Mobilink in Different Market Structures
History of Cellular
he need to increase the public safety was key to the
genesis of today’s rapidly growing wireless
communication industry. In1920s’ police departments in
Detroit, Michigan and Bayonne. New Jersey and the
Connecticut State Police were among the first who sought to
use in their patrol cars, the technology that had improved
the safety of oceangoing vessels – radiotelephone service.
T
The United States involvement in World War 2 created an
urgent need for FM technology to take the place of
Amplitude Modulated (AM) technology for higher quality,
two-way mobile radio communications on the battlefield. The
strategic value of wireless communication on the mobile and
portable communication on the battlefield spurred
Shaheed Zulfiqar Ali Bhutto Institute of Science &
Technology, Islamabad
1
Mobilink in Different Market Structures
companies like AT&T, Motorola and General Electric to focus
on refining prominently among the products developed
during the war years and carried over into peacetime use.
Although there was a form of mobile telephone service
available in the late 1940s, its capacity was limited – with
few radio channels available to carry calls, and cities like
New York limited to 12 simultaneous callers.
In 1947, AT&T engineers decided to stretch the limited
number of radio frequencies available for mobile service by
scattering multiple low-power transmitters throughout a
metropolitan area, and “handing off” calls from transmitter
to transmitter as customers moved around in their vehicles.
This was the birth of wireless technology.
But there was ahead of its time. It took 20 years to develop
sophisticated call “hand off” technology. In 1973, Motorola
introduced its revolutionary new Dyna TAC mobile phone, a
conveniently sized radiotelephone set. At the same time,
European countries also started using cellular phones with
different systems.
Today, wireless competition has accelerated to the point that
more than 3 billion people can now choose between 339
service providers around the globe.
Shaheed Zulfiqar Ali Bhutto Institute of Science &
Technology, Islamabad
2
Mobilink in Different Market Structures
INTRODUCTION:
Industrial development of a country is not possible without
having a modern telecom infrastructure in place. Countries
that have weaker telecom, infrastructure, using the latest
technology can today quickly step in to the future. Recent
industry figures confirm that cellular has become a primary
tool not just for business everywhere, but also that it has
become a mass-market service. There were over 200 million
cellular phones in use worldwide by the end of 2000. Cellular
service is soaring in Asia. By the end of 2005 there were
more cellular phones in Asia than in Europe. Key thing is that
wireless is easy to deploy and it is much more versatile and
reliable for Pakistani business to compete in the world
markets on equal footing, it is important to provide it with
excellent coverage and dependable communication system.
The number of fixed-line services in Pakistan has increased
five fold since 1990. However, whilst the majority of working
lines are in urban areas, 70% of Pakistan's population lives in
rural areas. Efforts by the government of Pakistan to
promote the development, modernization and diversification
of its telephone infrastructure over the last decade have met
with mixed success.
Nevertheless, recent strong growth in the mobile market has
created a much more positive general outlook in the
Shaheed Zulfiqar Ali Bhutto Institute of Science &
Technology, Islamabad
3
Mobilink in Different Market Structures
industry. Mobile subscriber numbers have surged from less
than 2 million at end-2002, to around 11 million by mid-2005
and the growth has the feel of sustained development.
Significantly, two new mobile operators were licensed in
2004, joining the existing four operators, to create a very
busy market.
There is still plenty of room for further expansion.
Since the 1980s, considerable effort was made to upgrade
Pakistan’s telecommunications system. The nation’s Sixth
Five-Year Plan called for a public-sector investment of Rs10.1
billion to improve and expand the telephone and telex
systems.
MOBILINK IN PAKISTAN:
Pakistan Mobile Communication Limited (Mobilink) is the first
GSM Operator in Pakistan and since the launch of its services
in 1994, has Been at the fore front of Pakistan’s cellular
service industry. With its Cutting edge technologies, national
infrastructure and superior quality Customer service,
Mobilink, a wholly owned subsidiary of Orascom
Telecom, has achieved the status of “market leader” with a
customer Base in excess of 31 million subscribers.
To date, the company has invested over US$2.5 billion in its
infrastructure, Network rollout and the largest franchise,
Shaheed Zulfiqar Ali Bhutto Institute of Science &
Technology, Islamabad
4
Mobilink in Different Market Structures
retail and customer services Network across the Nation. The
company plans to invest an additional
US $500 million in 2008, to meet the growing demands of its
customers. Mobilink has also progressed from voice to
carrier-class nationwide Services by completing its own
6,500-kilometer fiber optic backbone Network across
Pakistan. It now plans to provide high-speed data
Connectivity in Pakistan through WiMax services. During the
last few Years, the company has aggressively expanded its
coverage, achieving Cell sites in excess of 6,500, over
200,000 retail outlets and coverage in More than 8,000
cities, towns and villages. With a systematic roll-out
Plan for the future, Mobilink is determined to maintain its
market Leadership in all areas to ensure that it continues to
reshape lives of Pakistanis everywhere by “connecting the
unconnected”. Additionally, the positive role of the
Government has been a catalyst in The phenomenal growth
of the cellular market in Pakistan. The Phenomenal growth
and the success of the mobile sector in 2006 – 07 Can be
seen with the estimated revenue figures of Rs 133 billion in
the Industry growing by a soaring 48% from 2005 - 06, with
Mobilink Contributing nearly fifty percent to it. OT took over
management control of the company in April 2001 and
changed the overall market dynamics through its aggressive
Shaheed Zulfiqar Ali Bhutto Institute of Science &
Technology, Islamabad
5
Mobilink in Different Market Structures
marketing strategy and expertise. In less than two years
time Mobilink achieved an exceptional growth of almost
672% and attained market leadership. Mobilink was the first
mobile service provider in Pakistan to operate a 100% GSM
technology as both existing operators employed AMPS
technology.
