Challenger Strategies: Case DNA Finland Ltd.

1. Challenger Strategies:Case DNA Finland Ltd. Mathias Tallberg Networking Laboratory, HUT mathias.tallberg@netlab.hut.fi 15.10.2003

2. Content • The Market Challenger and Challenger Strategies • The Mobile Operator Business • Case: DNA Finland Ltd. • Conclusions • Questions?

3. The Market Challenger and Challenger Strategies • The market challenger company challenge and fight other companies for a stronger market position • To improve its market standings, a challenger company needs a strategy aimed at building a competitive advantage of its own • Can rarely improve its competitive position just by trying harder or by imitating what a leading company in the industry is doing • If large market share companies have a significant cost advantage, small market share companies have only two viable options: move to increase the market share or withdraw from the business • Attack the market leaders strengths rather than its weaknesses (e.g. if the market leader is not serving the market well enough) • Indirect attack by attacking weaknesses or gaps in the market coverage (new geographic markets or poorly served segments)

4. The Mobile Operator Business • About big investments and fierce competition • Many issues to consider (regulation, investment, technology, marketing, disrtibution channel, organizational, purchasing etc.) • Most important: pricing? • Pricing offers a rich field of opportunities, but require deep understanding of the business as a whole • Falling ARPU nowadays a real problem • Traditional mobile network providers vs. mobile service providers

5. CASE: DNA Finland Ltd. • The Finnish Mobile Operator Market • DNA Finland Ltd. • Suomen 2G • Pricing for Voice • GPRS Pricing • The Acquisition of Telia Mobile Finland • The Distribution Channel

6. CASE: DNA Finland Ltd. • The Finnish Mobile Operator Market • Deregulation • At the end of 2002 there was 87 mobile subscriptions per 100 inhabitants • TeliaSonera, Radiolinja, and Suomen 2G holds licenses for GSM • TeliaSonera, Radiolinja, Suomen 2G, and Suomen 3G holds licenses for UMTS • Market leaders: TeliaSonera and Radiolinja • Market challengers: DNA, Saunalahti Group, Cubio etc.

7. CASE: DNA Finland Ltd. • The third largest mobile operator utilizing GSM/GPRS • Owned by Finnet Ltd. • Turnover in 2002 was 111 million € • A mobile service provider and its services work in Suomen 2G’s GSM/GPRS network • Subscriber base reaches over 700 000 • DNA’s services mainly targeted for corporate customers and other innovative customers, who are not afraid to try something new…

8. CASE: DNA Finland Ltd. • DNA funtions as the mobile service operator, Suomen 2G as the mobile network operator • DNA: • builds the products which are visible to the end-user • is responsible for customer service, distribution, pricing, marketing, and billing • develops customer relations • etc. • Suomen 2G: • builds and operates a nation-wide GSM/GPRS network and service • is responsible for connecting traffic with other networks, roaming agreements, and co-operation, both nationally and internationally • mobile service provider customers: DNA, Wireless Maingate, Fujitsu Invia, and PG Free

9. CASE: DNA Finland Ltd. • Voice Pricing • DNA wants its pricing model to be as simple as possible… • and of course competitively priced. • Operators such as Saunalahti Group and Cubio puts pressure on lowering prices • DNA Maraton, a typical challenger pricing policy: • Fixed monthly price for calls and SMS’s between DNA subscribers • DNA the first operator in the world providing such a service • User friendly and clear pricing

10. CASE: DNA Finland Ltd. • GPRS Pricing • Based on a fixed monthly charge (DNA GPRS for consumer customers an exception) • Differs from the pricing policies of other mobile operators providing GPRS service in Finland • Most affordable GPRS provider in the Finnish market • Two types of GPRS service: • DNA GPRS • DNA WAP-GPRS • DNA offered GPRS for a 11 month trial period without limitations to find out if there is customer demand for such a service => there was… • Is this the best alternative? • not fair • congestion

11. CASE: DNA Finland Ltd. • Acquisition of Telia Mobile Finland • May 12, 2003 reached an agreement with TeliaSonera about about the acquisition of Telia Mobile Finland’s operations • Now over 700000 mobile subscriber customers • The acquisition combined the resources of two challenger mobile operators • Over 100 employees lost their jobs • Suomen 3G sold, Suomen 2G got the UMTS license from Telia Mobile Finland • The Distribution Channel • Both traditional and totally new types of distribution channels (e.g. Filmtown, Helios, and R-Kioski) • Do not want to wait passively in stores, but wnats to find distributors who customers visit anyway and on a regular basis • The network of DNA shops: > 550 today

12. Conclusions • Mobile communications is here to stay • Decisions on strategies critical • DNA has been able to build a strong and wellknown brand fast • DNA’s mobile subscriptions have reached the planned 15% • The year 2004 will tell if DNA will be able to make positive cash flows as well…

13. Questions?