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What determines customers' loyalty towards telecommunication service

Mediating roles of satisfaction and trust

Article  in  International Journal of Services Economics and Management · January 2020

DOI: 10.1504/IJSEM.2020.111179

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234 Int. J. Services, Economics and Management, Vol. 11, No. 3, 2020

What determines customers’ loyalty towards

telecommunication service? Mediating roles of
satisfaction and trust

Hiram Ting
Faculty of Hospitality and Tourism Management,
UCSI University,
Lot 2976, Block 7,
Muara Tebas Land District, Sejingkat,
93450 Kuching, Sarawak, Malaysia
Email: hiramparousia@gmail.com

Kim-Lim Tan*
Faculty of Business and Law,
University of Newcastle,
Suntec Tower 4, 038986, Singapore
Email: kimlim.tan@newcastle.edu.au
*Corresponding author

Xin-Jean Lim and Jun-Hwa Cheah

School of Business and Economics,
Universiti Putra Malaysia,
43400 Serdang, Selangor, Malaysia
Email: lim.xinjean@yahoo.com
Email: jackycheahjh@gmail.com

Qian-Hui Ting
Faculty of Business,
Curtin University,
CDT 250, 98009 Miri,
Sarawak, Malaysia
Email: qianhui.ting@postgrad.curtin.edu.my

Hui-Bun Ting
Faculty of Hospitality and Tourism Management,
UCSI University,
Lot 2976, Block 7,
Muara Tebas Land District, Sejingkat,
93450 Kuching, Sarawak, Malaysia
Email: tinghb@ucsiuniversity.edu.my

Copyright © 2020 Inderscience Enterprises Ltd.

What determines customers’ loyalty towards telecommunication service? 235

Abstract: The purpose of this study is to: 1) examine the effects of corporate
image, pricing, service quality and network quality on customer loyalty in the
Malaysian mobile telecommunications sector; 2) to determine the mediating
effects of customer satisfaction and trust. The study’s hypotheses were tested
using partial least squares structural equation modelling (PLS-SEM). In total,
388 respondents participated in this study. Our findings revealed that network
quality and corporate image exert a positive effect on customers’ satisfaction
and trust which in turn influence customers’ loyalty. In addition, the mediation
results showed that both trust and satisfaction mediate the relationship between
network quality and loyalty as well as between corporate image and loyalty.
Thus, it is recommended that telecommunications service providers in Malaysia
should further improve on their network coverage and corporate image to
effectively address the needs of their customer base and ultimately retain its
loyalty.

Keywords: loyalty; trust; telecommunications; satisfaction; S-O-R model;

Malaysia.

Reference to this paper should be made as follows: Ting, H., Tan, K-L.,
Lim, X-J., Cheah, J-H., Ting, Q-H. and Ting, H-B. (2020) ‘What determines
customers’ loyalty towards telecommunication service? Mediating roles of
satisfaction and trust’, Int. J. Services, Economics and Management, Vol. 11,
No. 3, pp.234–255.

Biographical notes: Hiram Ting is an Associate Professor at the Faculty of

Hospitality and Tourism Management, UCSI University, Malaysia. He is also
the Chairman of Sarawak Research Society and the Vice President of
Marketing in Asia Group Scholar. He received his PhD in Marketing and is
actively involved in behavioural research and consultancy projects. His areas of
interest include marketing, consumer behaviour, generational issues, tourism,
hospitality and organisation behaviour.

Kim-Lim Tan is a Sessional Lecturer at the Faculty of Business and Law,

University of Newcastle, Singapore. He received his PhD in Management from
the Curtin University, and has extensive teaching and industrial experience in
human resource management. His research interests include organisational
behaviour, human resource management, future of work, tourism and consumer
behaviour.

Xin-Jean Lim is a PhD student under Research Fellowship in the School of

Business and Economics, Universiti Putra Malaysia. She currently teaches data
analysis in business research methods. Her research interests include consumer
behaviour, social media marketing, online marketing and customer relationship
management.

Jun-Hwa (Jacky) Cheah is a Senior Lecturer in School of Business and

Economics, Universiti Putra Malaysia (UPM) and an external member of
relationship marketing for impact cluster at the Griffith University. He obtained
his PhD in Business Economics from the University Putra Malaysia. His areas
of interest include consumer behaviour, quantitative research, and
methodological issue.

Qian-Hui Ting is a Master student in Philosophy in Faculty of Business, Curtin

University. Her research interests include consumer behaviour, psychological
capital and the future of work.
236 H. Ting et al.

Hui-Bun Ting is a Tourism and Event Lecturer for the Faculty of Hospitality
and Tourism Management at the UCSI University Sarawak Campus. He
received his Corporate Master of Business Administration from the Universiti
Malaysia Sarawak. He has extensive experience in tourism and hospitality
fields. His research interests include business events, event management,
tourism management and destination marketing.

