent telemarketing, TV advertising, celebrity endorsements, billboards, radio and bulk mail inform consumers of the various long-distance rates and services that are available.

Although consumers possess significant leverage, mobile service providers are fortunate in that the product they offer is virtually a necessity. Usage may vary but every developed area will employ these services regardless of the cost. This is why the government is so involved in protecting the consumer. Additionally, long-distance providers have an extremely large pool of consumers to target. The impact of loosing a few clients is relatively insignificant, considering the billions they still have the opportunity to acquire.

According to the Ofcom report more than 50% of consumers of mobile services prefer pre-paid services, as it is easier to switch network suppliers.

5.2 Power of suppliers

The value chain in mobile communications has considerably changed with the inclusion of services other than basic voice and data services. In the past providers of mobile telecommunications services also were network providers. Technological and software infrastructure was naturally already integrated into the network. Therefore service providers did not have to work with a lot of other suppliers and were in a relatively strong negotiating position towards suppliers of application devices and systems integration for example.

However nowadays we typically see an expanded value chain that includes a wide range of suppliers. For instance the delivery of a music download via mobile device involves the record publisher which typically holds and controls the content rights of music delivered and thus becomes a part of the value chain. The application necessary to access the content via a mobile phone comes from an application service provider like Virgin Mobile.

Moreover, mobile virtual network operators (MVNOs) such as Virgin Mobile that do not have their own infrastructure deliver their service platform involving another supplier platform as T-Mobile.

“Finally, consumers access the service using a mobile phone. This growing complexity in the value chain has made it more difficult both to measure the size of the mobile telecommunications market and to define its competitive structure.”

5.3 Threat of substitutes

5.3.1 Skype

Although there are no direct substitutes for mobile voice services, Skype is however seen as a threat by mobile network operators. Skype offers lower cost calls globally and connects its users all over the world for free. Consequently, people rather use Skype calls than having to pay for international voice services. This, of course, leads to profit losses for network operators.

Skype has launched applications for iPhones and Black- Berry devices with the help of which users got an alternative to traditional cellular networks.  They can make voice calls through via WIFI only.

However, Skype has its drawbacks in quality. The problem is that Skype’s traffic capacity is insufficient and that the Internet via which it is working, does not support QoS (QoS is an engineering term and refers to a resource reservation control mechanism).

Moreover according to Lazar the biggest factor of Skype’s potential success will depend on how well skype penetrates the mobile market. Furthermore, Skype is going to run more over carrier’s data networks “once they start building more 4G networks based on technologies such as Long Term Evolution and WiMAX.”

5.4 Threat of new entry

The entry of new companies into the industry is seen as a way to increase competition and therefore to increase the benefits for customers. The barriers of entry into the mobile telecommunications industry and market are incredibly high since frequencies for mobile telecommunications constitute a scarce resource and because the entry requires huge investments in building infrastructure. The only alternative way requires the acquisition of a commercial contract to obtain access to an existing operator’s network .

5.5 Rivalry

MNOs operate in an environment of intense rivalry. Firstly because services provided by MNOs are undifferentiated and mainly compete on price. The potential in further market penetration is declining and the companies are vying for market share.

6. Competitive analysis

6.1 Market share

Currently O2 holds the biggest share of the long-distance market with 28%. Vodafone and T-Mobile hold 22.2% and 22.1% respectively and are closely followed by Orange with 21.2%. Hutchinson 3G (3 Network) finally contains 6.5% of the market. The later competitive analysis will concentrate on those 5 major players.

7. Commonalities and Differences

This part of the report will look at commonalities and differences between the major players in the mobile telecommunications industry in the UK (and which were mentioned in previous section) in terms of services and the handsets range they provide, price, brand positioning and retail outlets atmosphere.

7.1 Commonalities

The group of major players as O2, Vodafone, T-Mobile, Orange and 3 Network are, as has been mentioned, global companies, with global strategic goals and huge resources and influence. They do basically offer services on the same markets.

7.2 Differences

Each MNO’s aim is to attract customers, therefore they differenciate themselves by brand positioning, product/service range and price.

7.2.1 Positioning

3 Network position themselves for the niche market of technology-focused customers by providing 3G services since they came to the UK market.

Orange is positioned as a strong brand which is known across the globe for its strong content, qualities and technological expertise.

Unlike elsewhere in Europe, where T-Mobile position themseves as a mid-marketplayer, in the UK it «positioned towards the younger end and it is reflected in its marketing communication.»

Vodafone’s market positioning is about the quality of the product and the services they offer. They are leaders in product and service innovations.  has a wide ranging handset portfolio covering different customer segments, price points and an increasing variety of designs.

O2 has perhaps the greatest appeal to younger consumers of all the major networks.

