Professional Documents
Culture Documents
0 Introduction
been dominated by the top 3 players, known as Maxis, Celcom and Digi (Goh 2015a).
U mobile (UM), founded in 1998 and launched in 2007, spotted opportunities and
became the fourth player after a successful marketing campaign in 2014. UM has
introduced many new services and telecommunication products to the market such as
Unlimited Mobile Internet proposition with voice, Data and SMS package for prepaid
users and free internet roaming in selected countries. Its active subscribers grew from
540,000 to over 4 million in the span of 4 years; while the top 3 players had only 2
million growth of customers collectively during the same period (Goh 2015a; U Mobile
2016a).
UM did not plan to remain as the 4th player in the industry and it wants to
become the leading mobile operator in Malaysia. To achieve the goal, Mr Wong Heang
Tuck (CEO of UM) revealed that the company will focus on its four-pillar strategy: (1)
fast and robust network, (2) innovative product and value-added services, (3) wide
distribution channels, and (4) intelligent bank-end system (Goh 2015a; Zhang 2015).
fierce and becoming challenging over years (Goh 2014). The objectives of this report
are to identify the strengths and market position of UM, as well as formulating
to understand the factors influencing the industry (Ennew & Waite 2013). Figure 1
Malaysia. Political factors refer to the range of issues including party politics,
government policies, legal and regulatory system (Ennew & Waite 2013). According
contribute positively to the customer base expansions. For instance, the Malaysian
early 2016 to recruit 1.5 million workers over the next 3 years and these foreign workers
are expected to subscribe to mobile services (The Straits Times 2016). In addition, the
investment, and government policy. In the 11th Malaysian Plan, the Malaysian
government intends to provide supports to Small and Medium Enterprises (SMEs) by
(ITU) also reported that a 10% increase in broadband & network penetration will
Malaysian government has increased its efforts in ICT infrastructures building, which
Implementation of Goods and Services tax (GST) has caused hiccups to the
industry while affecting the industry growth, revenue and subscribers. “The impact is
quite dramatic”, said by Mr Wong, CEO of UM in an interview with Digital News Asia.
Some dealers unable to sustain and closed their businesses due to the impact of GST
(Goh 2015a). It may be attributed to the multiplying effects of GST. According to the
Royal Malaysian Customs (2014), the tax payment is made in stages by the
to the customers. Therefore, subscribers are more cautious about usage, especially the
prepaid subscribers who come from the low income group or students (B. Sidhu 2015;
will remain intense over the next few years, compete to gain higher market share and
translate greater data usage into higher average revenue per user (ARPU). They also
repositioned themselves to be data centric rather than offering data as add-on service to
voice call and short message service (SMS) bundles, as response to users’ consuming
patterns (T. H. Goh 2016; B. K. Sidhu 2015). Customer dissatisfaction can be disastrous
to Telcos when they failed to manage in an appropriate way. Maxis suffered massive
market and had 12.34 million subscribers, followed by Maxis’s 12.31 million
subscribers and Celcom’s 12.25 million subscribers (T. H. Goh 2016). However, a loss
subscribers of top 3 players with the Q1 2015 statistics. This could suggest a gain of
subscribers in other Telcos such as U Mobile and TuneTalk (T. E. Goh 2016). The
Telcos were also repackaging their products at a faster pace in 2016 as a result of
increased competition (T. H. Goh 2016). Subscribers are often exposed to heavy
marketing messages and advertisements, and offered to switch service provider with
Hand Phone User Survey 2014 published by MCMC in year 2015 revealed that
hand phone users were dominated by the young adults (year 20-29), accounted for 35.1%
2015). This group of users are normally price conscious do not concern much about
brand loyalty (Liew 2016). The report also revealed a slight increase of non-Malaysian
hand phone users who were also contributing to the mobile subscriptions (Malaysian
user behaviours and becoming more data centric. (T. H. Goh 2016; Goh 2015a).
significantly and fuelled the competitions among Telcos. MCMC showed the evidence
recorded almost a 4-fold increment in year 2014 as compared to 2010. The increase of
to identify and organise both external and internal factors that U-Mobile is facing.
