Analysis of Thai’s mobile operators’ strategies - Report

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This report contains the comparison and analysis of 2 Thai’s mobile network operators’ (MNO) strategies, which are AIS (AIS and DPC) and True (True Move). The first one is the oldest and largest private MNO, while the second one is the newest player but quickly take position among the biggest 3 in the market.
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Analysis of Thai’s mobile operators’ strategies - Report

  1. 1. Wireless Infrastructure Deployment & Economics Homework 2 – Analysis of Thai’s mobile operators’ strategiesThis document is public version of the submitted report.Please contact the author for download / correspondent query.Author : Laili AidiIntroduction This report contains the analysis of 2 Thai’s mobile network operators’ (MNO) strategies,which are AIS (AIS and DPC) and True (True Move). The first one is the oldest and largestprivate MNO, while the second one is the newest player but quickly take position among thebiggest 3 in the market. This report is continuation from [1], which will give the reader a betteroverview of the discussed topic below. The first 2 sections consist of comparison and evaluation of the specific strategies, and thenthe conclusion part is presented at the last section. The strategies that are highlighted are networkrelated strategies, including spectrum strategy and network deployment, and then the businessrelated strategies, including overview of business landscape, product (branding and traffic plan),and their customer segmentation.Part A. Network Related Strategies Spectrum is among fundamental elements in providing telecom services, and it affects theway of every MNO runs their business. In Thailand, the telecom services are provided aroundband 1800 MHz, 2100 MHz, and 850 MHz and 900 MHz. As the telecom regulation runs underthe BTO concession, thus none of the private MNOs have these bands, as the only owners are thestate telecom companies (CAT Telecom and TOT) that granted the usage of the specific slice tothe private MNOs [2]. Frequency band 850 MHz (GSM-850/CLR) was previously separated into 2x12.5 MHzchunks, CAT Telekom operated the AMPS-A, and its concession, DTAC, operated the AMPS-B[9]. As technology changed, CAT Telecom made deal with Hutch to offer CDMA2000 service inthat AMPS-A spectrum (2x10 MHz), while DTAC did not upgrade its network technology. Later,True, which was the newest MNO at that time, acquired 2x5 MHz spectrum in the middle andDTAC was pushed to the corner with 2x10 MHz. Moreover, AIS is the only Thai’s MNO thatfully operate in frequency band 900 MHz (E-GSM-900), occupies 2x17.5 MHz under 25-yearBTO contract with TOT since 1990 [3]. True with the other 2 MNOs (Hutch and DTAC) aresqueezed in 2x25 MHz under CAT Telecom concessions. This situation is shown in figure 1. 1
  2. 2. Wireless Infrastructure Deployment & Economics Homework 2 – Analysis of Thai’s mobile operators’ strategies Figure 1. GSM-850 and GSM-900 Frequency Band Allocation in Thailand [4] Moreover, CAT Telecom owns frequency band 1800 MHz (GSM-1800) and granted this toits concessions: True and DPC (AIS’ subsidiary) get 2x12.6 MHz each from 2x75 MHz resource,while DTAC has major portion of the spectrum, which is 2x49.6 MHz. Furthermore, in frequencyband 2100 MHz (IMT), Thai Mobile (TOT’s subsidiary) possesses 2x15 MHz from total 2x60MHz capacity, while the rest 2x45 MHz remains unused, as the 3G auction has been repeatedlydelayed [3]. AIS is the MNO that was hit with the impact of this uncertainty as it is still waiting tounknown period of time for the auction, due to unsolved political and legal issues. This situation isshown in figure 2. Figure 2. GSM-1800 and IMT Frequency Band Allocation in Thailand [4] From the description above, it can clearly be seen that True (under its subsidiary, True Move)has made significant achievement toward its network related strategy. It saw opportunity to grabmarket by providing first 3G services (trial) in its launching using 850 MHz and 1800 MHz band,and offered bundling with iPhone 3G [5]. Using this, True has grown rapidly and extensivelyexpanded its market share to 17.9 million subscribers in Q3 2011 (AIS 44.6%, DTAC 30.9 %,True 24.5%), makes it as the 3rd largest Thai’s MNO [3][5]. This can be remarked as importantaspect, considering the fact that it just launched full commercial operations in March 2002 [5]. Moreover, AIS is also in good position with its slice in 900 MHz band, and made good moveby offering both GSM900 (country wide) and UMTS900 services with frequency re-framing [3].The 900 MHz band provides greater coverage radius rather than 2100 MHz band for the sameCAPEX, and also impact to cost effective as only fewer base stations are required [6, 7]. Thus,these coverage and cost-saving benefits mean AIS can bring its 3G services to less-denselypopulated or regional/rural areas where greater distances separate subscriber and base station, thatpreviously were uneconomical to cover. However, as AIS has large subscriber segments (asdiscussed in section B), both in the city and rural area, it is important for them to get the BTOconcession in 2100 MHz band, as this band is best suite in the cities and large town [8]. The otherreason is, it is impossible for them to completely shut down its 2G operation (even in city area),and DPC only has small chunk to provide 3G service in 1800 MHz band, as well as this band isstill not a viable option for 3G services yet [7]. 2
