Professional Documents
Culture Documents
ECONOMIC
(GROUP ASSIGNMENT 1)
DIGI
Group C
Submission Date :
29 March 2017
Submitted to :
Dr Munzarina binti Ahmad Samidi
Prepared by :
Number Group member Matric
number
1. Khor Yee Hooi 247740
2. Lee Yi Ling 247671
3. Amy Lau Yii Fong 246701
4. Eniwa A/P Jugit 238601
Introduction
Malaysia. The company majority owned by Telenor ASA of Norway with 49%. Digi was
founded on 24 May 1995 and Shah Alam was the headquartered of the Digi. Digi was
services. Besides, Digi became the first telecommunication to launch and operate a fully
digital cellular network in Malaysia since 1995. On 14 May 2004, Digi also be the first to
offer GPRs ( 2.5G) and later EDGE(2.75 ) in Malaysia. This mean that Digi had more
competitive advantage to get more market share on Malaysia to compete with other
1,800 MHz band was primarily used by Digi for GSM with the network code of 502-
16. It was listed under the infrastructure category act on the Kuala Lumpur Stock Exchange
(KLSE). Native dialling prefix identifier of “010”, “016”, “0143”, “0146”and “0149” was
used by Digi. The payment is free to the subscriber who switched from their old mobile
service provider over to Digi at this moment. Digi also provided variety of mobile
communication. They offer prepaid and postpaid plan, SMS, data plans and services,
has 2G coverage of 95% on populated areas , 3G at 90% , 4G LTE at 85% and LTE-A
Malaysia to launch VoLTE which initially available to iPhones running iOS 10.1.
Nowadays, Digi had growth significantly which has a total of 12.35 million
subscribers (10.39 million are prepaid, and 1.95 million from postpaid customers). Among
the subscribers, 64.5% are Internet and 62% of them are smartphone users and also 3.3
service. Based on the report from Central Intelligence Agency (CIA), it had created a higher
telecommunication network coverage in urban area compare to rural area. The increasing in
population and urbanization in Malaysia had lead to increase the demand for
telecommunication service. In order to increase the sale profit, Digi had increased their
increasing of demand.
Malaysia government which allow customer switching from one mobile service to another
provider had lead some effect to the telecommunication service industry. The implementation
of MNP had lead more competition in telecommunication service industry. In order to attract
more user, Digi have to lower its price and provide cheaper package like DiGi Friend &
Family package and Digi campus. Apart from that, Digi also upgrade their plan to respond to
the change of lifestyle. For example, the customer can enjoy free call, free sms and free
The creative innovation of new product and the significant growth of market share
had driving the Digi won many award over the year including ranked 100th on Forbes
World’s Most Innovative Companies 2014 and ranked as one of the top 3 companies in
Digi vision to deliver the best experience to the customer across Malaysia to enjoy the
Market structure consist some of the key traits of a market, which are number of firms,
similarity of the product sold and ease of entry into and exit from the market.
Digi vs Monopoly
Monopoly Digi
It has single seller in the market and It has a few competitors in the market
the firm is a price setter
Digi vs Monopolistic competition
Digi vs Oligopoly
Oligopoly Digi
It has few seller in the market It have few competitors in the market
an oligopoly. Oligopoly is when there is a few seller in the market, as we can say that Digi
has a few competitors that is Maxis and Celcom. The Digi will fiercely compete on the price
with the competitors to attract a larger share market than their competitors. Hence, since they
are the ones that will be setting up the price policy, they will have mutual interdependence
towards each other because as I said, one’s action will affect others. However, in some cases,
the Digi and the competitors would decide to cooperate with each other instead of competing
because they would assume their control on the market and benefit from supernormal profits
in the long run. Other than that, Digi would also choose to work together to prevent new
companies to enter the market, as well as there are high entry barriers which is caused by the
copyrights, patents of the companies, advertisement and the economies of scale. Digi also
requires large amount of capital to incur a good deal of costs on advertising and on other
BEHAVIOUR OF DIGI
The behaviour of Digi can be identified by considering the number and the size distribution
of firms in the market; the extent to which products are differentiated; how easy it is for firms
to enter the market; and the extent to which firms are integrated or diversified. However,
there are 3 large cellular communication firms (Digi, Maxis, Celcom), individual market
12 35
Number of subscribers (00'000)
10 34
Percentage(%)
Digi
8 Digi 33 Maxis
Maxis Celcom
6 32
Celcom
4 31
2 30
0 29
Q1 2015 Q1 2016 Q1 2015 Q1 2016
For the first quarter (Q1) ended March 31 2016, Malaysia’s top three mobile operators
collectively had 36.73 million subscribers. This is lower than the 37.23 million a year ago, or
While overall subscriber numbers among the incumbents are lower, it is clear that Digi
managed to gain the most ground in Q1, securing a slim lead over Maxis with a 33.6%
market shares. Although Celcom appears to be the big loser of Q1, by no means is it out of
the race – after all, it is just mere 0.7 percentage points away from the lead, and only shrank
Digi Telecommunication Sdn. Bhd. provides mobile voice call, text message, internet
connection and other mobile communication services to 12.3 million users in Malaysia,
which include 10.2 million prepaid plan users and 1.9 million postpaid users. Furthermore,
the numbers of internet subscribers are increasing 7.8%, total 65.8% of total Digi users. Digi
operates 2G, 3G, and 4G LTE network. 4G LTE is the latest technology for wireless
communication for a mobile phone that has the fastest speed in current technology.
