Telecommunication Industry and Its Effects on Pakistani Society Marketing Essay

Industry Analysis report (2004) by Economic Affairs Section PTA aimed to highlight the initiatives and their consequences which PTA took for the growth of telecom sector in Pakistan. The developments in the telecom sector of Pakistan, exclusively the cellular sector are analyzed. Various Surveys conducted from state sources. PTA provided several incentives for the growth of cellular mobile in Pakistan including the reduction in royalty and introduction of calling party pays regime in year 2001.

During the year 2004 under cellular mobile policy annual royalty reduced from 1. 5% to 0. 5% of annual gross revenue minus inter operators’ payments for new entrants. The Government of Pakistan decided to move away from monopoly situation in basic telephone and took steps to introduce more competition in the cellular market of Pakistan. The competition introduced in the telecom sector showed positive impact on the growth of the sector in short span of time.

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The benefits of the competition in the telecom sector introduced by PTA have started passing on to the consumer in just few months after the introduction of new policy in terms of reduction in tariffs and extension in coverage. At the end of year 2003 the mobile subscribers were almost 2. 4 million which increased to 6. 5 million till the end of September 2004. In the year 2003-04 sector grew by 173% (Figure – 2). These operators have started acquiring market share as much as possible by bringing down the prices of new connections to zero.

Due to the deregulation in the sector, share of Telecom sector in GDP increased from 1. 5% in the year 1999-2000 to 1. 7% in the year 2003-04. As a result of these initiatives, in the year 2004, approximately 370,000 direct and indirect employment opportunities were created, out of which 5000 were created by the cellular sector through vendors, franchises and distributers. The industry analysis report of 2004 enlightens the reader with the basic reasons which lead to the dramatic progress in the cellular sector of Pakistan.

It gives quantitative evidence for the growth witnessed in the telecom sector, especially cellular sector. The report has highlighted the policy measures taken by Pakistan Telecommunication Authority in order to promote growth in the telecom sector. All policies were aimed to create an investor and competition friendly environment and they did as the results are mentioned above. Most of all, the substantial number of employment opportunities they created made the government predict that the telecom sector has immense potential and if the policy of eregulation continues, the economy will show a positive growth trend. This analysis report is essential to the fact that it covers the favorable policy introduced by PTA and its impact on the telecom sector itself and the economy in the short span of time. Tahir. A (2008) wrote an article to find how advertising impacts the cellular phone consumers in Pakistan. The name of the topic poses itself as the research question. The author has taken all cell phone consumers in Pakistan into consideration.

The author has used the concepts of advertising and service marketing to explain the theory behind the impact on consumers of cell phones in Pakistan and has quoted an incident of a Pakistani consumer which corroborates with the theory explained in the article. As mentioned in the article, “the consumer’s behavioral response to the aggressive media call still remains dependent upon the actual service differentiation. The more this differentiation is on the core service level, the more it shall meet the needs of the targeted prospects in an advertising message and there will be more trials, purchases and re-purchases.

Further to this service differential at augmented service level within service variants or in value added services re-assures hearing to the advertising message and responding to the message”. The major objective of advertising is to persuade, inform, generate repurchase and build brand image in the eyes of the consumer. The article quotes “An operator’s loyal customer went for the Blackberry device being advertised by the operator. Customer was only interested in the device due to some features and not in the Black Berry Internet Service and wanted that device should also work on other operator’s SIM as well.

Finally, customer found out that the device is locked for other operators. This aspect was kept hidden by the operator. Therefore, from the customer’s perspective, the advertising message became useless and also generated a negative image. At the end, customer bought an unlocked device from another operator which supports all networks and also became consumer of their postpaid service while terminating the service from the first subscriber. For this consumer, first operator’s message for the Black Berry device will not result into any favorable behavior. This article derives an interesting conclusion with the help of an incident which emphasizes on the fact that advertising although have a strong impact on consumer; however consumer behavior is not absolutely dependent upon adverting but on the real value the service delivers. The article explains the impact of advertising on cell phone consumers with the useful concept of service marketing and advertising. It states that advertising is all about informing, persuading and facilitating the potential consumer about the new service or product.

Emphasis should be laid most on delivering the service with full value. The message in the advertisement should be comprehensive so that the consumer gets the whole idea of getting the service in a certain way in order to avoid incidents like the one mentioned above. As stated in the article, cell phone consumers “evaluate alternatives and most important are post purchase evaluation where consumer evaluates the service for need satisfaction, value for the money and service provider’s promise against the actual benefit received. ” Aslam, et al (n. d. wrote a research paper which focused on knowing the intensity of competition in the cellular sector of Pakistan and the terms in which the mobile service providers are competing. The authors have taken into account all mobile subscribers of Pakistan. The authors have gathered statistics regarding the market share of mobile service providers, growth in cellular sector, market segments mobile companies are targeting, mobile subscriber base from previous years and other related information from authentic sources from PTA website, telecompk. com, Wikipedia and pakistaniat. com.

