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IUSACell – Case Study
-Group: B- IIM – Ahmedabad- 6th Feb 2010
Participants: Hemendra, Dhruv, Suvadip
Background Mexican Telecom Market About IUSACell
Vision & Strategy Current Environment & Challenges Product Market Mix Measure of Success Vulnerabilities Observed Functional Strategy Gaps Business Plan Going Forward Strategy
Discussion Outlines
Mexico Market Scenario
Monopolistic Market till 1989 - Telemex being the only LL operator
IUSACELL Started Cellular Services in 1989Telecom Regulatory Body, SCT created 9 cellular business regions & Infused competition with 2 licenses per region.
6 Year exclusive rights for public domestic and international long distance services with Telemex
Inadequate & unreliable services of TelemexLow mobile penetration in 1993 – 0.4%High customer dissat with Landline services
Delivery time 6 months & aboveHigh call drop – 14.5%Call success in first attempt– 82.7%
About IUSACELL
1939Founded by Alego
Peralta
1989Incorporated as a wholly
owned subsidiary to market cellular services in
Mexico City area
1957Entered
Telecommunication
Area of Operation4 out of 9 regions
Current market share ranges from
40% to 70%
Service OfferingBasic Telephony , Value Added Service , Roaming
& Telephonic Accessories
199323% stake bought
by Bell Atlantic
Current Vision & Strategy
• Vision: - To be an established player in Telecom services & solutions with a high degree of customer satisfaction.
• Strategy: - Aggressive acquisition thru reducing upfront cost- Addressing the base thru flexible pricing package- Targeting high value new subscribers thru alternative educational tools
- Creating differentiation thru enhanced Value Added Services.- Customer Service Restructuring- Regional Expansion thru acquisitions & JVs
Current Environment & Challenges (SWOT)
STRENGTH WEAKNESS1. Presence in 4 most lucurative markets in Mexcio 1. Poor understanding of Customers requirements2. Region 9- Central Hub for routing calls to the US 2. Targeting Wrong set of customers 3. Highest mobile customer base 3. Decline of APRU and HIGH in Churn4. Wide offering of VAS/ VOICE 4. High on customer dissat (billing & service)5. International partners-Bell Atlantic 5. Dependacy on single operator as a carrier
6. High cost of customer acquisition
OPPORTUNITY THREAT1. Low Mobile penetration 1. Advance Technology2. Growing Economy 2. Competition entry3.Opportunity in NLD/ ILD and BroadBand services 3. Telmex's capacity to cross subsidised mobile business4. Bad Landline services 4. Regulatory environment.5. Digitization of Network 5. Political Uncertainty
Basic
Services
VAS
Roaming
Services
Handset &
Accessories
Current Market Mix
Services
Business &
Personal Users
Professional
SEC C&D
users
Customers
Huge
Untapped
Potential
Duo
Competition
High ARPU /
MoUs as
compared to
US.
Market Scenarios
Subs presence
in 4 key regions
(Central &
North)
Coverage in the
most dense &
lucrative
markets.
Strategic
connectivity with
US markets.
•
Market Presence
0%15%30%45% 38% 37%
25%42% 36%
22%
Socio-Economic Class
IUSACELL Telcel
18-25 Years 26-35 Years 36-49 years > 50 Years0%5%
10%15%20%25%30%35%40%
20%
34%38%
8%
26%
38%
28%
8%
Age-Wise Classification
IUSACELL Telcel
62% of the customers are from Middle & Lower Segment.
Telcel’s customer composition is better than IUSACELL.
Telcel has higher proportion of younger users.
IUSACELL has higher proportion of middle-aged customers.
Customer Profiles
Customer Profiles
0%10%20%30%40% 37%
13%20%
4%11%
35%
12%28%
7% 11%
Occupation-Wise Classifi-cation
IUSACELL Telcel
Business Personal Both0%5%
10%15%20%25%30%35%40%45%
33%27%
39%33%
25%
42%
Usage-Wise Classification
IUSACELL Telcel
Higher proportion of Senior Management users are with Telcel.
Strategy Gaps
• Customer Segment- Customer Profile: ‘Many Free Riders’
- 74% of churn customers stop using cellular services.- 62% of the customers belong to SEC C&D.- 40% customer used less than 100 min- Lower proportion of youth segment.
• Product Strategy- VAS, not appealing customer?- Sub. Rev less than 5%- Poor usage except msg. center- Telephone & Accessories:- Contributing about 2.5 % of rev but attracting risk profile customers.
Strategy Gaps• Distribution Strategy
- Despite CSC relatively lower proportion of SEC A & B but resulting in high cost
- CR (Corp Rep): 75 people but relatively lower proportion of high value customer like President / Director, relatively to Telcel
• Customer Care Management- 35 % of churn to Telcel due to customer service issues- Lack of Retention activities
Vulnerabilities Observed Aggressive Customer Acquisition
- High Cost- Poor targeting of Customer
High Customer Churn- Poor Network Quality- Billing issues- No customer connect
Expanding new business segments with core segment is under strain
Segmented approach for customers
Best Fit Plans For:
- Light Users: 0-300- Medium Users: 301-800- Heavy Users: > 800
Segmented Approach:
- Roamers (Inroamers): Roam Mexico @ IUSA Cell
- VAS: Bulk Minutes/ High Rentals (Built in VAS)
- Data Plans & NLD / ILD- Local Voice Calls- Regionalized Segmentation
- Light Users: 0-300- Medium Users: 301-800- Heavy Users: > 800
Mass Advertising:
- Low ARPU users (Prepaid)- Convenience User
(Advance Rental Scheme)- Productivity (Solutions +
Voice)
Direct Marketing:
- Churn from Competition - Retention Plans- Bill Payment – Loyalty
Points
MoU Usage Pattern
Winback & Loyality
LifeStyle
Strategy….Going Forward
Segmented approach for customers
Best Fit Plans For:
- Light Users: 0-300- Medium Users: 301-800- Heavy Users: > 800
Segmented Approach:
- Roamers (Inroamers): Roam Mexico @ IUSA Cell
- VAS: Bulk Minutes/ High Rentals (Built in VAS)
- Data Plans & NLD / ILD- Local Voice Calls- Regionalized Segmentation
- Light Users: 0-300- Medium Users: 301-800- Heavy Users: > 800
Mass Advertising:
- Low ARPU users (Prepaid)- Convenience User
(Advance Rental Scheme)- Productivity (Solutions +
Voice)
Direct Marketing:
- Churn from Competition - Retention Plans- Bill Payment – Loyalty
Points
MoU Usage Pattern
Winback & Loyality
LifeStyle
Strategy….Going Forward
Measure of Success
• Growth in Revenue Market share• Enhance Revenue Per Subscriber (ARPU)• Increase in Operating Income
Microsoft Office Excel 97-2003 Worksheet
Business Plan for IUSACELL
• Based on status quo
Microsoft Office Excel Worksheet
Thanks !!!
Target Market: Product & Market Mix
Segment Product / Services Value Proposition
Category A – Life Style / Productivity
VAS , Data, Voice Solutions – 20%
Solution / Differential Service Experience
Corporate / HNI / VIP
Voice & VAS – 30% Customized / VAS / Retention
CMS: Category C Segmented Base Voice – 45%
Usage Based Segments
About IUSACELL
Subsidiary of Grupo IUSA- A diversified group- into Industrial Production/ Construction, Telecom, Energy Supply
Established – October 1989Area of Operation - 4 out of 9 regionsCurrent market share - 40% to 64% (in different regions)1993-94 : 43% stake bought by BELL ATLANTICService offering: Basic service, VAS, Roaming and Telephones
accessories.