  3. 3. Wireless Infrastructure Deployment & Economics Homework 2 – Analysis of Thai’s mobile operators’ strategies In term of network deployment, both AIS and True also have made good movement with itsstrategy. True Move prioritizes to build its 3G network in selected international areas, which arearound 2 km radius of most BTS and MRT routes in the BMA, tourist and provincial areas inPattaya (Patong Beach), as well as Phuket and Chiang Mai airport [5]. Moreover, AIS prioritizestheir 3G service limited scale in Bangkok shopping malls and some major rural areas [3]. As the3G network in Thailand is still in early stage, these different choices are beneficial to both of themto grab specific user segment that is not overlapping each other. However, in term of scalability,True still only have fewer distribution channel and its coverage still not reach the whole country,compared to AIS, that has much larger coverage area.Part B. Business Related Strategies 1. Value Chain AIS’s businesses run above the enterprise that is supported by its 9 child subsidiaries, whileTrue Move businesses run together with its other 4 network company [3][5]. This business empiremodels are little bit different, but at the end, both of them use that to build products and servicesaround the concept of “ecosystem”, by synergizing their businesses within each other’s subsidiaryor company network, as discuss later in “Product” section. Moreover, using the spectrum allocation mentioned above, both AIS and True do almost allthe possible value chain of an MNO. Both of them use third party to run some of theinfrastructure and operation activities, for example AIS use Huawei to provide IN for its pre-paidmobile service, while True Move uses both Alcatel-Lucent and Huawei both for softswitchsolution, BSC, microwave, etc [8]. They also build large range of choices for retail distribution, portal and reseller. Trueseparates their distribution channel into 5 models: Wholesale partner, Direct sales, Multi-retailer,Retail shop (True shops, TrueMove shops and kiosk, TrueLife shops, True Coffee), Retail partner(Move Up Vans)) [2]. AIS builds its distribution channel into 3 models: Distributors portal(Telewiz), Electronic channels (Refill On Mobile (ROM), mPAY, GSM eService) and Direct sales(GSM Smart Shop) [3]. It is reported that 80-90 % are operated through the first 2 channels. 2. Product As same as what happening in the other telecom ecosystems, these 2 Thai’s MNO alsoimplement product differentiation, as both of them offer postpaid and prepaid service. AIS hasdeveloped 4 strong brands within those products, which are targeted to specific group that hassubstantial market size, while True Move comes with distinctive bundled packages [2][3]. AIS has obvious data toward its large range of tariff plans [3]. The Postpaid service isbranded with “GSM advance” (for workers, urbanities, tech-savvy and quality-orientedcustomers), with packaging services: “Smart Mix & Match” with 10 different tariff plans, “NETSIM” package, “Smart Phone” package, “ BlackBerry” package, “iPhone” package. The Prepaidservice is separated as: “GSM 1800” (for basic voice communication segment) with 2 differenttariff plans, “One-2-Call!” (for teenagers segment) with 24 different tariff plans, and “Sawadee”(for customer segment in provincial area, first time users, and those who need longer validity datesat affordable prices) with 3 different tariff plans. Furthermore, as mentioned before, True Move comes with bundling model [2]. Trueimplement Converge package models with its other company networks, such as: Mobile paymentservices for postpaid (cooperation with True Money), free WiFi access/higher upload speedservice postpaid (cooperation with True Online), etc. It also has unique non-voice products and 3