Strength
UM attracts its customers by offering competitive packages at lower price.
Taking an example of the post-paid plan offered by the 4 major Telcos (Maxis, Celcom,
Digi and UM) in 2016, UM is charging RM70 for 15 GB of data; Digi and Celcom are
offering 10GB package at the price of RM80 while Maxis is priced at RM128. All
packages come with unlimited bundled calls, but only Maxis and Celcom offer
unlimited bundled SMS (Digi 2016b; Maxis 2016a; Celcom 2016b; U Mobile 2016c).
growth of the company. It has successfully raised more than RM2 billion from the
shareholders to invest in the company (Goh 2014). Besides, it does not only rely on its
dealer to expand market share but also utilising multiple channels to distribute its
Speedmart and Sen Heng) (U Mobile 2016a). UM does not have “legacy” products to
maintain and it constantly introducing new products to the market. For instance, it
offered U-MicroCredit Instalment plan, International Airtime Transfer and free internet
roaming in 9 Asia Pacific regions for its subscribers (Goh 2015a; U Mobile 2014).
Weakness
Although UM has been investing to enhance its network coverage and network
quality, it has the narrowest coverage in comparison with other 3 Telcos as shown in
appendix 1 (Digi 2016a; Celcom 2016a; U Mobile 2016b; Maxis 2016b). The company
and caused negative impacts to the company if the product qualities do not keep up with
expectations (Goh 2015a). Moreover, U Mobile is still experiencing financial loss (net
loss of RM363.24 million) despite a 95% growth of revenue (RM 919.17 million) in
2013. In comparison, its competitors each have RM6.7 billion turnover which is
significantly higher than UM (Goh 2014). In first quarter of 2016, Maxis has made a
net profit of RM520 million, followed by Digi’s RM399 million and Celcom’s RM288
million. This showed that the top 3 players have massive cash flow to invest in future
Opportunity
benefited UM as it is more cost efficient for 4G development using the lower frequency
band due to its characteristics: better penetration within buildings and wider coverage.
This government decision may enable UM to challenge the industry leaders, especially
Celcom and Maxis, as their allocations for 900MHz to 1800MHz are reduced
effectively July 2017. The market leaders are expected to allocate more resources in
capex for constructing new sites to avoid disruption of service quality (The Star Online
Increased smartphone users has caused significant increase in mobile data usage,
this will trigger Telcos to repackage their offerings in order to capture higher market
of smartphones has changed the usage patterns as the users are consuming high volume
to form collaborations with local and international partners in distributing its products
and building infrastructures to enhance service quality. With these strategic alliances,
UM can continue its “light capex, lean opex” model and continue to grow at a faster
Threat
Since UM is sharing Maxis’s 3G radio and LTE access, as part of the 10-years
service if Maxis did not intend to renew or extend the service sharing as a result of
to be intensified with the latest allocation of spectrum (The Star Online 2016a).
Competitive advantage
culture to enhance its service coverage and quality, and form strategic alliances with
and their purchasing behaviours. Table 1 shown the market segmentation based on
behaviours in using the call service. It is clearly shown that UM was adopting a focused
and targeting strategy, mainly targeting the group comprises of students, young adults,
young subscribers, migrants, travellers and lower income group (Goh 2015a; Liew
2016). In order to expand its customer base, UM has to change its strategy and start to
products. UM has been creating engaging and interactive content in social media to
attraction young audiences, especially in the college student markets who are price
conscious. They also engaged influencers and celebrities to widen their market
penetration. UM must improve its service quality and change people’s brand perception
to access to new segments (Liew 2016). Currently, Maxis and Celcom are providing
wider and better quality network but both have been reportedly losing subscribers due
6
Network Coverage
5 Celcom Maxis
3 Digi
0 1 2 3 4 5 6
U-Mobile 2
Price
even without wide network coverage in Malaysia. UM is mainly serving its customers
base in Klang Valley and Johor Bahru. As shown in figure 3, Celcom and Maxis are
offering wider network coverage however their pricings do not seem encouraging to
the new and low income subscribers. Digi is positioned between Celcom and UM,
offering affordable plans while providing wider network coverage than UM (Goh
2015b; Goh 2015a; Maxis 2016b; Digi 2016a; Celcom 2016a; U Mobile 2016b).