They have explained the competition scenario in the cellular sector with the help of Porter’s Five Forces Model. As per the research work, The Porters Five Forces model revealed some interesting facts regarding the competitive environment in the cellular sector: The bargaining power of customers is very high because of the low switching cost in the industry. There are attractive substitutes available to the buyer even in the form of keeping the same cell phone number but changing the service provider. It makes very difficult for the market players to retain their customers.

The brand loyalty can only be created through superior marketing campaigns and service. This is a type of industry where, at least in present times, the bargaining power of suppliers is at the low level because of the nature of inputs for the business. Moreover, with the deregulated and friendly environment given by the government of Pakistan, the industry has become more competitive and quality services driven. Although the cell phone subscribers are more than 95 million, still the threat of substitute products is high for the industry. Buyer’s interest in substitutes and rice-performance swap are the most important to consider in determining the threat of substitutes. It is not easy to enter in this capital intensive sector of the telecommunication industry. So, the threat of new entrants is low. Though the growth and potential of the sector look very attractive, still it is very difficult to take risk for a new investor because the penetration in the market would be very difficult. When the competition is fierce, obviously the competitive rivalry will be at the highest level. The very high level of competitive rivalry among the major players of the cell phone sector is clearly observable.

Just look at the advertisement campaigns of the rivals and you can see how intense the competition is. It looks like a battle for supermacy going on between the rivals. All means of attracting new and potential switching customers are being used by all the competitors to gain as much market share as they can. Exit barriers, industry growth, product differences, brand identity, and diversity of rivals are the main reasons of very high competitive rivalry. The market share of major mobile service providers as per June 2009 survey conducted by telecompk. com is as follows: Mobilink 30. 9%, Ufone 21. 2%, Warid 19%, Telenor 22. %, Zong 6. 8%. This brief research work reflects a comprehensive attempt to cover the level of competitive environment in the cellular sector. The effectiveness of PTAs deregulation policy in promoting the growth of telecom sector is also mentioned along with periodic upsurge in the mobile subscriber base which reached 95 million mark in June 2009 from 48. 2 million in 2006. As per the research work, the future scope of development and investment opportunities in the cellular sector is very bright since this area is now open for competition and already the industry is witnessing a healthy competition.

Active advertisement campaigns are being run by all mobile operators to attract new and retain existing customers. Business Monitor International (BMI) ranked Pakistan as a key destination for telecom growth. The forward and backward linked businesses to telecom have become very lucrative if considered from investment viewpoint. Call Centers, outsourcing IT enabled services, network solution providers, franchises by newly licensed operators, to telecom operators etc all fall in this category. Ahmad.

I, et al (2010) wrote on the impact of demographical characteristics of cellular service users on their satisfaction of service and intentions to retain as customer in future. The study focuses only on the SMS service provided by telecom organizations. 400 students were selected who use the Short Messaging Service (SMS) of any cellular company from different universities and surveys questionnaire were personally administered. 331 questionnaires were received back with a response rate of 82. 75%. There were 60% male students and 40% female respondents with an average age of 20. 43 years.

Sample was selected through convenience sampling a form of non-probability sampling. Survey was conducted through questionnaires. Descriptive analysis and Pearson correlation were used to assess the relation of demographics and extent of usage on customer satisfaction and retention. The findings are presented in the form of tables. The instrument used for data collection for satisfaction and retention comprised 7 point likert scale ranging from strongly disagrees to strongly agree. The mean score for satisfaction and leave-intentions are 5. 25 and 5. 33 respectively both showing somewhat agree.

The average age of the respondents is 20. 43 years. The average SMS sent by a user are 100 to 200. The results indicate that the satisfaction has a significant relationship with the customer retention . Similarly, gender has a significant relationship with satisfaction and intentions to retain as customer. Age was having negative and insignificant relation with satisfaction and customer retention. The service in use (Service provider) has insignificant relation with satisfaction and retention. No of SMS per day also proves insignificant relation with the satisfaction and retention of customers.

The scores indicate that overall customers are slightly satisfied with satisfaction and retention. At the same time correlation findings indicate that gender has significant relationship with satisfaction and retention. Both male and female behave differently while deciding to retain current service in future. Males were found to be more satisfied with the service provider and intend to retain the service provider in future. Age factor has not shown significant relation with satisfaction and retention. Hence changes in age factor have no relation with satisfaction and retention. David. G (n. d. made a study which based on the question that whether the country has taken a wise decision to announce service-specific policy approach in formulating the mobile cellular policy or should a macro-sector development approach been a better choice? The author has considered the policy framework for the telecom sector of Pakistan, India and Malaysia. The information regarding various policy approaches used in formulating the telecom sector policies for the research paper is gathered from authentic state sources of Pakistan, India and Malaysia which include the IT department and telecommunication authorities of respective countries.

