Industry Analysis of Telecom Industry
The development of any country completely depends upon the growth of telecommunications; it is a technology of transmitting signal through a long distance for the sake of communicating with each other. Throughout the world, telecom industry is being controlled by private companies instead of government monopolies. Traditional telecom technologies are also being replaced by modern wireless technologies, specifically in case of mobile services.
One of the major objectives of telecom industry is to enhance the quality and speed of Internet technology. These days, telecom industry is more concerned with texts and images (Internet technologies), rather than voice (telephone service). Most of the research works are going on Internet accessibility, specifically on data applications and broadband services. The other major division of telecom industry is mobile network sector, where lots of innovative research works are going on. Previously the traditional telephone calls used to earn the maximum revenues, but these days mobile service is going to replace traditional telephone services.The telecommunication industry is more than just telephone services.
In addition to the transmission of information this group also covers activities which offer access to a certain networks including the internet. It includes the distribution of sound, images, data or other information via cables, broadcasting, relay or satellite networks. It encompasses telephone, telegraph and telex communication, the transmission of radio and television programs, internet access provision and the maintenance of networks. 2. Goods and servicesThe telecommunications industry delivers telephone, television, Internet, and other services to customers throughout the Philippines.
Providing the primary means of communication to virtually all businesses, households, and individuals, telecommunications firms supply an essential service to the Philippine economy. In addition to offering traditional services such as wired phone and cable TV, telecommunications companies also offer services such as cellular phone, broadband and mobile Internet, and satellite TV, among others. B. Brief History: How did it all start? By whom?When? The telecommunication deregulation thru the enactment of the Public Telecommunications Policy Act of 1995 as spearheaded by then President Fidel V. Ramos, gave players such as SMART, Globe and PILTEL (Pilipino Telephone Corporation) the opportunity to slug it out with Philippine Long Distance Telephone Company, which monopolized the telecommunications industry.
With the advent of cellular technology coming in two competing standards—GSM (European) and CDMA (American) standard, further wrested the monopoly from PLDT which was then purely a fixed wire line provider.SMART and Globe adopted GSM technology to provide mobile voice services while PILTEL chose CDMA. By the year 1997, it was clear that GSM was going to be the de facto standard of mobile telecommunications thus SMART and Globe became the dominant players, PILTEL had become stagnant and unable to grow with the same degree as with SMART and Globe, thus being acquired by SMART eventually. With the uptake on Internet usage in the country, telecom providers limited only to providing voice services diversified their offering to broadband thus they became Internet Service Providers (ISP’s) at the same time.It was envisioned that the succeeding technology of 2G GSM which was 3G technology could meet the broadband needs, however due to technological limitations (speed limit of 3G) and the lack of a killer application, like the SMS/text, the mass adoption of 3G, is really slow prompting providers to have a “wait-and-see attitude”, that is, they continue experimenting with different technologies coupled with different selling plans.
Today, competition in the industry is very much alive, with each offering countless promos that can only mean great for the consumers. C.Macroeconomics Significance The telecom industry has been an important contributor to the Philippine economy in many, diverse ways. National telecom infrastructures were built and have re-invested significant amounts of money back into the local economy. Players in the industry have put in capacities and invest in new technologies in line with the government’s investment priorities.
This same infrastructure now enables the growth of other industries including the BPO, offshoring and outsourcing sectors which in turn provides employment to hundreds of thousands of Filipinos.Second, the industry has provided jobs and livelihood to thousands of retailers, distributors, third-party agents, content providers, and a whole host of other micro and medium-scale businesses. Third, the industry’s key players have been one of the largest taxpayers in this country. Perhaps most important, the industry, since it was opened up to competition in the mid-1990s, has put a powerful communication and information tool in the hands of millions of Filipinos, providing them with affordable and indispensable communication services.It is in this context that the industry espouses the principles of free market forces to propel the industry forward, providing more robust and converged services to its subscribers, investing in the infrastructure to support the demands of the industry, and continuing to play an important role in the development of the economy.
