Analysis of major players in malaysian telecommunication industry

The purpose of this article is to conduct a critical evaluation of major players in Malaysian telecommunication industry; Maxis Mobile Sdn. Bhd and Digi.

This article will generally research the challenges experienced by Telecommunication industry players in Malaysia, how key players sponsored the marketplace challenges, and to discuss the market placement for Maxis Mobile and Digi in specific as figures shown that Malaysian telecommunication market is saturated with penetration market rate greater than completely.

Limitation and Scope of Report

Data used in this report is completely supplementary as researcher is having inability in conditions of funding and period to execute proper data gathering because of this report. You will discover constraints and problems in confirming data accuracy and money as well.

Overview ON THE Industry

Maxis was set up in season 1995 with the dialing prefix "012", "014", "0142" and "017". Maxis has the largest customer bottom in Malaysia contain 42 percent of market share as of 2009. TeleNor from Norway possesses 49 percent of Digi (016 prefix) and presently Digi has the largest subscriber platform in Malaysia.

Product

Telecommunication providers provide basic services that help communication between people. These services derive from 2G, which stands for second-generation wireless mobile phone technology. The major difference between 2G and technology before that is cell phone conversations are digitally encrypted. In Malaysia, telecommunication providers offer a variety of services from the basic 2G tone call services, short messages, multimedia text messages, caller ringtones and video calls. Plainly all telecommunication providers offer the similar products therefore there are very little products differentiation can be drawn. The pattern in telecommunication technology is moving to 3G, 3. 5G presently. 4G services will be released to Malaysian market by early on 2011.

Price

All telecommunication players provide same services with little variations in prices that will not exceed ceiling price dependant on Ministry Of Communication Malaysia. Maxis, Digi and Celcom, the 3 major players in Malaysia, creatively market the same services with different product packaging. Costs becomes the critical buying decision factor for industry that provides identical products. Preset line cellphone services are relatively cheaper comparing to mobile services but mobile services members increase faster than set lines because of overall flexibility and mobility that mobile services can provide and fixed lines cannot. However telecommunication charges in Malaysia is still expensive looking at to other ASEAN countries. Malaysian telecommunication industry is within healthy stage and providers have relatively higher margin to survive despite the saturation of market penetration.

Place

Customer Service Outlets

2005 MCMC study [1] showed that Selangor having the largest share of subscriber basic accounting to 24. 7 percent. Johor has the second largest share of subscriber (13. 7 percent) and followed by Kuala Lumpur (9. 7percent). The statistic still apply for now as Klang Valley (contain Selangor and Kuala Lumpur) gets the biggest population and most developed area in country due to the strategic locations. Administration and private industries concentrate the purchases in Klang Valley and created a great deal of careers. This subsequently encourage the migration of people from outskirt to towns.

Due to advertise saturation in Malaysia, telecommunication players are also taking a look at ASEAN market (Indonesia, Vietnam, Philippine, Thailand, Cambodia, Myanmar) for growth alternatively than depending on home demand. There are also symptoms of mergers and collaboration within the industry to accomplish organization development because organic progress is too gradual for sustainability in the industry.

Signal Coverage

All telecommunication players claim they may have best coverage within Malaysia and international roaming however there is absolutely no formal report posted to rectify the says. General consumer experience concluded that Maxis has strong coverage in urban area, Celcom has good coverage in rural area and Digi has the worse coverage.

Promotion

Due to little differentiation in products and pricing, 3 major telecommunication players in Malaysia, namely Maxis, Celcom and Digi, have constantly create new marketing promotions to excite the Malaysian market. Cheaper postpaid plans, relationship with Blackberry, I Phone, good friend finder, bubble conversation, endless music download and other promotions were among the few offers ran to appeal to new or hold on to existing customers. Smaller telecommunication players, XOS and U Mobile, are relatively peaceful and have a tendency to be followers of offers launched by Maxis, Celcom and Digi.

Size Of The Market

Malaysia is one of the largest export nations worldwide and it is ranked 28th out of 121 countries by "Global Enabling Trade Article 2009" which released by World Economic Forum. Malaysian possessed RM 48billion FDI in 2008, but fell to RM 4. 2billion in 2009 2009 credited to economy down change [2]. Regarding to statistic posted by The Malaysian Communication and Multimedia system Payment (MCMC), penetration rate for cellular phone line registration (pre paid and post paid) grew enormously from 21. 8 percent in 2000 to 108. 1 percent [3]. The telecommunication increase wave has perceived to be stabilized as penetration rate has achieved more than 100 percent due to multiple subscriptions. New customers acquisition should not be the primary to-do for telecommunication players, but instead, key players should concentrate on increasing earnings per subscriber and also to retain customer devotion.