The paper compares the policy framework of Pakistan cellular sector with that of India and Malaysia. The telecom sector policies of India and Malaysia deals the mobile-cellular sector as a subtopic being a sub-sector of the overall telecom market. Malaysia’s National Telecom Policy (1994-2020) provides long-term guiding principles for telecom sector development covering macro and micro issues to integrate IT and Telecom sector in to the mainstream policy-document.

India’s National Telecom Policy (NTP) of 1994 and 1999 provide a comprehensive framework to make country a global player in IT where telecom sector becomes an engine of growth for the whole economy. Both countries have promulgated single integrated-policy instruments to gear-up economic development. Moreover, both countries provide room for a comprehensive dialogue to take place between the public and private sector, using mature means of conflict resolution, advocacy and commercial diplomacy. The evolving telecom sector of Pakistan is of micro-level scope.

The Ministry has issued three different policies which are IT Policy and Action Plan 2000, Telecom Deregulation Policy 2003 and Mobile Cellular Policy 2004. The national telecom de-regulation and mobile polices provide an “investment protectionist regime” contrary to the India and Malaysia, which provide a pro-competitive regime for telecom competition and convergence. Moreover, the claim of Pakistan’s mobile cellular policy to be technology neutral is not fully correct, as the mobile policy revolves around GSM-technology and quite anti-convergence in nature.

In developing the telecom sector, India has relied upon indigenous resources whereas the Pakistani policy formulation reflects reliance moreover on international consultants such as ICC and Mac Carthy Tesult etc. Therefore, Pakistani policy exercise lacks serious pre-policy consultation process and debate which would have brought maturity in formulating telecom policy. As per the research paper, the current Mobile Cellular Sector Policy 2004 is not an end but the beginning of exciting times in Pakistan, where over USD $500 million of investment is promised.

The most important point about this policy is that Mobile-Cellular Policy is more of a Licensing Policy than a Sector-Policy. Calling it “Mobile-Cellular Sector Policy” is deceptive. On the other hand, India has a single-telecom-sector policy and Unified Licensing Regime. Bhatti. B (2009) has questioned why Nokia and Samsung have no plans for setting up handset manufacturing plants in Pakistan? The author has considered the economy of Pakistan as a whole for his writing. He has used information collected from the renowned news agency of Pakistan “The News” regarding the issue.

The findings in the article tell the reader that the two handset manufacturing giants namely Nokia and Samsung have no plans in the recent future to setup their manufacturing plants because of varied factors. Firstly, they say that the existing facilities in Asia region are sufficiently handling the demand in the country. It says that Samsung has 23 production bases, 42 sales subsidiaries strategically located in various countries. Samsung claims that the plant in Asia region is conveniently and sufficiently fulfilling the demand of Pakistan.

Further “However, it would depend upon further market growth, abundant availability of specialized human resources and facilitation from the Government in terms of securing the local production. ” Nokia Head in Pakistan says that Nokia has established itself as a global production base. He said “comprises of nine mobile devices and technology production units in: Brazil, China, Finland, Great Britain, Hungary, India, Mexico, Romania and South Korea”. He claimed that Nokia’s nine plants are already working on optimum capacity and demand is being sufficiently fulfilled.

On the other hand, Samsung may go for establishing domestic plants in the future if the technological infrastructure along with frequent exchange & training of specialized cellular engineers in the sector improves and safe and secure industrial environment. Apart from the already established production setup in the Asia region of both Nokia and Samsung which make them claim that the demand is being conveniently fulfilled in Pakistan, it is clear as stated in the article as well that until Pakistan’s infrastructure, energy and political situation is unstable, it is very difficult to persuade outsiders to invest in manufacturing sector.

Samsung’s future plans are also dependant on the future growth in the sector and congenial industrial environment. One more reason for their resistance to establish plants in Pakistan is that they already acquire substantial market share as stated in the article that is, Nokia 40% and Samsung 23%. So, if these companies would have any strategy to increase their market share in the future then possibly this would drive them to think over setting production facilities in Pakistan. Yasir. M (2011) has researched on finding the reasons for increase in sales of low cost mobile handsets in the Pakistani market?

The author has taken the mobile handset market of Pakistan into account. He has used information from the Federal Bureau of Statistics and interviews taken from officials of branded mobile manufacturers. The article reflects an interesting development in the Pakistan mobile handset market which is that due to decreasing purchasing power of people the sale of low cost mobile phones has increased dramatically. The Chinese brands have gained immense popularity and offering tough competition to the branded mobile phones.