The telecommunications sector is very important. Voice, data, SMS, and video continue to enhance lifestyle, commerce and economic growth. It’s a vital contributor to domestic growth in the context of a globalized economy.Telecommunications enable growth industries like call centers and BPOs. From the perspective of households, we provide vital services that allow them to earn a living or keep in touch with loved ones overseas.
Communication is at the center of the human experience. Therefore, it will grow in importance despite the changing global economy and environment. The technology innovation in the telecom field continues unabated, providing new services and opportunities to both service provider or operators and customers.In addition, most parts of the industry are competitive which helps to drive innovation and cost reduction, which again, consumers benefit from. 1.
Contribution to GDP/ Economic Output As mobile growth slows in Philippines, a big surge in broadband Internet is taking place. After years of solid growth, the mobile segment of the telecom market in the Philippines slowed dramatically in 2009, reflecting a general downturn in the economy. The country’s GDP growth had eased to under 5% in 2008, down from the 31-year high of 7. % in 2007 as the recession in the US, its main trading partner, started to hit exports and as rising inflation curtailed consumer spending. Growth in the Philippines slipped even further in 2009 coming in at just 0. 1%.
At the same time, the country’s telecom industry also shifted to a pattern of more modest growth, with the core mobile services business looking more like it was approaching maturity. By 2010, however, there was increasing optimism that the economy’s down time was passing, with the International Monetary Fund (IMF) forecasting growth in GDP of around 4% for the year.The major operators had been forced to cope with the pressures of slowing growth in traditional areas of the market and rising investment needs for new growth areas such as consumer broadband. Mobile expansion had certainly slowed by 2010, but the operators were continuing to talk positively about the market’s potential. With modest growth the clear pattern into 2010, the mobile market remained central to the development of the Philippines telecom sector, just as it has done over the last decade or so.
Although the sector as facing challenges there was clearly some energy remaining in it as the two leading operators continued to roll out their Third Generation mobile offerings. In the meantime there is a growing interest in broadband services, with the major players in the local telecom market starting to invest heavily in the expansion of broadband access and looking at both wired and wireless broadband platforms to provide coverage. The demand for broadband services was starting to rapidly increase coming into 2010, underpinned by the rising availability of PCs in the country. There were an estimated 12 million units by 2009 representing a PC penetration of 13%). Despite the fresh new round of growth, overall broadband penetration remains relatively low; there were only three broadband services for every 100 people in the country early in 2010. The country’s fixed-line subscriber penetration, which has been well and truly living in the shadow of the mobile juggernaut, remained essentially stagnant.
It has certainly been a long period of difficult times for the fixed-line operators.Despite the concerted effort of both the government and the operators to expand the national fixed network, fixed-line teledensity stood at less than 5% in 2010 and only a little more than half of all Philippine towns and cities had a basic telephone service. The Philippine telecom and IT market continues to reflect considerable optimism despite the vicissitudes of the local market and the questions hanging over the global economy; significantly, the sector has been contributing more than 10% to the country’s GDP, having obviously been given a massive boost by the mobile segment over the last decade. . Contribution to Employment Telecom industry analysis uncovers the fact that this industry has a huge business potentiality and is going to be a booming industry.
Telecommunication industry has created immense employment opportunities. Telecommunications jobs are found in almost every part of the country, but most employees work in cities that have large concentrations of industrial and business establishments.Job openings are expected to arise in the telecommunications industry as a result of the growing number of retirements and the continuing need for skilled workers. Prospects will be best for installation, maintenance, and repair workers, many of whom are expected to retire in the coming years, as well as for customer service representatives, who tend to have high turnover, creating many openings. Most of the employees in this industry are engaged in large establishments, although there are some small establishments, where a large number of small contractors are involved.
The industry has provided jobs and livelihood to thousands of retailers, distributors, third-party agents, content providers, and a whole host of other micro and medium-scale businesses. 3. Contribution to Investment The expansion of telecom industry is so massive. It is because the telecom business promises high return to the investor. Telecommunications managers need to make strategic decisions in an increasingly volatile environment where permanent investment in new technologies has become crucial for growth and satisfaction of customer demand.The factors which determine presently the investment decision process in the telecommunications industry are entirely different from the ones the industry was used to consider during the early days of regulation and/or state control.