Target Segments

As of 2nd July 2010, Malaysian inhabitants matter is 28. 25 thousands, with more than 60 percent of the population between 15 to 64 years of age. 4. 7 percent of Malaysian populations are 65 years and above and there are 27. 2 percent of youngsters below 15 years of age [4]. Human population for age group between 15 to 64 years old has the biggest spending power since they are the group that formed the working force for Malaysia. Marketing mix should be designed with the end in mind to target human population between 15 to 65 yrs. old. However, in 5 a long time, telecommunication players would have to redesign the target as the old inhabitants will develop and young generation will drop anticipated to low birth rate. People in the location is traditionally the prospective for telecommunication services assessing to rural area. Therefore telecommunication players focus the marketing activities to population in city.

Development INSIDE THE Industry

Exhibit : Malaysia Telecommunications Profits, 2008

Source: IDC(http://www. idc. com/getdoc. jsp?containerId=IDC_P6105)

Mobile communication brought the world nearer and Malaysians are also enjoying the capability of mobile phone services, which is the main earnings stream for telecommunication industry presently. People are substituting set lines with mobile telecommunication services which provide range of motion and higher availability. However with the estimated 2010 penetration rate of 108 percent, the mobile tone of voice revenue has already reached the maturity level, so as texting business. Whilst little development for both categories above, media messaging services and mobile data are anticipated to remove as the latest influx of progress for Malaysian telecommunication industry.

Challenges INSIDE THE Industry

Political/Legal

Malaysian government has strong control on the entire economy sector. It isn't a freely available liberal society and usually the government policies are set up to protect local centered bumiputra(indigenous) companies, as well as companies that are deemed 'pro-National Party government'. Formulation of regulations in Malaysian telecommunication sector is done by Energy, Telecommunication and Content Ministry. Take 3G license as example, TM (used to own by government in 90s), Celcom(subsidiary of TM) and Maxis were honored with 3G license where as Digi whose major shareholder is TeleNor from Norway lost the bet. Having said that, Malaysia is certainly going through a stage whereby people are pushing a 'different' tone of voice rather to have National Get together as the ruling party (that they were for the past 50years). The change of people's choice could bring hazard to 'pro-National Party government' companies when the opposition get together gets control as Malaysian government in enough time to come.

Economic

Malaysia's Gross Domestic Product in 2009 2009 was RM 679, 687 millions and RM 183, 364 thousands in 2010 2010 [5]. The GDP progress rate is 8. 9 percent for 1 / 4 2 in 2010 2010, GDP progress for Malaysia was forecasted to be 6. 2 percent progress year on year [6]. Overall Malaysian market is resistant towards world economy turmoil and telecommunication players are not impacted. You will find indicators of strong growth for Malaysia domestic market with the recent publicised 10th Malaysia Plan as well as the New Economic Model. The execution of 10th Malaysian Plan especially benefits the telecommunication industry because Malaysian administration is moving the united states towards knowledge established workforce somewhat than labour centered. Information Communication Technology is the key infrastructure to achiever the target. Telecommunication carriers are given bonuses such as duty exemption to develop their center business to aid the nationwide plan. While using strong economy development, there is no question for telecommunication industry to continue to experience development despite market saturation. Telecommunication companies should leverage and trip on the market recovery trend to achieve new high files in earnings.

Social And Cultural

Malaysia is a multi racial land. Malays will be the majority, followed by Chinese and Indians in Peninsular Malaysia. There's also minority group like Ibanese, Bajau and Kadazan which are mostly reside in the Sabah and Sarawak. Due to the multilingual culture, telecommunication providers need extra work to please all customers. Example, major dialects used in Malaysia including British, Mandarin, Bahasa Melayu and Tamil. Adverts have to be released via various mass media, with different dialects. This would result in increment of marketing cost in comparison to single language prominent countries such as America.