However, share of branded mobile phones is also increasing steadily. Zeeshan Qureshi, Head of Samsung Mobile says that 70 percent of Pakistani mobile buyers have a purchasing power around $50 which has brought a shift in the gadgets’ business. With the increase in demand of low price handsets, mobile phone imports have also shown substantial increase in the recent past. A report of FBS states “In July-November 2010, 98. 44 percent growth was witnessed in the mobile handset imports. The handset imports bill has doubled as against the same period of previous year.

A dramatic growth of 213 percent in November 2010 has been witnessed as compared to the same month of last fiscal year. ” Imran Zaki Head of Marketing Department LG Mobile says that the Chinese-manufactured handsets have gained popularity since it entered the market some two-and-half-year ago. Main reasons for their immense popularity are that their handsets have dual SIMs options and copycat version of branded handsets. ” The article highlights a key issue which is that Chinese mobile companies are playing an opportunistic role in Pakistani mobile market.

They are truly benefiting from the eroding purchasing power of people in terms of offering low cost handsets which are not just standard handsets but include technological features like high resolution camera, Wi-Fi, radio, torch etc which are offered at higher prices by branded mobile companies. Chinese mobile companies are not only catering to features of their handsets but also pay attention to their design. As stated in the articles many handsets are copycat versions of popular branded handsets. Another reason for increase in low-cost handsets demand is the surge in mobile phone thefts.

People then do not incur greater loss in case of a low cost handset gets stolen. Ahmed. G (2010) has tried to find out what prospects lead to the launch of 3G in Pakistan? The mobile phone users all over Pakistan are taken into account. The author has gathered information revealed in an interview of Salman Wassay, Head of Marketing Zong, taken by Daily Times. Mr. Salman Wassay, Head of Marketing Zong, has talked about various aspects regarding the cellular sector of Pakistan and suggested that time has come when mobile service providers should discover the undiscovered segments of cellular service market and meet their demands appropriately.

He emphasized on the fact that mobile service providers should concentrate on providing new services instead of going after cutting prices of existing services. He added that the cellular service sector has progressed a lot and blessed consumers with variety of value-added services with the Short Messaging Service on top for which he claims that Zong is the market leader in providing SMS service. He said that many mobile service providers like Telenor have come up with innovative services which can be categorized as mobile commerce services which include mobile banking.

Mobile banking has a huge market potential and if mobile companies concentrate on this along with other commercial services then they would be able to not only attract new customers but retain existing customers. He added that market has the potential where companies can now introduce high-speed data services. The emphasis should not only be on just introducing new services but also maintaining their quality as well otherwise this approach won’t be useful.

Unknown (2010) brought few problems into limelight which arise from TV commercials made by mobile service providers which lack a certain theme, ultimately leading to damaging the brand image of a company. The author has considered the ad campaigns run in the recent past by various mobile service providers. The author has closely observed them to find out whether the mobile company has been successful in conveying the desired message or not and compared it with other successful meaningful ads that have been produced by other operators, national or international.

He has categorized the ad campaigns run in Pakistan by mobile service operators into two types, sales oriented ads and creators biased ads based on their perception of the competitors and how they are directed by their bosses. He has highlighted certain ad campaigns of Zong, Telenor, Mobilink and Ufone which corroborate with his argument of theme less and baseless advertising. He argues that the creators of ads are not mature enough which is why the ads created by them do not clarify the message being conveyed. Most of the TV commercials lie in the second category.

He said that it seems pretty clear the creators’ work that they either concentrate on cutting the prices of their services or making a mockery of other mobile service providers’ ad campaigns which is not only immature but against the business ethics and an uncompetitive practice. He added that just cutting the price of a particular service does not mean this would always increase its demand; companies should concentrate on encouraging the utility and helpfulness of the service so that customers would find out how the service would help them in their daily lives.

Unknown (n. d. ) endeavored to find out what is the best mobile network in Pakistan. He conducted various surveys, interviews and questionnaires and gained information from officials of various mobile service operators. The author claims through his/her findings that Mobilink is the best mobile service provider in Pakistan. He made SWOT analysis and BCG matrix of the Mobilink and other mobile operators and these studies came to the conclusion which made Mobilink on top of all.

It put every company on back in terms of network coverage, strong brand image, highest market share, greater number of franchises etc. He has considered Ufone as its closest competitor and its call rates are relatively cheaper than Mobilink. He has suggested that in order for Mobilink to stay on top, it needs to concentrate on bringing their call rate relatively down, improve their network service because the surveys indicate that network problems are faced frequently by customers at times