7.2.2 Product/Service range

3 Network was the first to offer mobile TV, and to extent the skype services available to their customers. This attitude not to regard VoIP services as a threat but as an opportunity proved itself. “Data from 3 shows that people who use Skype on 3 generate 60% more revenue for 3 than their non-Skype-using customers. Skype users spend almost a third more on SMS than non-users, and are 14% less likely to leave 3 for another network.”  Moreover the loyalty is higher as the share of contract-based users is higher than pre-paid users.

The facts mentioned above compensate the lower range of handsets offered and the absence of iPhone. In addition “3 Network offers  and  that allow you to make free Skype-to-Skype calls, and calls to landlines and mobiles outside of your own country at our .”

7.2.3 Price

3 Network keeps its prices quite low in comparison with other networks. For instance a £15 pay monthly contract allows 300 minutes to any network and 300 minutes 3 to 3 calls plus skype and msn application free.

For instance IPhone is offered exclusively by O2, Skypephone from 3 network, Blackberry storm for Vodafone, T-Mobile Google phone G1.

Or additional services like free skype to skype calls available only from 3 network included into contract and SIM-only package from O2.

8. Orange AS

Although each one of the MNO’s  has its strengths and weaknesses all of them lack customer services quality.

This section will identify service marketing issues for the next 5 years for Orange.

Although Orange is positioned as the MNO that provides qualified products and services, it is currently suffering from customer pressure about its customer service quality.

For instance there are a lot of complaints about contract termination charges and requirements of advanced notice, particularly about time (time you are required to inform the company before you can calcel your contract).

Despite Orange is positioned as the MNO that provide qualified products and services its reputation as such can be severely damaged because of poor customer service.

Managers at Orange seem to be aware of this issue and address it.

During the next 5 years Orange would need to think about adapting services to an aging population and communicate that according to “grey” market segmentation needs. In order to keep current customers happy and attract new ones it will need to improve customer service and to improve its image that has been damaged by the service issues. The major customer service issues occurred in post-purchase operations such as customer support particularly via call centres. This issue will be further discussed and given solutions and recommendations now.

8.1 Call centres

Good customer serviceis vital for service industries as the quality of customer services is directly linked to the success of the company.

It is found that quality of services provided by call centres is affecting customers “willingness to buy from a company, their perception about a company and the possibility of recommending a company to others.”
“According to the survey almost all business professionals (98.9%) indicated that poor consumer services by a company’s contact centre would make them have negative perception about the company as a whole. On recommending a company to others, it was found that about 91.5% of professionals thought a negative experience from a firm’s customer service point, would deter people from recommending a firm to others.”

“Contrary to the negative effects of poor contact centre services on branding and marketing efforts, positive call centre experiences among customers will have a positive impact on an organisation's fortunes.”

8.2 Recommendations for improving call centres customer services using Disconfirmation Model of service quality

This model is based on expectations and performance of the service following by satisfaction or dissatisfaction about the company. 

The expectations to such a company as Orange are high. The performance does not meet the expectations.

There are measures that can be taken to increase customer’s satisfaction about call centre customer services.

Firstly “Telephone inquiries at call centres should be answered as quickly as possible as six or more rings before a customer is connected is unacceptable.” Secondly, “companies using automated call centers may have to add live operator services to fully meet customer satisfaction. “Most prefer to speak to an actual person rather than an automated system – respondents who were initially connected to a 'live' operator were significantly more likely to be satisfied with the service experience than those connected to an automated menu,”Finally, “As much as possible, call centre representatives should avoid putting customers on hold for long periods as putting customers on hold for three or more minutes could have a negative impact on a company's image.”

Bibliography

Corporate-marketing-branding.suite101 :  [Online] [Accessed 29/12/2009]

California State University, Stanislaus: Dr. Randall Harris September 16, 2009 TelecommunicationsIndustry , Table data takek from Key Note www.keynot.co.uk, Telecom report  whereas original sourse of data taken from The Netsize Guide 2009, Netsize Group/Informa Telecoms & Media 

Nature.com  [Online] [Accessed 29/12/2009]

Networkworld.com: Mobile Skype: Idea sounds

good, but not the calls 13  APRIL 20. 2009 •  [Online] [Accessed 29/12/2009]

Ofcom (2005)  [Online].[ [Accessed 28/12/2009]

Ofcom: The Consumer Experience 2009 Research Report [Accessed  26/12/2009]

Ofcom . [Online].[ [Accessed 28/12/2009]

University of Bath: Constantina Bichta, “Industry in breaf: The UK telecommunications industry 2001”, Published by University of Barth, November 2001 www.bath.ac.uk/cri/pubpdf/Industry_Briefs/Telecomms_Constantina_Bichta.pdf 

 [Online].[Accessed 17/01/2010]

---