  4. 4. Wireless Infrastructure Deployment & Economics Homework 2 – Analysis of Thai’s mobile operators’ strategiesservices, such as: voice SMS, remixable ring tones (“IRemix”), ‘‘over-the air’’ top-ups, “GameSIM” (to online gamers), “Inter SIM” (for frequent international calls customers), first-worldtouch SIM using RFID for payments from any mobile phone, Iphone bundle packages (iPhone 3G,3G S, 4), etc. From this data, it can clearly be seen that AIS has more competency in dividing the demandand behavior of its customers into smaller particular segment, by providing wide range of choicesof products and service, while True puts more effort in mass target group. It means, AIS focuses inprice differentiation that seems to be done in order to fulfill specific needs of its large customersegment. True does not have packaging services as broad as what AIS has, but it is more focus tobusiness model differentiation, to maintain current customer base and strengthen the serviceconvergence with its other subsidiary companies. Moreover, Pricing is also an important aspect to be compared, especially in calling cost, as itis mostly rated significant in customer perception and influence purchasing decision-making inspecific brand package. True offers the lowest call cost of both pre-paid and post-paid servicewithin same network, while AIS offer the lowest price from second minute onward for call outsidethe network. 3. Customer Segmentation & ARPU It was reported that True Move has 7.7% postpaid subscribers (Q3 2011), while AIS has10.8% (Q4 2010) [3][5]. Thus, we can conclude that the overall mobile ARPU of these MNO, andThai’s market as overall, is strongly influenced by prepaid customers. The graph in figure 3 belowdescribes the ARPU of these 3 biggest Thai’s MNOs. Even tough the number of connectionsreported by operators does not necessarily equal to the number of subscribers, this data can beused as indicator of the quality of subscribers and revenue health. 4
  5. 5. Wireless Infrastructure Deployment & Economics Homework 2 – Analysis of Thai’s mobile operators’ strategies Figure 3. 3 Biggest Thai’s MNOs ARPU [9] From this, it can be seen that all of these MNOs suffers with decreasing number of ARPUover these several years. However, True has the most obvious data, despite the fact that it has donegood movement in acquiring subscribers. It is reportedly, it significantly reduced tariff, which wasmade in order to survive during the price war and acquire more subscribers [5]. AIS seem stillperforms better in grabbing user, especially in upper segments (corporate and small and medium(SME)), while True seem graps more subscribers from the low-ARPU segment, and probably lowloyalty too, which will makes this is definitely not healthy in the long term. True seems to tradeoff with lowest ARPU because of this, as well as a result of their lowest pricing strategy, and thisARPU drop significantly in recent years, especially in its Pre-paid subscribers.Part C. Summary From the data and discussions mentioned above we see some differences and similaritiesamong these 2 MNOs’ strategies in running their businesses. Indeed, these strategies, more andless, also as impact of the telecommunication regulation and the strength of company’s financialhealthiness. AIS, as the oldest private MNO took huge advantage over their great market cap,large subscriber base, and current position, especially in spectrum allocation. Meanwhile, True, asthe new private MNO and small company compare to its competitor, introduced unpredictablemovements and unique business plan in order to grab customer, which then changed the marketlandscape. However, both of them suffer from saturated market and drop in ARPU, which means theyhave to increase operation efficiency, and find new business models in order to survive from tightcompetition, especially due to introduction of new technologies and possibly new kind of actors as 5
  6. 6. Wireless Infrastructure Deployment & Economics Homework 2 – Analysis of Thai’s mobile operators’ strategieswell. Thus, as there are multiple MNOs with overlapping coverage as well as saturated growth inmobile, the consolidation for the basic mobile coverage can also be an option to be considered,and focus on presenting new technologies and better services.Appendix - Reference(s)[1] Aidi, Laili. Homework 1 – Country Study: Thai’s Telecom Market. http://www.slideshare.net/lailiaidi/thais-telecom-market-country-study-presentation [Nov. 12, 2011][2] True Annual Report 2010 http://www2.truecorp.co.th/en/ir_annual_report.aspx [Nov. 15, 2011][3] AIS Annual Report 2010 http://investor.ais.co.th/AricleListAISIRNews.aspx?mid=77 [Nov. 11, 2011][4] Thailands mobile market overview – Spectrum http://jows.blogspot.com/2010/02/thailands-mobile-market-overview.html [Nov. 11, 2011][5] True Q2 Report 2011 http://www2.truecorp.co.th/en/ir_quarterly_results.aspx [Nov. 12, 2011][6] New spectrum band for 3G to lead to major increase in coverage http://www.gsmworld.com/newsroom/press-releases/2065.htm [Nov. 19, 2011][7] Spectrum Refarming: Roll-out 3G services on 2G spectrum http://www.telecomcircle.com/2009/12/spectrum-refarming/ [Nov. 19, 2011][8] Universal Mobile Telecommunications System http://en.wikipedia.org/wiki/Universal_Mobile_Telecommunications_System [Nov. 19, 2011][9] Thailands mobile market overview – ARPU http://jows.blogspot.com/2010/02/thailands- mobile-market-overview-arpu.html [Nov. 12, 2011] 6

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