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15.00%

17.00%

19.00%

21.00%

23.00%

25.00%

27.00%

29.00%

31.00%

2003 2004 2005 2006 2007 2008 2009 2010 2011

How can China Unicom use the iPhone to increase 5% How can China Unicom use the iPhone to increase 5% of the subscriber market share within 24 months?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 5% of the subscriber market share within 24 months?

CU should set competitive pricing on iPhone and associated plans; deliver a clear iPhone message which is most appealing to customers; and set a sustainable strategy to maintain the market shares gained from launching iPhone.

1. CU should set the pricing plans which could achieve market penetration in long terma) After attracting the first adopters, the pricing strategy should decrease gradually over time in 2 yearsb) The phone subsidy amount have to take unlocking possibilities into account to avoid customers walking away with

the unlocked iPhone

3. CU needs to find a “killer” message on iPhone to attract most China users considering switching to 3Ga) CU has to sell the most appealing feature of iPhone which China customers want most to overcome the weak

brand image of Apple in Chinab) The “killer message should also stand outs from competitors’ phone like HTC, Blackberry, etc.

4. CU should plan on longer term strategies to sustain the market shares gained from iPhone launcha) CU should look for other smartphone alternatives e.g. oPhone, HTC, etcb) CU should spend resources in improving the network quality in both 2G and 3Gc) CU should target on younger age group in long term as younger generation did not have strong bad perceptions

on CU

COMPLICATION

QUESTION

ANSWER

RATIONALE

RATIONALE

RATIONALE

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Section [2]

Dummy Charts - Pricing

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Case in point – Hong Kong’s iPhone launch iPhone helped Hutchison increased its ARPU by 15%

Total iPhone subs contributed 5% of Hutchison’s total subscriber base

Data revenue increase is phenomenal – increased by 22% since iPhone launch

More than 50% of iPhone users subscribed to the highest tariff plans

GRAPH of APRU boost

PIE chart of total subs

Change in data revenue

Conclusion: iPhone can boost ARPU

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Unicom’s pricing is uncompetitive Total upfront payment is too high

Tariff plans are cheap

Grey market iPhones are priced cheaper, and they don’t need upfront payment

Grey market iPhones have WiFi

CHART comparing total upfront payments

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Section [2]

Dummy Charts – Message

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3G - What do customers think so far?

47%

27%

0%

10%

20%

30%

40%

50%

60%

CU CT

% of respondent willing to switch number to operator

Of 300,000 respondents, 47% potential customers are more willing to change to China Unicom than China Telecom .

It could be due to the fact that these customers are aware that some of the more popular 3G handsets will only work on China Unicom’s WCMDA network.

Source: Market research report

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3G - What do customers think so far? (Cont’d)

% of respondent think pricing of data plan is acceptable

42%

16%17%

0%

10%

20%

30%

40%

50%

60%

CT CU CM

Of 300,000 respondents, 42% customers think pricing of China Telecom is more reasonable comparing to 17% of China Unicom.

This could be due to the fact that China Telecom’s data plan charges is time based instead of the usual byte based, which is more “user friendly” in nature.

Source: Market research report

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.

High-speed mobile internet access is the most likely service that will gain interest from customers as it is nominated as the most appealing 3G service.

The most appealing 3G applications is

56%

15%

27%

0%

10%

20%

30%

40%

50%

60%

70%

Mobile Internet Video Call Mobile TV & othersSource: Market research report

3G - What do customers think so far? (Cont’d)

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Is iPhone Special? Can iPhone Deliver? Apparently, what iPhone can deliver to customers in China is similar to what OPhone is

offering by China Mobile and China Telecom

Chinese customization

Low handset production costs

Software platforms Apple store Fetion, Monternet, Mobile market

Network standard advantage

(with 85% of the world)

China MobileChina Unicom

iPhone OPhone

China Telecom

iPhone Vs OPhone

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Potential for cheaper prices and promotions is the number one attractions for customers to switch to China Unicom

Reasons for potentially shifting to Unicom

0% 20% 40% 60% 80%

Don't know / Others

Handsets

Better technology /Data speed

Network / Coverage /Service

Trust the brand

Price / Promotions

Source: Market research report

Reasons for potentially shifting to Unicomunder MNP

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. 13

Section [2]

Dummy Charts – Strategy

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.

Potential no. of target customers China Unicom plans to capture market size of 30 Million customer in one year after the launch

of service i.e. 1/3 rd. of the Chinese 3G market by 2010.

The company has earmarked RMB38.7 billion (US$5.6 billion) to develop its 3G business in 2009

Strategy to target customers in one years time

Source: Market research report

Target Market

350,000

30,000,000

0

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

35,000,000

Market amassed throughadvertisements till Aug 09

Target customers in one yr. afterservice launch

Po

ten

tail

Cu

sto

mers

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Factors affecting iPhone penetration China Unicom should promote heavily the factors that attract Chinese customers viz: Style,

price subsidy, functionality

China Unicom should create awareness of geniune Apple iPhone to wary customers from buying look a like or from gray markets.

Strategy to target customers in one years time

Source: Market research report

Factors affecting iPhone penetration

Style Other smartphones

Price subsidy Brand Image Wifi disabled Functionality Grey market ChineseCustomizations

Look alike Networkcoverage

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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 Apple iPhone will be a popular product in China due to its unique features and sleek look. Disabled Wifi to comply with government regulation will create some set back. China Unicom must work with Apple to improve its battery life and 3G connection.