1 Introduction

Over the last two decades, telecommunications deregulation efforts on a global scale
have advanced the provision of telecommunications infrastructure and equipment –
therefore enhancing mobile cellular, paging services, and internet connectivity.
Deregulation of industries encourages economic efficiency through competition among
industry players (Kahn, 1979; Xavier, 1996). A recent report by Deloitte substantiated the
claim indicating that mobile technologies and services generated $1.5 trillion of
economic value, which is equivalent to 5.4% of GDP and has created more than 17
million jobs across the Asia Pacific region (GSM Association, 2018).
According to the Malaysia Department of Statistics (2018), the information and
communication technology industry has contributed 18.3% to national GDP in 2017. This
contribution was highly driven by the telecommunications sector which boasts a figure
for mobile phone subscriptions of 42.3 million (Malaysian Communications and
Multimedia Council, 2017) and a mobile cellular penetration rate of 131.8% amongst the
Malaysian population (The Star, 2018). Furthermore, Malaysia’s Smartphone penetration
rate is expected to exceed 80% by 2021, which is equivalent to economically
well-developed Singapore (PwC, 2018). Plans to deploy 5G networks nationwide further
enhance the prospects of the Malaysian telecommunications sector (Anis and Kaos,
2019). Given the rising potential of the Malaysian telecommunications sector in terms of
prospects and a growing consumer base, the strategic behaviour of telecommunications
providers amidst stiff competition have received increased attention from academicians
and practitioners alike.
In today’s highly competitive marketplace, an organisation’s ability to create, build,
and maintain customer loyalty plays a pivotal role in sustaining its competitive advantage
(Hur et al., 2010). With customer loyalty, organisations are perceived to enjoy high
returns on time, effort and investment (Wong, 2010). Numerous studies have shown that
loyal customers are more likely to revisit, purchase more frequently and create positive
word-of-mouth, all of which translate into profit and enhanced sales for organisations
(Bahri-Ammari and Bilgihan, 2019; El-Adly, 2019). Given the benefits associated with
customer loyalty in its attitudinal and behavioural aspects, customer loyalty is
undoubtedly a valuable intangible resource for organisations.
A survey conducted by Digital News Asia (2015) reported that approximately 83% of
consumers in Malaysia have intent to switch telecommunications service provider.
Likewise, around 66% of the respondents insisted on higher speed internet or data
connectivity with the potential corollary of terminating their existing subscription from
their current service provider (SKMM, 2015). This implies that customer loyalty in the
Malaysian telecommunications landscape is under threat. Indeed, Digital News Asia
(2015) attributed a lack of transparency in pricing and subscription plans as the main
 What determines customers’ loyalty towards telecommunication service? 237

causes that initiate switching behaviour. Other perennial issues faced by subscribers, such
as inadequate network coverage especially in the outskirts and rural areas further erode
the trust placed by consumers in telecommunications providers (Kaur, 2017; Kugan,
2017; Vijandren, 2017). From this, we can see that a vast number of subscribers are not
fully satisfied with nor do they place sufficient trust in their current telecommunications
service providers. As such, these issues in practice provide us with a compelling basis for
scrutiny.
In this study, we attempt to address three research gaps. Firstly, there are relatively
few studies conducted on the influence of factors such as price and network quality on
customer loyalty towards telecommunications service providers in Malaysia. As a
developing country, Malaysia has been lauded by the World Bank for uplifting the
country’s telecommunications sector (Malay Mail, 2019). However, the nation’s facilities
and infrastructure are far from ideal with respect to providing stable connectivity and at
an affordable price. Even though many existing literature such as Shafei and Tabaa
(2016) have examined these factors, their focus was on developed countries which
arguably may not be truly applicable in a developing Asian country given the difference
in cultures and more importantly infrastructure readiness.
Secondly, the extant literature does not provide a comprehensive list of determinants.
As Ling and de Run (2009) indicated, the importance of improving customer loyalty goes
beyond price wars and factors such as image and service quality should not be
overlooked. For instance, Shafei and Tabaa (2016) suggested that network quality,
customer support and pricing structure are key predictors of customer loyalty. On the
other hand, Lee (1970) argued that value-based customer management and the
understanding of customers play an important role in enhancing loyalty towards mobile
service providers. Fernandes’ (2018) study, however, puts forth that service orientation,
service quality and marketing mix strategy are key in influencing customer satisfaction.
In this regard, this study is among the first few to bring together network quality, service
quality, price and corporate image as the drivers of telecommunications services,
whereby the obtained outcomes will assuredly advance the body of knowledge.
Lastly, there have been comparatively few studies that simultaneously examine the
mediating role of trust and satisfaction in the context of telecommunications. Although
these constructs have been widely tested in a direct manner, there is still a lack of
evidence clearly articulating which path generates higher predictability towards customer
loyalty. Using an advanced statistical technique termed as PLSpredict, this study
addresses this gap by comparing the two paths to determine whether its effect to customer
loyalty is comparable via building customers’ trust to that of satisfaction.