More than 80 percent of Malaysians are young, IT-oriented and there are constantly signs or symptoms of population getting into cities. Due to Malaysian's colonial history, Malaysians are some what receptive to European influence while protecting their root base of origin. This might means customers of telecommunication industry are directly interacted, up to date, and won't accept not latest information of everything. The earth now could be very informative as there are a lot of channels to source for information. Customers now are well informed compared to more aged days and nights. Telecommunication players are anticipated to satisfy customers' must know everything about their products prior to making purchase decisions. Telecommunication industry players need to serve the customer inhabitants which is demanding and know about their privileges. However, telecommunication players also face misuse of services by irresponsible customers. For instance spam junk announcements and blood circulation of rumour brief messages. Increase in such happenings would eventually pressure Ministry of Communication for taking necessary action such as imposing tighter policies in telecommunication sector.

There is also a unique group of people in Malaysia- overseas workers. The amounts of foreign workers increase with an alarming stage. 10 percent of the 2004 Malaysia workforce was registered international workers [7]. Majority of foreign personnel are from Indonesia, Nepal, Bangladesh, India, Myanmar, Philippines, Thailand and other neighboring countries. Telecommunication players should analyze the feasibility of recording revenue in the forex market such as calling foreign staff' home countries and explore the chance of partnership with other providers for the reason that region.

Technological

An increasing challenge in telecommunication industry is network development and network search engine optimization. More membership means network traffic congestion, which is a good problem to acquire. As stated, products and charges in telecommunication industry is indistinguishable across all players, therefore proving quality services is the key to success. In case the service agency is not 'smart' and quick enough to optimise the network topology, it might bring into troubles like customer dissatisfaction and cost increase that will impact the business's revenue.

Telecommunication players also battle to develop impressive services because the current technology in telecommunication are mostly GSM centered and 3G technology is comparatively immature in Malaysia but it was to be the way to go since mobile data services are expected to boom. 3G technologies need a lot of in advance investment and telecommunication players would come across chicken-and-egg contemplation. Telecommunication players will have strong controversy internally to encourage stakeholders to get large amount of money into 3G before viewing the actual income. It is also questionable whether how significant will 3G take revenue in a different way from current 2G technology. Internationally addititionally there is trend of merging fixed lines and mobile services that allow customers to possess one amount and use that same quantity for set lines, mobile phone calls and access to the internet but you won't work in Malaysia due to TM's (Malaysian federal government linked telecommunication company) monopoly in set series and wired broadband services.

Environmental

Telecommunication providers need to enhance the network service to ensure best network quality is provided to customers. Therefore it is essential to identify proper locations to make telecommunication towers for strong sign coverage throughout Malaysia. You will discover constantly resistances from residents when a strategic location is discovered because generally people think that telecommunication transmission is bad for human body in long run although there is absolutely no scientific research information to verify the belief. Telecommunication players also occasionally get into law suit for building telecommunication towers on private land due to lack of local regulators governance in land possession management. Communications And Multimedia Take action 1998 demanded network specialist to have all acceptable steps to revive the land to a condition that is comparable to its condition before the activity began in case a network facilities service provider engages in a hobby in relation to any land. Telecommunication players must interpret Communication Work and have strong knowledge of The Action before constructing towers to protect their investments and purchases.

Challenges Experienced By Maxis

Internal Rivalry

Although Maxis is the first choice in Malaysian telecommunication industry, its command position has been aggressively challenged by 2 major competition, Digi and Celcom. Both Digi and Celcom is evenly established but public perception towards this 3 major players will vary. Maxis seen as the first choice unchallenged and well established in the locations or area with congested network traffic. Digi is superb in marketing campaigns but has yet to get up on variety of subscribers. Celcom is the owner of by TM, has strong support from the government and has strong signal coverage in rural area because Celcom leverages network services from TM.

Basic products are homogenous but Maxis has been always the first firm to provide new value added services such as I Phone, Blackberry, friend finders, Nokia endless music download to name a few. Maxis gets to capture the client subscriptions by releasing of value added services before Digi and Celcom do. However, customers transitioning cost is low with the implementation of Mobile Amount Portability Coverage by Ministry of Communication Malaysia. Mobile services customers are free to transition to any telecommunication providers while they get to wthhold the existing numbers. Therefore Maxis offers cheaper every month rate and requires customers to sign a twelve months contract.

Maxis invests an enormous amount of cash in building the telecommunication network including releasing two satellites, Binariang 1 and Binariang 2 compared to Celcom who leverages on TM, and Digi who leverages on TeleNor. Exit cost for Maxis is high and Maxis is iconic in Malaysia as the major service provider, it holds Malaysian's reputation in the telecommunication industry worldwide.

