How can China Unicom use the iPhone to increase 10% of the subscriber market share within 24 months?. MGMT 650B – Consulting Skills for Managers. Presented by Team D: BOHRA, Shilpa Rajesh; CHAN, Yat Hei; LIN, Michelle Lan Yan; MO, Siu Hei; TONG, Sze Man; TSE, Mei Yi Joyce. Section [1]. - PowerPoint PPT Presentation
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Transcript
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How can China Unicom use the iPhone to increase How can China Unicom use the iPhone to increase 10% of the subscriber market share within 24 months?10% of the subscriber market share within 24 months?
MGMT 650B – Consulting Skills for Managers
Presented by Team D:BOHRA, Shilpa Rajesh; CHAN, Yat Hei; LIN, Michelle Lan Yan; MO, Siu Hei; TONG, Sze Man; TSE, Mei Yi Joyce
Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. We accepts no liability whatsoever with respect to the use of this document or its contents. 2
Section [1]
Storyline
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Storyline – Pyramid Principles China Unicom (“CU”), being the second largest mobile operator in China as well as globally, is facing a highly
competitive market resulting with losing subscriber market share in China every year since 2003. SITUATION
In August 2009, CU partnered with Apple to launch iPhone 3G in China hoping to regain its subscriber market share.
How can CU use the iPhone to increase 10% of the subscriber market share within 24 months?
1. CU has to set the price for iPhone and associated plans and its positioning in China carefully.a) There is a price range to iPhone and associated plans that China subscribers are willing to pay b) Competitors response to CU’s pricing will affect the number of subscribers c) Handset subsidy CU give to subscribers has to be taken into accounts
2. CU has to position itself and iPhone to appeal to mobile phone usersa) The uniqueness of iPhone and CU can open up a new market for CUb) The approach that CU takes is required to maintain competitive edgec) CU need to prevent grey market
3. CU has to use effective distribution channels to target their customers.a) The customer segment that CU is going to target will greatly affect the number of subscribers that they can attract.b) The different channels that CU use can effectively reach the targeted subscribers to boost market share.c) The methods that CU apply is convenient for target customers to buy
4. CU has to use promotion initiatives to market iPhone and the associated plans.a) The brand awareness that CU and Apple build can introduce themselves and get the attention from more potential
subscribers.b) Advertising in the well chosen locations and media can effectively draw awareness to the iPhone and to China
Unicom.c) Other non conventional measure, ie. bloggers, can help China Unicom to advertize more effectively and
efficiently.
COMPLICATION
QUESTION
ANSWER RATIONALE
ANSWER RATIONALE
ANSWER RATIONALE
ANSWER RATIONALE
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Section [2]
Dummy Charts
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Premium Pricing Strategy on iPhone in China According to BRICS, 3G services generate 25% to 30% premium over 2G ARPU internationally
In China, an average of 29% ARPU premium is charged on data ARPU over blended APRU
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
Japan UK Italy Germany China SouthKorea
Russia USA Spain France Canada Brazil
Data revenue as % of total revenue Data ARPU premium over blended ARPU
ARPU premium and proportion of data revenues internationally
Source: BRICS
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iPhone Pricing Strategy in Hong Kong Hong Kong “3” has recently launched the iPhone 3Gs plan in Aug 2009. China Unicom can
use “3” iPhone pricing strategy as reference Net ARPU increases from Plan B to Plan E as data plan usage and handset subsidies
increase
117 94 106 123207
104142
175
191
21138
198248
298
0
100
200
300
400
500
Plan A Plan B Plan C Plan D Plan E
Net ARPU Handset subsidies per month
119 95 108 12420819 103
140174
190
138
198
248
298
0
100
200
300
400
500
Plan A Plan B Plan C Plan D Plan E
Net ARPU Handset subsidies per month
“3” - Monthly Tariff & Net ARPU for iPhone 3Gs 16GB version
“3” - Monthly Tariff & Net ARPU for iPhone 3Gs 32GB version
Source: “3” iPhone plan
RMB RMB
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The high end segment of the market will beable to afford the premium pricing of iPhone
<=Rmb1,000 ,
7%
Rmb1,001 -2,000, 34%
Rmb2,001-3,000, 26%
Rmb5,000+,12%
Rmb3,001-5,000, 21%
Source: China Reality Research
Monthly Household Income
Telecom expenditure accounts for approximately [3%] of household income in China iPhone will target the high end segment of monthly household income of above [Rmb3,001],
such that telecom expenditure will represent a minimum of approximately [4%] to monthly household income
Telecom expenditure as % household income
3%
4%
5%
6%
4%
0% 2% 4% 6% 8%
China
Hong Kong
U.S.