4. Contributions to Foreign Exchange Earnings Telecommunications exports, including electronics, which had been growing by double digits before 2001 and had accounted for at least 75% of export revenues in 1999, which accounts for a substantial portion of the country’s foreign exchange earnings. 5. Linkages with the Rest of the EconomyEfforts to transform the Philippine economy from a primarily agricultural producer of crops for subsistence and export to a more diversified growth economy led by manufactured exports commanding more favorable terms of trade like its Asian tiger neighbors have been repeatedly hindered by natural disasters and external economic shocks. The government’s preliminary results show 61.
3% of employed persons engaged in agriculture in 2002, up slightly from 61. 1% in 2001, whereas the percent employed in industry (including manufacturing, construction, mining and quarrying, and power production) decreased from 10. % in 2001 to 9. 5% in 2002. `The manufacturing sector, though expanded and diversified since political independence, depends on imported raw materials and cannot supply internal need. Electronics and telecommunications exports, which had been growing by double digits before 2001 and had accounted for at least 75% of export revenues in 1999, proved vulnerable to the worldwide slowdown in consumer demand in the recession of 2001, and the contraction by half in foreign investment as a result of the 11 September 2001 terrorist attacks on the United States.
Throughout the 1990s the shortage of electric power has been a notorious constraint on the economy. Between 1993 and 1999, the Philippine government liberalized telecommunications, deregulated transportation, privatized water, and resolved the power crisis. Chapter 2 Basic Supply Conditions A. Basic Production Process All of the local telecommunication companies buy technology from foreign vendors. Often, these vendors provide not only the technical solution to the newly acquired equipment, but also operational and turnkey trainings to select telecommunication player employees.It is also usual practice for vendors to deploy the technology for the first few clients and provide long term technical support to the buyer since market players do not have the absorptive capacity to fully assimilate the technology.
Instead of seeking the best ideas which can be translated into new technological breakthroughs, the typical telecommunication carrier in the Philippines adopts a contented stance just to be mere copycats of Western counterparts, imbibing Western technologies as provided by foreign vendors.Pursuing to develop a Philippine capability for telecommunications equipment is not a common objective of local telecommunications carriers. Most technological breakthroughs are mere marketing blow-ups of carriers promoting already mature technologies designed by foreign vendors. Innovative services in the Philippine telecommunications market are merely applications of old technologies in the Western world but new services to the Philippine market. B.
Major Investment Requirements Telecom industry is a vast and diversified industry and needs a huge capital to invest.That is why the competitors of this industry should be such that they can meet that demand. From the investor’s point of view, it can be said that they should be well aware of cash flow in this industry. Operating a telecommunication services business is often highly capital intensive, with significant investment required to purchase large scale telecommunication service transmission networks that can run into billions. Hence a good financial modeler should carefully account for the need to perform detailed capital expenditure analysis when building a telecommunication services financial model.
Some of the major capital expenses, using a cellular services provider as an example, include purchases of base transmission stations (BTS), which increases incrementally as the number of subscribers and the geographic network coverage of the operator expands. Mobile switching centers (MSC) are also another major expenditure item; MSCs are required to ensure the smooth and efficient controlling of subscriber calls to ensure that they are patched through correctly to their intended calling party. Again, MSC costs ncrease incrementally as the customer base of a provider increases. Billing system costs and customer service management system costs are also major capital investments, as sophisticated IT systems and software are required to operate the often large scale requirements of these systems to serve and manage millions of customers. The most important factors of input to investments in telecom networks are electronic equipment, cables and wires. Prices for electronic equipment have decreased rapidly and are expected to continue declining in the future.
This affects in particular the costs of switching but transmission is affected also. Although investment goods are becoming cheaper, the level of investments in telecom services is growing rapidly and capital costs still constitute a substantial share of total costs of production. C. Major Cost Items The telecom sector is characterized by very large investment costs. The precise percentage of total costs attributed to investments depends of course on the definition of investments and of telecom activities (e.
g. whether research, marketing or similar activities are included).Although some sources claim investment, and investment-related costs to be as much as 90 percent of the costs of production, most estimates based on financial data, however, vary between 60 and 75 percent. Thus, by all measures the telecom sector is comparatively capital intensive. Network maintenance costs, typically contain the costs required to operate and maintain a telecommunication services network.