UM’s marketing effort has been reflected in the growth of customer base and
growth of revenue. However, the company will need to reposisiton itself in order to
capture higher market share. Based on its competitive advantage: (1) commited share
holder, (2) competitive product pricing and (3) innovative products to enhance service
flexibilities, UM can reposition itself to widen its network coverage but not only
focusing Klang Valley and Johor Bahru. It is recommended for UM to adopt the
Intangible repositioning strategy to expand its customer base in other states (Goh 2014).
As shown in Table 1 and 2, rural users, young adults, students are within the segment
which is price sensitive. UM should form strategic alliance with other service providers
to ride on their infrastructures and extending its service to the same market segment in
different states. Once UM has achieved the repositioning, it can close the gap between
itself and Digi or replacing Digi’s as the top 3 Telcos in Malaysia by creating its points-
perception within the same market with its scarce resources. UM can own less
developments and offer better service qualities. When the service qualities are
improved, people will start to change their brand perception and attempt to accept the
offered products (Liew 2016). For instances, Digi was perceived to have bad signal
coverage in early years however it managed to recover by improving its service quality
The marketing campaign resulted a massive increase of brand score and succesfully
leaders aggressively to gain future market share. As a challenger, UM can set high
aspirations while leaving the market leaders to fall prey and run business as usual.
Although UM aspired to be the top telco in Malaysia but realistically it should target its
market challenger strategies towards Digi, which also offering affordable products to
It was suggested that UM has to reposition itself in the previous session and
expand its subscriber base by targeting the same segment at different geographical
locations or different segment in the same regions. Each chosen target customer
segment should have a tailored marketing mix based on the competitive advantage of
tailored for decision to penetrate into same customer segment residing at other
geographical locations, while table 4 suggested the decisions to penetrate into new
continue to education the targeted market segment to adopt its products. Under such
circumstances, UM will be expecting to experience sale rise and lead to profits increase
when marketing expenditures are average out over larger volume. However, the
marketing activity has to be monitored and shift the trial communications to loyalty
communications at the later stage (Kotler & Keller 2015). Gerpott et al. (2001)
supported that customer retention, loyalty and satisfaction are high associated and
satisfaction is the key to loyalty which eventually leads to retention in the
telecommunication industry. Awan and Iqbal (2014) further added that brand image is
services, however research conducted by Amani et al. (2015) concluded that Malaysian
telcos are focusing more on the revenue aspect of subscribers but overlooked the
personality aspect. UM has to rectify this issue in order to avoid mismatch of customer
Table 3 Market mix strategy for targeting same customer segment at different location
Telco is no longer a mere network service provider but rather a total solution
provider to business and individual. Telco is redefined as Telco 2.0 and it should create
customer value by meeting customers’ needs in future lifestyle but not only as a
communication medium. Future trend in ICT development require telcos to review the
suggested by (Yoon 2007). Yoon (2007) further elaborated that telco should innovate
and provide better service quality to customer by providing seamless, secure, rich and
technologies such as RFID, computer learning and virtual reality to develop new
business areas or reduce service lead time. R&D plays an important role in technology
advancement. Yoon (2007) provided real-life example of telco 2.0 implementation in
Korea and illustrated how telco services restructure and involved in production,
6.0 Conclusion
This report has analysed the macro and micro environmental factors of
Malaysian telco industry and identified the competitive advantage of UM. Market
segmentation analysis and perceptual map shown that UM’s performance and brand
image are still behind the top 3 players despite its strong growth. Besides, UM must be
able to identify different customer segments within the market and plan its resources
wisely to target certain customer segment; while the marketing mix toll must be
and 15% growth of ARPU if service quality and brand image can be improved while
maintaining its competitive pricing. UM also needs to keep up with the fast-changing
technology in order to respond in time and gain market advantages over other telcos.
(3021 words)