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Wireless Service Providers

Wireless Service Providers. Kasey Harbes Elizabeth Kelley Dylan Hull Zachary West. Why Wireless Industry? . Access to communication services has become a necessity in America Growing online business has increased demand for wireless internet access

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Wireless Service Providers

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  1. Wireless Service Providers Kasey Harbes Elizabeth Kelley Dylan Hull Zachary West

  2. Why Wireless Industry? • Access to communication services has become a necessity in America • Growing online business has increased demand for wireless internet access • Households with only wireless phones doubled from 2007 to 2010 from 15.8% to 29.7% • Number of pricing plans available is incredibly high

  3. The industry • Industry Description • Industry Structure • Markets • Competition • Key Success Factors • Main Competitors • HHI

  4. Defining the industry Main Segments Main Activities • SMS and MMS • Wireless telecommunications equipment rental • Operation and maintenance of switching and transmission facilities • Wireless internet services and other non-messaging data • Selling cell phones and other wireless devices • Wholesaling wireless infrastructure capacity to telecommunications resellers • Local, long distance and international calling Percent of Industry Revenue

  5. Major Markets Percent of Industry Revenue

  6. Industry Structure

  7. Competitive Landscape • High competition with a steady trend • Internal competition • Service Based • Product innovation • Geographic coverage • External

  8. Key Success Factors • Developing close relationships in complimentary industries • Access to capital investment for funding • Ability to quickly adapt to technology changes • Brand recognition • Exclusive product sales contracts • Economies of a scale

  9. Major Competitors Market Share

  10. HHI • Verizon: (36.5)2 • AT&T: (32.1)2 • Sprint Nextel Corporation: (15.4)2 • T-Mobile: (10.7)2 • Other: (5.3)2 • 1,332.25 + 1,030.41 + 237.16 + 114.49 + 28.09 • = 2,742.4 = HHI • Recall: HHI > 1,800 is a highly concentrated market

  11. Pricing Strategies Second Degree Pricing Penetration Pricing Locking-in Tacit Collusion

  12. Two Part Tariff • Service composed of two parts

  13. Two Main Pricing Models

  14. Subsidy Model • Mainly used by major competitors • What factors influence subsidy? • Upgrade fees on subsidized phones Source: http://www.verizonwireless.com and www.att.com

  15. Transparent Cost (Prepaid) • Serves a niche market • Pay as you go or by days • No contract commitments • Savings roughly = subsidy Source: www.verizonwireless.com

  16. Other Pricing Strategies

  17. Penetration Pricing • High fixed cost industry and heightened barriers • 2nd Tier firms can undercut competition • Low variable costs

  18. Unlimited Individual Plans • Verizon - $120/month (36.5%) • AT&T - $120/month (32.1%) • Sprint - $99.99/month (15.4%) • Virgin Mobile - $55/month (<5%)

  19. Lock In Costs

  20. Tacit Collusion • Two firms agree to play a certain strategy without explicitly saying so.

  21. Identical Pricing Plans

  22. Tacit Collusion Continued • Offer many of the same devices • Similar contract agreements • Similar termination fees

  23. Tacit Collusion Continued • Verizon – 36.5% Market Share • AT&T – 32.1% Market Share • Possible reasons: • Network externalities • Geographic advantages

  24. Analysis & Recommendations

  25. Industry Currently • Industry is thriving and experiencing fast rates of growth Revenue in Millions Year

  26. Industry outlook • Increased demand for wireless data services • Wireless has started replacing land lines • Expanding demand for wireless data services will offset declining voice-only service demand E-Readers Tablet Computers

  27. Wireless Data Services • Verizon’s early adoption of LTE technology will soon be followed by AT&T and Sprint • Consumer experience dependent on several factors • Verizon’s upcoming mobile video network may put strain on broadband data allocation

  28. Industry Outlook • Revenue outlook predicts continued growth Revenue in Millions Year

  29. Advertising Expenditures vs. Market Share

  30. Industry Recommendations • Invest in data intensive infrastructure • Bundle data plans across devices • Worldwide plans via strategic alliances • Move towards less costly mobile devices • Partnerships with other companies? • Verizon Wireless and Time Warner Cable Potential Partnership

  31. Questions?

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