This will vary considerably between a fixed telecommunication network and a cellular or mobile telecommunication network.For a cellular telecommunication network, there will be costs involved in operating base transmission stations (BTS) for the onward propagation of radio waves required to carry voice and data signals, and may involve both upkeep costs as well as rental costs for the surrounding land required to physically host the BTS across the territory of operation. Leased line costs are also another major cost item in network maintenance costs, and are incurred as cellular services operators are required to rent existing high bandwidth telecommunication cables that enable the operation of the BTS network.Most of these costs can be modeled on a unit cost per BTS basis for simplicity. Billing costs are another significant cost item in a telecommunication services financial model. In order to ensure a proper and efficient sales billing and collections cycle for the millions of customers that a telecommunication service provider often has to serve, resources are required to develop and operate sophisticated IT billing systems, manage paper invoices, collect payments from various payment touch points (such as online, check, cash, ATMs, etc)Staff costs are also a major cost item in a telecommunication services financial model, it being a highly customer intensive business with a high degree of customer interaction required in pre sales as well as post sales, and also an extensive telecommunication infrastructure to operate and maintain.
Marketing costs, as the telecommunication services business is normally extremely competitive (especially in fully liberalized markets), many providers invest significantly in marketing and branding campaigns to differentiate their offerings and gain consumer mindshare.Marketing costs are often dimensioned on a per subscriber basis, and can also be termed customer acquisition costs. For cellular service providers, cellular handset discounts and subsidies are also a key cost item that should be accounted for in a telecommunication services financial model. Handset discounts or D. Major Suppliers The telecommunications services industry in the Philippines is one of the strongest performers in the country’s economy.
However, continuity in progress and development in the industry remains to have an unstable outlook, as the industry’s players suffer considerable pressure both from the technological advancement of its suppliers and of meeting the demands of its target markets. A dynamic industry such as telecommunications services thrives on continuous advancement and the constant search for improvements to existing technological platforms.Philippine Telecommunications carriers remain at the mercy of foreign telecommunications equipment suppliers for these technical platforms that determine their capacity to provide the demanded state-of-the-art telecommunications services. Together with Management of Technology Advocates in the Philippines, the largest telecommunications operator and prime technological mover, the Philippine Long Distance Telephone (PLDT), has recognized the significance of developing homegrown innovative capability.With the pursuit of innovation made more complex in the context of recent times by rapid globalization and commercialization, Philippine technology managers have finally realized that a synergy of resources and perspectives from a collaborative effort between industry, academe, and the government holds promise to be the most efficient and effective way to develop an innovative capability that is both self sustaining and contributive to national competitive advantage. 1.
What is the Structure of Supplier Industries? Are Suppliers many or few? . How strong is the bargaining power of suppliers? Why? 3. Are there imported inputs? How are the tariffs for these inputs? Despite the rapid growth of the telecommunications industry in the country, most of the raw materials, production equipment and technology used in the telecommunications industry in the Philippines are still imported. More than half of electronics exports are semiconductors manufactured from materials imported on consignment basis with no connection to the local economy but the use of cheap labor.This import-dependence is the result of monopoly control by foreign capitalists and government policies that favor this situation. The deregulation of the telecommunications industry and the lowering of tariffs based on the ITA-WTO and AFTA-CEPT only encouraged the importation of electronics equipment.
E. What are the major factors that affect supply? Is the industry sensitive to exchange rate? Climate change? Technology?Whilst the core proposition of the need for communication remains, the industry is subject to technological change and the business models of charging tariff rates for traditional forms of communications such as fixed and cellular phone services is under threat, most noticeably from internet enabled telephony services that are able to operate at significantly lower cost, and are therefore able to pass on their savings to consumers. CHAPTER 3: MAJOR ENTRY BARRIERS OF A TELECOMMUNICATION COMPANY Introduction:In theories of competition, barriers to entry are the obstacles that make it difficult to enter a given market. These may refer to the hindrances that firm faces in trying to enter a market or industry. Examples would be government regulations or individuals trying to gain entrance to a profession, such as education or licensing requirements.