2 Theoretical framework

The model of this study is developed based on the stimulus-organism-response (S-O-R)

model. The theory of planned behaviour (TPB) and the Technology Acceptance Model,
while being used in other studies such as Yang and Zhou (2011), is deemed inadequate
for this study as it does not identify the agent that is initiating the changes when using the
S-O-R model. According to Mehrabian and Russell (1974), the stimulus function (S) is
an influencing agent that initiates changes within an individual, and organism (O)
represents the cognitive, affective or emotional change that one will experience as a result
238 H. Ting et al.

of being exposed to the stimulus. As a result, one will respond through behavioural
changes (R), which can either take the form of an approach or avoidance. Previous
literature revealed that the S-O-R model has been used to understand how the services
cape of offline stores influences consumers’ expectations in a cognitive and emotional
way (Tankovic and Benazic, 2018). The increased interest of scholars in trying to
understand customers’ motivations and their behaviours have further enhanced the
suitability of the S-O-R framework in various contexts. For instance, Peng and Kim
(2014) and Ng et al. (2019) utilised the S-O-R framework to understand the way in which
the presence of hedonic and utilitarian values within a website stimulates consumers’
attitude towards online shopping. Cao and Sun (2018) leveraged the S-O-R framework to
understand the discontinuous intentions of social media users. Anisimova et al. (2019)
conceptualised their study as such that corporate brand serves as a stimulus to consumers’
mentality which then elicits responses in the form of customer satisfaction and loyalty. In
this study, the ‘stimulus’ factors are comprised of network quality, service quality, price
and corporate image; ‘organism’ is hereby represented by satisfaction and trust; and lastly
‘responding behaviour’ is signified by customer loyalty (see Figure 1).

Figure 1 Research framework

3 Literature review

3.1 Network quality

According to El Azouzi et al. (2003) and Shafei and Tabaa (2016), network quality is
determined by network speed, network capacity, network experience, network
responsiveness, cell edge performance, dropped-call rate and network footprint latency.
The ability to provide superlative network quality is a crucial trait to possess in
telecommunications services. Indeed, the relationship between network quality and
customer satisfaction has been established in several prior studies. Ahn et al. (2006) who
conducted a study on the Korean telecommunications market, asserted that frustration
with call quality results in customer dissatisfaction. Similarly, Ahmad (2011), Aydin and
Özer (2005) and Wang et al. (2004) in their studies of the telecommunications markets in
China, Turkey, and Pakistan respectively, concluded that network quality significantly
 What determines customers’ loyalty towards telecommunication service? 239

determines service quality. More specifically, the study by Wang et al. (2004) suggested
that network quality drives service value. Therefore, this study posits that network quality
positively affects customer satisfaction and trust towards telecommunications service
providers in Malaysia. The following set of hypotheses is hereby proposed:
H1 Network quality positively affects customers’ satisfaction.
H2 Network quality positively affects customers’ trust.

3.2 Service quality

An increasingly competitive business environment has driven an evolution in
differentiation strategies from branding to services and subsequently experiential
marketing (Nasution et al., 2014). Given the strong emphasis on customer experience in
the domain of experiential marketing (Schmitt, 1999), service quality is deemed critical
in achieving differentiation (Venetis and Ghauri, 2000). Nasution et al. (2014) as well as
Venetis and Ghauri (2000) have recognised the manifestation of service quality by
delighting customers which consequently translates into competitive advantage for an
organisation. Moreover, service quality was found to benefit organisations in terms of
market share, financial growth and ultimately organisational success (Chenet et al.,
2010). Fernandes’ (2018) study elucidated that a telecommunications service operator
must always strive to provide its best features and services to customers as a way to
secure a tenable footing and maintain an edge in the increasingly competitive
telecommunications services sector in the country.
Along with that, service quality has been found encourages intention to repurchase,
purchase quantity, positive word-of-mouth in addition to desensitising customers to
pricing (Chenet at al., 2010). Past studies have revealed that customers’ attitude towards
service providers are influenced by perceptions on service quality, which increases the
likelihood of customer retention (Antón et al., 2007; Aydin and Özer, 2005; Zeithaml
et al., 1996). Likewise, Chenet et al. (2010) found a positive relationship between service
quality and customer satisfaction. In the context of Malaysia’s service industry, a direct
relationship has been found between service quality and trust (Liu et al., 2011; Rasheed
and Abadi, 2014). In a similar vein to extant literature, we postulate that service quality is
an antecedent of customers’ satisfaction and trust towards telecommunications service
providers in Malaysia. The following hypotheses are proposed:
H3 Service quality positively affects customers’ satisfaction.
H4 Service quality positively affects customers’ trust.