Japan
UK
Source: [China Reality Research]
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¥9,552 ¥9,552
¥5,388¥4,498
¥0
¥2,000
¥4,000
¥6,000
¥8,000
¥10,000
¥12,000
China Unicom iPhone Plan China Mobile HTC Hero Plan
CNY398 ARPU x 24 Months Handset Value
China Unicom iPhone vs China Mobile HTC Hero
Source: [China Reality Research]
At the same monthly tariff, China Unicom iPhone handset value is about $900 higher than China Mobile HTC Hero handset value
By paying total of Rmb9,552 for 2 years, China Unicom customers receive a CNY5,388 value iPhone and China Mobile customers receive a CNY4,498 value HTC Hero
Unlimited Data + Free Handset Plan (24 Contract Months x ARPU in CNY)
RMB
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¥9,552 ¥9,552
¥7,152 ¥7,152
¥4,752 ¥4,752
¥2,352 ¥2,352
¥5,388¥4,498
¥0
¥2,000
¥4,000
¥6,000
¥8,000
¥10,000
¥12,000
China Unicom iPhone Plan China Mobile HTC Hero Plan
CNY398 ARPU x 24 Months CNY298 ARPU x 24 Months CNY198 ARPU x 24 Months
CNY98 ARPU x 24 Months Handset Value
China Unicom iPhone vs China Mobile HTC Hero
Source: China Reality Research
Handset Value Breakeven point for China Unicom is CNY225 (CNY5388 / 24 months) vs China Mobile’s is CNY187 (CNY4,498 / 24 months)
For both China Unicom and China Mobile, minimum plan charge will be from CNY187 to CNY225
Breakeven Analysis for Unlimited Data + Free Handset Plan (24 Contract Months x ARPU in CNY)
RMB
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80%
70%
20%
30%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
China Unicom China Mobile
Constructive to Industry Destructive to Industry
Regulator's Opinion to Price War
Source: Interview with Mr. [x]
Regulators, Mr. [x] believes that price war by China Unicom or China Mobile is constructive to the industry
Regulator's Opinion to Price War
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Scenario Analysis of Handset subsidies as % of ARPU by China Unicom & China Mobile
Source: [China Reality Research]
The percentage of handset subsidies provided to subscribers will appeal subscribers interest to subscribe certain plan with China Unicom instead of China Mobile
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China Telecom Market Development
Time
Mar
ket
Op
enn
ess
1987 1995
• Strictly government controlled
• China Telecom Monopoly
2008
• Highly regulated and government controlled
• China Mobile & China Unicom Oligopoly in wireless
3G licensesissued in 2008
• Start deregulation and market opening
• Market new entrant of China Telecom in wireless market
China Mobile IPO in 1997
China Unicom IPO in 2000
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FACTORS AFFECTING iPHONE POSITIONING
Price Subsidy BusinessStrategy
Global image Long termopportunity
Gray Market GovernmentRegulations
OtherSmartphones
Google'sAndroid
High endconsumers
Features 335 citiescoverage
CATEGORIES
Factors affecting iPhone positioning
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APPLE iPHONE FEATURES
iTunes preinstalledCensorship Model
Custom apps.Safari browserTank 2.0
Cultural TwitterlutionSecret Police
The Little White BookiMade this iPhone
Other App store offeringsDisabled Wifi
Third party applicationsExpanded emailsHigh speed surfing
Wireless videoBattery life uneven
Shaky 3G conectionSleek lookWCDMA
Features affecting iPhone Appeal
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Demographic of mobile phone users in China
Below 20
41 to 60
60 above
21 to 40
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Current Tariff Structure in China Mobile Industry
RMB / Month
Tar
iff
Str
uct
ure
(M
inu
tes)
0 100
• Solely Air time• App. 500 mins/mth• No data capacity
150
• App. 1500 mins/mths• 20 MB data capacity
Heavy Users / Business Users
• 2000 mins above • 80 MB data capacity• Video Air time
Casual users
Moderate Users
50 200 250
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Effectiveness of advertising channel (Base on survey)
TV
Cold Calls
Flyers
Coupons
Transportations
Newspaper
0%
5%
10%
15%
20%
25%
30%
35%
TV Newspaper Cold Calls Flyers Coupons Transportations
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3G adoption intention among urban consumers CU should focus on its promotion resources to increase CU’s brand awareness and iPhone
popularity among the 31% of non-3G users considering upgrading to 3G
Are you considering upgrading to 3G?
69%31%
No
Yes
Which 3G provider appeals most?
68%
13%
19% China Mobile
China Unicom
China Telecom
Source: China Reality Research
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WCDMA network is CU’s competitive advantage
Global 3G technology coverage and usage
0%10%20%30%40%50%60%70%80%90%
WCDMA TD-SCDMA CDMA2000
Terminal model
Delivery Volume
Source: SA Research
CU should advertise its licensed WCDMA network is the most commonly used 3G technology globally and receives widest industry support like Apple and iPhone
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Locations CU should spend advertising on
Income per Capita by Cities in China
0 5,000 10,000 15,000 20,000 25,000 30,000 35,000
Inner Mongolia
Liaoning
Shandong
Fujian
Jiangsu
Guangdong
Tianjin
Zhejiang
Beijing
Shanghai
RMB
CU should place TV commercials on the top 5 cities with highest Income per Capita, namely, Shanghai, Beijing, Zhejiang, Tianjin, Guangdong
Source: National Bureau of Statistics
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Non-Conventional means should also be used to promote CU and iPhone Advertisements should be placed in the most commonly bloggers or websites in China
A nationwide electronic platform should be set up to sell iPhone, 3G VAS services and support customer needs