These barriers protect incumbent market leaders as they restrict the occurrence of competition in the market. In order to lessen or avoid the existence and possible rise of monopolies or the so called market power, the use of barriers to entry would be effective.Definition According to George Stigler , barrier to entry is a cost of producing which must be borne by a firm which seeks to enter an industry but is not borne by firms already in the industry. According to Franklin M. Fisher, a barrier to entry that prevents entry when entry is socially beneficial.
According to Joe S. Bain, it is anything that allows incumbent firms to earn supranormal profits without threat of entry. A. Major Barriers That Prevent the Entry of New Players into the Industry. 1.Advertising or Product differentiation.
Market leaders in the field of telecommunication, such as PLDT, can spend heavily on advertising as it will make it more difficult for new competitors to afford having too many advertisements. Telecommunication companies may see this as an edge because new companies are not yet that eager to spend much on advertisements since they are still after the returns of their investments. Market leaders can use advertising in emphasizing their brands and in making differentiations with other brands.Telecommunication companies can lay emphasis on its competitive advantages and at the same time making the consumers realize that their brand is highly different and cannot be easily substituted by other brands. This will make it hard for new entrants to gain consumer acceptance. 2.
Capital Requirements Telecommunication companies must always have the capital to start up. They may require capital investments in inventories or production facilities. 3. Control of Resources. If a telecommunication company has a stable control of resources, other entrants are unable to compete in the industry.
And with the increase dependence of business sectors in telecommunications, incumbent firms in this field should continue on managing their telecommunication expenses properly. Self monitoring is also a beneficial a barrier as this will lead telecommunication companies to have on hand information and greater control on their resources. 4. Cost Advantages Independent of Scale. Market leaders in the field of Telecommunication must maintain their good reputation in providing high quality means of technology. They must not lose their expertise and mastery with the different know-how’s regarding Information technology.
Favorable access to raw materials and favorable geographic locations must be taken into consideration to determine possible alterations that would help the entrance of other firms. Learning curve cost advantages must always be prepared to determine and solve the rise of likely occurring variations within the company and the industry it is into. 5. Customer Loyalty. Large incumbent firms should continue on encouraging their customers and making their services more beneficial so as to maintain, if not increase their customer loyalty.
The presence of established strong brands within a market can be a barrier to entry in this case. 6. Access to Channels of Distribution. Telecommunication companies must maintain long standing-relationships with key distributors or retailers to overtake new entrants and to prevent them from having close connections with other sectors. In order to persuade distribution channels to accept a new product, new entrants often must provide incentives in the form of price discounts, promotions, and cooperative advertising. Such expenditures act as a barrier by reducing the profitability of new entrants.
. Intellectual Property. Telecommunication firms can use patents, trademarks and service marks as a kind of entry barrier. This will give the firm the legal right to stop other firms producing the similar product for a given period of time. Patent also give telecommunication firms the legal protection to produce a patented product for a number of years 8. Supplier agreements.
Telecommunication companies must maintain having exclusive agreements with key links in the supply chain can make it difficult for other manufacturers to enter an industry . Research and Development Expenditure. Telecommunication firms may resort to having heavy spending on research and development. It acts as a strong deterrent to potential entrants as it is concern primarily with strategies on developing new products and will allow them to improve production processes and reduce unit costs. B.
Natural Barriers To Entry Natural barriers to entry generally arise on account of economies of scale. The demand conditions in the market may be such that only a few big firms can operate successfully. 1.Economy of Scale. Economies of scale occur when the unit cost of a product declines as production volume increases.
When existing competitors in an industry have achieved economies of scale, it acts as a barrier by forcing new entrants to either compete on a large scale or accept a cost disadvantage in order to compete on a small scale. Large, experienced telecommunication firms can generally bring into being goods and services which are lower in costs compared with the services offered by other inexperienced firms. 2. Inelastic Demand.One strategy to prevent new entrants in the industry is to offer and sell at a lower price than others, but without sacrificing the quality of the companies’ products and services. Telecommunication companies may adopt predatory pricing policies by lowering prices to a level that would force any new entrants to operate at a loss.