MONOPOLY OF MOBILINK:
Before Mobilink there were two companies already in the
market but with different technology. Prior launching of GSM
service in Pakistan, Mobilink obtain the assurance from Govt
of Pakistan that no further GSM licenses will be granted for
the period of ten years in order to get the maximum time to
yield the benefits of penetration, stability, infrastructure and
monopoly.
Shaheed Zulfiqar Ali Bhutto Institute of Science &
Technology, Islamabad
6
Mobilink in Different Market Structures
CELLULAR SUBSCRIBERS IN PAKISTAN
YEAR INSTA MOBILINK PAKTEL TOTAL GROWTH
%
1995-96 20,950 16,385 30,703 68,038 …
1996-97 43,029 52,600 39,398 135,027 98.4
1997-98 53,184 82,912 60000 196,096 45.2
1998-99 108,058 87,556 70000 265,612 35.4
1999-2000 112,000 114,272 80,221 306,493 15.4
Mobilink’s monopoly were from 1994 to 2000, In this period
Mobilink’s growth is increased in 1st five years then
decresced because of political instability, war with India in
1999, and Atomic explosions in 1998. In the period of 1998-
99 the Mobilink’s growth were decrease to record 20%.
Shaheed Zulfiqar Ali Bhutto Institute of Science &
Technology, Islamabad
7
Mobilink in Different Market Structures
TECHNOLOGY DIFFERENCE:
Meaning of AMPS – "Advanced Mobile Phone Service", is an
analog technology that uses an 800MHz cellular band.
Developed at Bell Labs and transferred to the regional Bell
operating companies at the time of the divestiture in 1984,
AMPS was put on the market in the 1980’s and is the
worldwide cellular standard. (By: Diane Shired)
The GSM was formed in 1982, to discuss how to make
wireless technology work across geographic borders.
Meaning of GSM is "Global System for Mobile
Communications", it a digital cellular phone technology
based on a specified standard for how data is sent over a
Shaheed Zulfiqar Ali Bhutto Institute of Science &
Technology, Islamabad
8
Mobilink in Different Market Structures
wireless network. Mobilink is the first cellular company with
GSM technology in Pakistan.
MONOPOLISTIC STRUCTURE:
Pakistan' has gone through a monopolistic telecom & IT
vendor's age.
Overall, the thrust of market strategies for 2004 was on
acquisitions. Three factors contributed to this:
1. The upfront cost of acquiring a connection went down
significantly - opening up a whole new segment of the
market. The cost of acquiring a cellular connection went
down from Rs. 3000 to Rs. 1000
2. Mobilink increased its coverage to several new cities
across Pakistan – once again opening up new regions
with pent-up demand. The share of the top-5 city gross
sales in Mobilink sales went down from 67% to 61%1
1
Shaheed Zulfiqar Ali Bhutto Institute of Science &
Technology, Islamabad
9
Mobilink in Different Market Structures
3. There was a sense of urgency to capitalize on these
opportunities as the operators with newly awarded
licenses geared up to start operations. There was a
clear imperative to grab customer base – to sweep the
market – before the new players enter the field. Both
Mobilink and Ufone pursued this strategy with varying
degrees of success. For Mobilink this meant going from
2 Million subscribers at the end of 2003 to a projected
4.5 Million subscribes at the end of 2004.
Mobilink’s consolidated revenues, however, averaged around
$934.6 million, an increase from $921.5 million in the year-
ago quarter. Average revenue per user (ARPU) declined to
$2.8 for the third quarter from $3.5 for the same period last
year. The company spent $406 million for the first nine
months of 2008, up from $353 million in the same period of
last year. Similarly, the company’s market share dropped to
34.8%, it was 36.4% last year.
TOTAL REVENUES BY CELLULAR COMPANIES
(Rs. MILLIONS)
Company2004-05 2005-06 2006-07 2007-08
Shaheed Zulfiqar Ali Bhutto Institute of Science &
Technology, Islamabad
10
Mobilink in Different Market Structures
Mobilink34,456 54,065 64,654 79,936
Ufone8,599 16,098 21,867 27,455.2
CM Pak2,400 3,329 2,897 25,85.3
InstaPhone2,693 1,539 472 259.7
Telenor565 6,338 22,837 45,081.2
Warid
Telecom168 8,527 20,405 26,804.7
Total48,881 89,896 133,132 182,080.9
MARKET SHARE:
In this fiercely competitive arena, Mobilink set itself the
target of reaching 7 Million subscribers and retaining a
market share of 54% by the end of 2005.