The rise of technology had increased the demand for a higher speed and more stable
internet connection. According to the latest Digi quarterly report, the 4G LTE network
coverage is expanded to 85% of Malaysia which covering 275 towns. Furthermore, the data
showed that there are 4.2 million users are 4G LTE subscribers. This is a great achievement
for the company. The number of internet users increased significantly had risen the internet
In conclusion, the supply of Digi 4G internet network is important for the company to
generate its profit. The continuous expansion of 4G internet and provides the lower cost
internet plan were the two of main strategies for Digi to continue be the industry leader in
communication service.
Price competition
In an oligopoly, Digi is using game theory model in which firm make decision that
explicit take each other’s behaviour into account. Telecommunication assumed to provide
homogenous product which adequate capacity to respond to the market demand. It is a non-
cooperative game in which negotiation and enforcement of binding contract are not possible
between them as they are competed in the same market place. They decided interdependence
price strategy, with a small number of firms, each firm profit is depends on very firm’s action.
This means that they are aware of competitor’s market price while forming certain
expectation on rival’s pricing strategy. They either can Maintain Price or Undercut Price.
Telecommunication 1
The game model is simplified for 2-player model. The payoff for every possible
action are ranked in order in preference (higher number is preferred). The most preference
outcome happened when one of the firm undercut the price while his rival maintain the price
to get greatest gain of market share compare to its rival. There was no change in market share
and profitability when both of them maintain the price. The market share will remain
unchanged same goes to when the firm undercut the price. However, a lower price will
reduce firm profit. Both player have Nash Equilibrium at (2,2) for Prisoner’s Dilemma Game.
This is because each of them know that if he maintained price it is the best interest of the
other to undercut. The firm will used these interaction to escalating the price-war which will
Chart 1 and chart 2 show the APRU of postpaid and prepaid for year 2011 until 2013
Product Differentiation
There are two main categories of product for all the telecommunication companies in
Malaysia which are postpaid plan and prepaid plan. In this section, the entire communication
service price of product from each company will be discussed to show the difference between
The table below showed the product differentiation for the postpaid plan:
is cost only RM80 compare to the other plan RM98. For SMS rate, although Digi users have
to pay RM0.10 per SMS but Digi is the only companies that offer 300 free SMS which worth
RM30 for their users. In the views of internet plan, to fulfill the demand of the lite-usage user,
Digi offer a less quota plan which is 10GB for weekday and 10GB for the weekend, and at
In conclusion, the users can choose the perfect plan for themselves based on their
different needs and companies use different strategies to expand their market and generate
company’s profits.
Advertising
broadcast advertising (conducted by this company is TV and radio) and printed advertising
about their packages that are offered to people by putting their advertisement in anywhere.
Apart from that printed advertisement can deliver more details and information that broadcast
advertisement is not telling to the people outside there. These advertisements used to create
brand or product differentiation in order to soften the price competition. Through the
advertisements, it can create customer loyalty and attract the customer to buy the product.
They create market power in the sense that the customer may be willing to pay more for the
preferred brands. Thus, it allows these types of firms to allocate it price above marginal cost.
number preferred) , the most preferred outcome by firms is where one advertises while its
competitors don’t may lead to market share and profitability gain at expense of it rivals.
Other than that, advertising is very important because it influence the change in market share
and profitability. When all the firms did not advertise, there are no changes in the market
share and profitability. As all the firms advertise, the market share remains and reduced
profitability. Digi use similar strategy by advertising less gaining market share and more
Digi is one of the Malaysian oligopoly cellular communications industry with high
barriers of entry. There are high exit barriers due to huge capital investment (sunk cost) is
required to operate this kind of market which is under the government licensing restrictions.
In 2016, Digi achieved the highest number of the overall subscriber but there are a few
difference with the other two telecommunications company which is Maxis and Celcom.
Apart from that, Digi also leads in subscriber market share which means that Digi serve are
The continuous expansion of 4G internet and provides the lower cost internet plan were
the two of main strategies for Digi to continue be the industry leader in communication
service. For examples, Digi had provided a more affordable internet plan for their user which
is cost only RM80 compare to the other plan RM98. This causes Digi company able to
compete with others company and sure the consumer will seek for the lower price and the
Digi currently doing good job and should continue to push ahead with its plan to allow
the greater customer choices. Digi may able to conduct an advertisement with lower cost to
reduce its expense and getting more profit. Other than that, Digi must conduct benchmarking
against regional and international cellular communication industries on key areas like return
on equity to determine fair-returns, earning per share, service quality control, technical
Digi added more subscribers in 1Q16, now at 12.3 million. (2016,April 26 ) Retrieved
from http://www.malaysianwireless.com/2016/04/digi-adds-subscribers-1q16-now-12-3-
million/
http://www.digi.com.my/aboutus/corporate_overview/milestones.do
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http://sustainability-ranking.channelnewsasia.com/top100-2015.html
http://www.kinibiz.com/story/corporate/26321/margin-contraction-weakens-1q13-telco-
results.html
Chapree, C., Song, H., Bass, T., F., Cheng, A., Yau, P. T.,& Rabik, N. (2016,March
03).[update:2016 Plans!] The Complete List of Postpaid Plans in Malaysia and What they
https://www.lowyat.net/2016/21310/the-complete-list-of-postpaid-voice-plans-in-
malaysia-and-what-they-offer-celcom-maxis-digi-and-u-mobile/
K. (2014, May 31). MaxisONE plan, the latest postpaid plan from Maxis. Retrieved from
http://www.malaysianwireless.com/2014/05/maxis-oneplan-latest-postpaid-plan-maxis/
Digi’s new postpaid plans have gotten smarter for 2015. (n.d.). Retrieved from
http://www.soyacincau.com/2015/03/18/digi-new-smart-plan-2015/
telcos%E2%80%99-q1-2016-report-card-oh-dear-oh-my
http://digi-mobile.listedcompany.com/news.html/id/564506
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report-card-oh-dear-oh-my
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