Threat of New Entrants

All telecommunication providers in Malaysia need a license to operate and its renewal will be granted after multiple assessments by Ministry of Communication Malaysia. The Ministry does issue new licenses however the amount has to be proportionate to size of market. For the past five years, there were four 4G Wimax licenses issued to YMax, Redtones, P1 and Amax. Three years have past and only P1 able to move out services but it isn't as receptive needlessly to say. Membership rate is low because new 4G providers do not have existing customer bottom and they're not allowed to provide 2G services like Maxis will. Mobile services operator licenses were given to U Mobile and XOS but both companies cannot penetrate to the marketplace despite numerous of marketing effort attempted. U Mobile and XOS combined have less than five percent of Malaysian mobile registration market share. Access hurdle is high anticipated to license requirements and huge investment for network create and new providers have not shown hazard to Maxis.

Bargaining Electric power of Buyers

If customers are looking for basic mobile services, then there are a few choices to pick from because the products and costing are homogenous. However Maxis companions and cross over with various companies directly into provide unique proposition such as World Glass live mobile broadcast, Maxis is the one provider that offer its subscribers to view live fits via telephones. Maxis also creatively design the product packages that contain product capabilities that entice customers and connect them with long-term agreements. With this, Maxis increases customers' turning cost, ensure earnings stream to Maxis for sustainability rather than going for quick wins.

Buyers have strong bargaining electricity but Maxis is brilliant enough to bundle homogenous products with unique add-ons to reduce customers' bargaining ability.

Bargaining Electric power of Suppliers

There are two major types of suppliers to Maxis, business as usual suppliers and unique value suppliers. Maxis has strong bargaining electric power over the business as common suppliers who provide network instruments, reportings, billing, traffic search engine optimization and other 'tool' tools for Maxis to perform your day to day procedure. Where for unique value suppliers such as FIFA and other marketing co-partnership suppliers, Maxis must strive through and compete with other telecommunication providers to obtain sole collaboration which is persuasive reason for customers to sign up Maxis's services.

Threat of Substitute

Threat of alternative is high for Maxis because the products and price is homogenous across industry but Maxis mitigates the menace by conditioning add-on values to basic products, and will be offering various pricing deals which tailor customers' needs.

Summary of Existing Rivalry

5 Forces

Weighting(5 as maximum)

Internal rivalry

5

New entrants

2

Bargaining electricity of buyers

3

Bargaining vitality of suppliers

3

Threat of substitute

4

Proposal to Maxis and Digi to meet up Challenges

Pricing

Charges on mobile tone of voice services are governed. However telecommunication providers are free to design the services packages block. In postpaid area, Celcom gets the lowest determination fees but Digi and Maxis have the cheapest voice cell phone calls and short information fee rate. Maxis and Digi should run researches to analyse customers' usage and payment habits to better segregate the charging blocks. Then Maxis and Digi can offer plans that deemed to be realistic and suit most customers' needs.

Exhibit: Price evaluation between Digi, Celcom, Maxis

Celcom gets the lowest monthly dedication fee while Digi has the cheapest demand rate. Although Maxis is not necessarily the cheapest but consumers still choose Maxis for its telecommunication service as well as after sales services. Corporate and business customers always have a tendency to choose Maxis because the image Maxis portrait.

Maxis can also introduce rebate system or 'chatting time' deposition like how travel mls work in airlines. Maxis can have more earnings from existing customers and increase customer commitment by offering attractive bundled data ideas. With this, Maxis can steer clear of the red ocean warfare that slash price and hurt the company's margin and increase earnings per subscriber, easily ahead of other challengers.

Product

In homogenous product environment, the only path to outperform opponents is to provide quality services. Maxis must continuously provide best value services to avoid customers moving over to competitors. The offerings from Maxis include pre-paid call plans, regular subscription programs, global roaming, MMS, WAP (over both GSM and GPRS), Residential Fixed Collection services, Broadband Internet programs, and as of early 2009, 3G services to both prepaid and postpaid registration customers. Apart from consumer structured products, Maxis offers business customers, VSAT services (satellite founded communications) and BlackBerry founded mobile services besides regular services. Maxis also provide a web Music store because of its customers to download multimedia content.