This is effective to price-sensitive consumers. 3. Network effect. Telecommunication firms must maintain and capture a significant user base. It must at least acquire a large portion of the market share in order for competing players to have a difficulty in entering the same industry.ARTIFICIAL BARRIERS TO ENTRY Heavy initial investment requirement and ownership of strategic resources with no close substitutes may be other causes restricting entry of new firms.
Further, patents, trade marks, tariff, quota, licensing, other Government regulations and product differentiation create artificial barriers to entry in the oligopolistic market. Firms can earn profits in the long-run due to these barriers to entry. 1. Intellectual Property. Telecommunication firms can use patents, trademarks and service marks as a kind of entry barrier.This will give the firm the legal right to stop other firms producing the similar product for a given period of time.
Patent also give telecommunication firms the legal protection to produce a patented product for a number of years CHAPTER 4 BASIC DEMAND CONDITIONS INTRODUCTION What Does Demand Mean? It is an economic principle that describes a consumer’s desire and willingness to pay a price for a specific good or service. Holding all other factors constant, the price of a good or service increases as its demand increases and vice versa. A. DOMESTIC MARKETS Domestic Market Size, Quantity and ValueTelecommunication in the Philippines About over 80% of Filipinos are subscribers. This growth was driven by the popularity of SMS, known locally as texting. The Philippines was the first country to adopt the service to any great extent, and remains the texting ‘capital’ of the world.
The reasons for the success of SMS texting are numerous, and include the fact that Filipinos are both gregarious and good communicators. Texting provided an inexpensive means of keeping in touch. In general, other wireless data services are still in their infancy in the Philippines.Services such as WAP, GPRS and MMS are being adopted only slowly. 3G is now starting to be deployed. The Internet is still not well used except in the main urban areas such as Manila.
Despite the relatively early introduction of the Internet to the Philippines, the service has not been anywhere near as successful as in many other countries. Registered subscribers still represent only about 5% of the population. E-commerce is also still at an early stage. Although there is much discussion and publicity about the service, very little business is actually being conducted online at present.Broadband services are now deployed in Metro Manila and other major conurbations, but the service is still largely unavailable in most rural areas.
The range of technologies being used where broadband is available includes DSL, fixed wireless, coaxial cable and satellites. The pay-TV industry has considerable potential. There are more than nine million TV households in the country, but only about 1. 2 million subscribe to pay-TV. The Philippines is one of the least developed telecom markets in the Asia-Pacific region.
That being so, it has greater investment potential than the more mature markets provided that the economy continues to develop and further social unrest is avoided. PHILIPPINE TELECOMMUNICATION’S STATISTICS Philippines Internet Usage Stats and Marketing Report Internet Usage Statistics: 29,700,000 Internet users as of June/09, 29. 7% of the population, according to Yahoo. Latest Population Estimate: 99,900,177 population for 2010, according to the US Census Bureau. Internet Growth in Philippines: YEARUsersPopulation% Pop.
Usage Source 20002,000,00078,181,9002. 6 %ITU 20057,820,00084,174,0929. %C. I. Almanac 200814,000,00096,061,68314. 6 %Yahoo! 200924,000,00097,976,60324.
5 %Nielsen 201029,700,00099,900,17729. 7 %ITU HISTORICAL GROWTH RECORD As mobile growth slows in Philippines, a big surge in broadband Internet is taking place. After years of solid growth, the mobile segment of the telecom market in the Philippines slowed dramatically in 2009, reflecting a general downturn in the economy. While growth in mobile subscribers slowed, so also had mobile revenues with just a 1% rise on the previous year, this compared to revenue growth of almost 6% in 2008.Into 2010 the Philippines mobile market had 75 million mobile subscribers (81% penetration) and looked likely to continue modest growth (10%-15%) through to the end of the year. The country’ s GDP growth had eased to under 5% in 2008, down from the 31-year high of 7.