While the market share target is lower than current share of
61%, the share of each competitor in the market will remain
relatively small – since that there are more players to go
around. Taking Mobilink’s share as a given, there are two
Shaheed Zulfiqar Ali Bhutto Institute of Science &
Technology, Islamabad
11
Mobilink in Different Market Structures
possibilities for the competitive field: Either all four players
will manage similar levels of acquisitions, or one clear
competitor will emerge taking the lion’s share of
competition’s acquisitions.
From our perspective, the former scenario is clearly
preferable, since in this scenario all the competition will
neutralize each other to some extent and they will have to
fight on multiple fronts. In this scenario no one will gain a
share large enough to threaten Mobilink’s leadership
position. Given that U-fone and Paktel have a head start with
established brands, distribution, and coverage in more cities,
they are likely to acquire more subscribers than Warid and
Telenor. On the other hand these last two will be more
aggressive in their strategies but will be hampered by the
fact that their operations will roll-out in Q2 and their initial
coverage will necessarily be limited to major cities. Given
this, and given the current base Ufone already has, we see
the end-2005 market position as looking like this:
Shaheed Zulfiqar Ali Bhutto Institute of Science &
Technology, Islamabad
12
Mobilink in Different Market Structures
Shaheed Zulfiqar Ali Bhutto Institute of Science &
Technology, Islamabad
13
Mobilink in Different Market Structures
Shaheed Zulfiqar Ali Bhutto Institute of Science &
Technology, Islamabad
14
Mobilink in Different Market Structures
Shaheed Zulfiqar Ali Bhutto Institute of Science &
Technology, Islamabad
15
Mobilink in Different Market Structures
PEOPLE RESPONSE TO MOBILINK’S INCENTIVES:
“People respond to incentives. The rest is commentary”
Mobilink has launched two products i.e. JAZZ and INDIGO
(prepaid and postpaid). In monopolistic competition mobilink
introduce many packages in the market. Some of the
packages are;
Jazz octane
SMS package
Ladies first
Free connections
Free balances
Low calls Rates nationwide
Low calls rate on international roaming
Urdu Power tools
Shaheed Zulfiqar Ali Bhutto Institute of Science &
Technology, Islamabad
16
Mobilink in Different Market Structures
Mobilink Pco
An amazing prepaid service with two pre-paid packages i.e.
Jazz Easy, Jazz Max. The benefits of pre-paid products are:
No daily charges
Low outgoing rates
180 days validity of Jazz scratch cards
FEATURES OF JAZZ
ANALYSIS:
Demand of mobile phones has been increased during the
past four years rapidly. In 2004-05 the total number
Shaheed Zulfiqar Ali Bhutto Institute of Science &
Technology, Islamabad
Outgoing calls (24 hours) Rs. 3.50
Incoming Calls Free
Sms to any mobilink number (per sms)
outgoing
Rs.1.00
Sms to any other network (per sms)
outgoing
Rs.1.50
International Sms (per sms) outgoing Rs. 5.00
Voice mail and CLI Free
Daily charges Free
17
Mobilink in Different Market Structures
subscribers were 12.7 million which increased to 34.4
millions in 2005-06 and similarly in 2006-07 36.45 million as
compared to 0.3 millions in year 1999-2000. The reason for
this increase advent of new mobile companies in Pakistan
which create competition in Telecom industry.
When we compare the figures of Mobilink year 1999-2000
with 2006-07 we will find that the mobilink had monopoly
due to certain reasons; (provided other factors remain
constant such as expensive mobile sets, lack of information)
Being a only GSM company having protection from
government. It has a high price rate per minute.
High subscriber’s identification module (SIM) rates (i.e. Rs.
3000 minimum in 2002).
Both caller and receiver had to pay for a call.
Roaming charges.
High taxes imposed by the government.
Similarly high rates of other services i.e. sms, etc.
Above reasons shows that mobilink was not providing
services to its efficient scales as compare with today it mean
moblink had created dead weight loss.
After monopoly,
After the expiry of patent Pakistan mobile phone industry
Shaheed Zulfiqar Ali Bhutto Institute of Science &
Technology, Islamabad
18
Mobilink in Different Market Structures
Was open for new entrant and many farms arrived such as
Ufone in 2001, Telenor & Warid in 2004 and CMPAK in 2007
which created competition in the mobile market and because
of this competition prices (for their services) goes down
drastically during past five years , every company started to
provide free roaming services and SIMs rate also declined .
Due to this competition number of subscribers raised 4.4
million (provided other factor remains constant such as
mobile sets decreases their rates and rise of media
campaigns )
Market Power:
In spite of this competition Mobilink’s price is slightly higher
than other connections. Due to following reasons
1. Vast Network throughout the Pakistan.
2. Signal Quality
3. Fashion, Trend
4. HUM BOLAY MOHABBAT KE ZABAN (Different
languages)
Shaheed Zulfiqar Ali Bhutto Institute of Science &
Technology, Islamabad
19