Other than telecommunication services, matching to National Telecommunication Insurance policy of Malaysia (1994-2020) [8], network Infrastructure is also key area to be explored. Maxis owns its basic network infrastructure to support the telecommunication services needs. Maxis also needs to explore the business enterprise possibility to be the Mobile Virtual Network Operators since this is a untapped market in Malaysia.

The key strength Maxis has is its leadership in subscriber basic and the brand is continually perceived as the company that has best network coverage although research results do show that the conception is remained doubtful because Celcom and Digi do dominate market control for an extremely brief while throughout these years.

With the strong brand, Maxis has the advantage in consumer space and Maxis should take a look at providing value added and varied new services that can enhance the commitment of existing consumers such as GPS, mobile pocket, music finder, content enlargement and basically the rest of the new services that consumers could enjoy from the existing Maxis contact number. New services also help Maxis to convert customers from other companies without changing the mobile quantities. Since Malaysia is lady country, Maxis can also use Islamic Development Department of Malaysia to provide services such as to check 'halal position' on certain products. This will likely subsequently yield and drive more income.

Maxis also owns the permit as 3G operator in Malaysia. Mobile data services are seen as the latest development to drive income growth. Other 3G licensees are attempting to meet up with the timeline for 3G services unveiling, Maxis is very comfortable in this league. Maxis 3G has the biggest market share at the moment due to its existing customer basic.

Distribution

Currently Maxis has more than 50 customer support retailers in Malaysia. These outlets are either participate in Maxis, or it operates by Maxis Exclusive Partner (MEP). These retailers are called as Maxis Centre. Customers are able to perform activities below in Maxis Middle such as trying to get any Maxis service, pay all Maxis bills, update or replace SIM cards, get Hotlink Starter Packages and top-up seat tickets, apply to settle payments by immediate debit, suspend, terminate or reactivate Maxis lines and transfer ownership. Populations in the metropolitan areas are being used to performing duties online. City areas are also well linked by transportations. Therefore Maxis should choose tactical locations to open customer service centers and encourage users to perform supervision activities online. As for rural area, the Maxis should choose more authorized resellers to manage customer centers on behalf of Maxis to reach out to much larger crowd.

Promotion

Since tariff charges are managed by authorities body, campaign becomes very important to Maxis and Digi to preserve market management. Digi has strong market team and has generated the image as the telecommunication provider that has most creative marketing special offers. Digi knows their position as the third place in market, and has a tagline that says 'always the smarter choice'. Digi also understand their product well and in a position to position their products strategically. Example while Maxis and Celcom claim that they have the speediest broadband contacts, Digi stresses and educate the general public: 'for broadband, speed is about reliability'.

Mobile line services was positioned top category in the graph for advert spending in Malaysia for 2009 and 2010[9]. RM 150 millions was spent by mobile series services specialist in first half 2010. Celcom was placed number 3 3 as the most notable advertiser in first 1 / 2 2010, accompanied by Digi at forth position and Maxis at seventh. Although Maxis spent the least compared to other telecommunication giants, it has always been the first to introduce new marketing campaigns to Malaysian market such as I Contact and Blackberry. Maxis also connected up with major occurrences including the recent World Glass 2010 as the official mobile spouse, and sponsored in local happenings such as Akademi Fantasia, and sometimes plan concerts for singers such as Kelly Clarkson. This helps improve brands as well as earnings opportunities.

Therefore, Maxis should give attention to increasing income per subscriber by stimulating data usage. The products that Maxis offers now is still very much basic and for entertainment purpose. Maxis should also endeavor into offering financial services so collaborate with Bursa for talk about market changes, M budget with lenders for mobile repayment which making the phone numbers as one of the key identifier for every single individual.

Maxis can also utilize the 3G facility and use universities to promote mobile learning, mobile university administration since education is one of the strong industry in Malaysia.

Conclusion IN THE Proposal

Malaysian telecommunication sector encounters issues such as strong federal government influence in plans making, immature customers that abuse the convenience offered by mobile services, threat of world market down change, homogenous products, technology constraints, lack of telecommunication skills and intensive interior rivalry.

To dwelling address the challenges in country, telecommunication players spend money on creating a pool of strong marketing abilities that in a position to design creative marketing combination to attain business sustainability. Telecommunication players also realised that commercial public responsibility not only help in building brand reputation, federal government also receptive to it and eventually set up good rapport with federal. However overall telecommunication industry is very market influenced in nature and everything telecommunication players have to stay alert and must have the ability to respond to market fast to ensure business continuity.

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