3% in 2007 as the recession in the US, its main trading partner, started to hit exports and as rising inflation curtailed consumer spending. Growth in the Philippines slipped even further in 2009 coming in at just 0. 1%. At the same time, the country’s telecom industry also shifted to a pattern of more modest growth, with the core mobile services business ooking more like it was approaching maturity. By 2010, however, there was increasing optimism that the economy’s down time was passing, with the IMF forecasting growth in GDP of around 4% for the year. The major operators had been forced to cope with the pressures of slowing growth in traditional areas of the market and rising investment needs for new growth areas such as consumer broadband.
Mobile expansion had certainly slowed by 2010, but the operators were continuing to talk positively about the markets potential.With modest growth the clear pattern into 2010, the mobile market remained central to the development of the Philippines telecom sector, just as it has done over the last decade or so. Although the sector was facing challenges there was clearly some energy remaining in it as the two leading operators continued to roll out their Third Generation mobile offerings. In the meantime there is a growing interest in broadband services, with the major players in the local telecom market starting to invest heavily in the expansion of broadband access and looking at both wired and wireless broadband platforms to provide coverage.The demand for broadband services was starting to rapidly increase coming into 2010, underpinned by the rising availability of PCs in the country.
Despite the fresh new round of growth, overall broadband penetration remains relatively low; there were only three broadband services for every 100 people in the country early in 2010. The country’s fixed-line subscriber penetration, which has been well and truly living in the shadow of the mobile juggernaut, remained essentially stagnant. It has certainly been a long period of difficult times for the fixed-line operators.Despite the concerted effort of both the government and the operators to expand the national fixed network, fixed-line teledensity stood at less than 5% in 2010 and only a little more than half of all Philippine towns and cities had a basic telephone service. The Philippine telecom and IT market continues to reflect considerable optimism despite the vicissitudes of the local market and the questions hanging over the global economy; significantly, the sector has been contributing more than 10% to the country’ s GDP, having obviously been given a massive boost by the mobile segment over the last decade.
Market highlights: •Growth in mobile subscribers slowed dramatically in the Philippines in 2009 but despite the poor national economy still managed to grow 9% in the year; •Reinforcing the depressed state of the industry in 2009, mobile revenues grew just 1%, this compared to revenue growth of almost 6% in the previous year; •There was evidence of a modest recovery in the mobile market in 2010 with overall subscriber growth set to reach 10%-15% by year end taking penetration close to 100%; •Filipinos had sent an estimated 1. billion SMS messages every day in 2009; •However, the volume of text messages looked likely to peak at this 2009 level, as social networking websites started undermining some of the traffic patterns; •Broadband Internet access in the Philippines was finally growing in a significant fashion, with the country having experienced a four year growth surge in that market segment; •There were an estimated 2. million broadband subscribers by end-2009, but this still only represented 3% of the population; •Growth in the fixed-line market remained sluggish; fixed teledensity stood at less than 5% with the numbers only likely to edge up slightly in the short term; •The Philippine telecom sector continued to be an important element in the local economy, contributing over 10% to the country’ s GDP. MAJOR SEGMENTS OF THE MARKET Market SegmentIs a sub-set of a market made up of people or organizations with one or more characteristics that cause them to demand similar product and/or services based on qualities of those products such as price or function. Market Segmentation Is a concept and a process well known and largely used worldwide, in most business environments.
Segments of the Telecommunication Market 1. Business Market These are the persons using the service and paying from the company budget. 2. Residential Market They are also known as the consumers.These are the persons using the service and paying from his/her own wallet.
STRUCTURE OF THE DOMESTIC MARKET FOR THE INDUSTRY’S PRODUCTS AND SERVICES. ARE THE BUYERS MANY OR FEW? BIG OR SMALL? The buyers of the telecommunications industry in the Philippines are considered to be large as Filipinos are now inclined in using modern means of technology; especially for purposes of communication. Though, modern technologies for communication are not yet fully introduced in the country, a large portion of the population are now aware of newly developed forms of communication.That is why the rise of big telecommunication firms and also the existence of the call centers are now prevalent. Due to the increasing number of buyers, more and more firms are planning to enter the telecommunications industry which in turn may become a threat to those already established telecommunication firms.
HOW LONG IS THE BRAGAINING POWER OF BUYERS? WHY? Bargaining Power of Buyer Bargaining power is the ability to influence the setting of prices. Whether the bargaining power of your customers is weak or strong can be evaluated in a similar manner as supplier bargaining power.Even if buyers do not purchase in large quantities or offer a seller important market exposure or prestige, they may still have some degree of bargaining leverage if: (1) the cost of switching to an alternative product is low, (2) they can credibly threaten to integrate backwards into the business of the seller, or (3) they have discretion as to whether or when they purchase. Buyers typically have weak bargaining power when they purchase infrequently, buy in small quantities or when they face high costs to switch brands. Bargaining power of buyers depends on: 1.
Concentration of buyers- If there are few dominant buyers and many sellers in the telecommunications industry. 2. Differentiation. Whether the products and services offered the telecommunication firms are standardized. 3.
Profitability of buyers. 4. Role of quality and service. 5. Threat of forward and backward integration in the industry.
6. Switching costs- Whether it is easy for the buyers to switch their suppliers. WHAT ARE THE MAJOR FACTORS THAT AFFECT DEMAND? ARE BUYERS SENSITIVE TO EXCHANGE RATE? 1. Number of Consumers. More consumers mean more demand. 2.
Income of Consumers and Normal Goods. As income increases, demand for goods increases. 3. Income ; inferior goods. As income increases, demand for goods increases. 4.
Preferences of consumers. Consumer tastes are shaped by the way products are marketed or advertised to them. If an advertising campaign is particularly successful, people tend to buy more of a product. This often means that companies can charge a little more for their product. It can also be shaped by new trends. 5.
Price of a substitute. The demand for a product tends to decrease if the price of its substitute decreases. . Expectation of future prices and income. 7. Government policies.
8. Substitutes. The greater the number of substitutes and the attractiveness of their price, the smaller will be the demand for the good. 9. Number of sellers also impact demand by influencing the price of certain goods. Are buyers sensitive to income? Yes.
Buyers are sensitive to income because this determines their purchasing power. If their income increases, their ability to purchase goods and services will also increase. However, if their income decreases, their purchasing power will also decrease.Are buyers sensitive to price? Yes. Buyers are sensitive to price because if prices of goods will increase, and their income remains or decreases, their purchasing power will also decrease. As to substitute goods, if the prices of goods and services increase, buyers will prefer buying substitute products which are lower in price.
As to complimentary goods, if prices of goods increase, this will cause the decrease on the demand of its complimentary products since buyers will no longer buy. Another proof that buyers are sensitive to prices is in the case of future prices.If buyers expect that prices will increase in the future, they will prefer buying in bulk in order to avoid the possible rise of prices, thereby causing the current demand of a certain product to increase. However, if buyers expect that prices will decrease in the future, they will stop purchasing for the mean time and will only buy if prices are already low. This therefore results to a decrease in the current demand of a certain product.
Are buyers sensitive to tastes? Yes. Buyers are sensitive to tastes because of variations in lifestyle.They prefer buying products and services which are in demand in the market. And if these products are no longer favorable by the market, buyers will again stop purchasing causing alterations on the demand of these products. Are buyers sensitive to quality? Yes. Buyers are sensitive to quality because they tend to purchase products which are expensive as long as the quality is worth the price.
Are buyers sensitive to exchange rate? Yes. Buyers are sensitive to exchange rates because if the exchange rate increases, there income will also increase, thereby making their purchasing power to increase.Major Demand Determinants 1. Income Level. This directly represents the purchasing power of the people.
As the income level rises, people are able to purchaser a larger quantity or a wider selection of goods. 2. Population and Growth rate. As there are more consumers, there will be more demand and consumption will be high. 3. Performance of Related Industries.
Some goods and services might need the help of other industries before they finally reach the final consumers. 4. Availability and Price of Substitute Goods.The demand for a certain good or service will not be as high if there are alternatives or substitutes available. On the other hand, the demand may be higher than competitor’s because of lower price. 5.
Consumer Tastes and Preferences. These determine what brands people buy and the demand for the goods and services depends on what they want. 6. Prices.Bibliographyhttp://www. emarketservices. com/clubs/ems/prod/Report%20060113_Telecom. pdf