3.3 Price
Price is a factor that could attract or repel customers. It is also the medium of exchange
which allows consumers to obtain a product or a service in exchange for a pre-determined
amount of money. Previous literature suggests that price is a primary factor affecting the
service industry; in particular the telecommunications sector (Athanassopoulos, 2000;
Kollmann, 2000). Price serves as a manifestation of market conditions that is intricately
linked to competition and economic efficiency. However, Ling and de Run (2009) have
urged service providers to look beyond pricing. In a similar vein, Ali et al. (2010) and
240 H. Ting et al.

Haque et al. (2010) have found that highly competitive markets have motivated
telecommunications service providers to offer innovative and creative packages to
consumers in addition to offering competitive pricing to encourage sales volumes.
Organisations who strive to offer better value have been shown to be able to establish
strong bonds with their customers (Peng and Wang, 2006). However, if a perception of
unfair pricing prevails, then it may lead to undesirable corollaries such as negative
word-of-mouth or losing customers to competitors (Xia et al., 2004). In other words,
organisations who fail to deliver value according to consumer expectations may find
themselves facing wrath from the same. Considering the importance of price in any
purchase decision, it is imperative that we examine the effects of price on customer
satisfaction and trust. In this regard, the following hypotheses are hereby proposed:
H5 Price positively affects customers’ satisfaction.
H6 Price positively affects customers’ trust.

3.4 Corporate image

Corporate image represents the public’s impression towards an organisation (Barich and
Kotler, 1991; Gronroos, 1988; Keller, 1993). Such impression can be shaped via
cognitive processes comprising of an individual’s past experiences, feelings and thoughts
towards an organisation or its brand (Yuille and Catchpole, 1977). Results from a study
by Nguyen and Leblanc (2001) revealed the existence of a directly proportional
relationship between customers’ perceptions of corporate reputation or corporate image
and customer loyalty. Another study by Kaur and Soch (2018) on 885 Indian mobile
users revealed that corporate image is a key determinant that influences user satisfaction
and loyalty. Taken together, corporate image possesses a strong tendency to influence
customer satisfaction. Similarly, studies by Brodie et al. (2009), Lai et al. (2009), Malik
et al. (2012) and Nasser et al. (2012) have found that customers with a positive
perception towards a particular brand are more likely to exhibit customer satisfaction and
customer loyalty. Additionally, Raza and Rehman (2012) and Alam and Salim (2012)
have found a significant relationship between corporate image and trust in their
respective studies. Thus, it can be inferred that customers who possess a positive
perception towards an organisation would place stronger trust in the latter’s products or
services. Hence, this study postulates that corporate image is an important predictor of
customer satisfaction and trust towards telecommunications service providers. Therefore,
the following hypotheses are proposed:
H7 Corporate image positively affects customers’ satisfaction.
H8 Corporate image positively affects customers’ trust.

3.5 Customer satisfaction

Customer satisfaction characterises a customer’s judgement towards the state of
fulfilment from acquiring a product or service (Shafei and Tabaa, 2016). Another
standpoint views customer satisfaction as the discrepancy between the expectation
regarding a service and the actual service rendered (Churchill and Surprenant, 1982;
Malik et al., 2012). The smaller the discrepancy, the higher the satisfaction experienced
by customers. Customer satisfaction has been widely associated with positive outcomes,
 What determines customers’ loyalty towards telecommunication service? 241

such as: customer loyalty (Cheah et al., 2019; Reichheld and Sasser, 1990), positive
word-of-mouth (Chenet et al., 2010; Høst and Knie-Andersen, 2004) and repeated
purchases (Høst and Knie-Andersen, 2004; Shafei and Tabaa, 2016). In line with the
above, Muhammad et al. (2016) suggested that customer satisfaction plays a crucial role
in promoting loyalty. Thus, consistent with extant literature, the following hypothesis is
proposed:
H9 Customers’ satisfaction positively affects customer loyalty.

3.6 Customer trust

Trust is a core communication issue for network providers today (Wong et al., 2019).
According to McKnight and Chervany (2002) and Deng et al. (2010), trust plays a dual
function: that of belief and that of intention. Belief has to do with the perception held by
the consumer on the provider’s ability, integrity and benevolence (McKnight and
Chervany, 2002). Intention is a mental state signifying a commitment to carry out an
action or a series of actions in the future (Bozic and Kuppelwieser, 2019; Damtew and
Pagidimarri, 2013; Lim et al., 2019; Rousseau et al., 1998). Morgan and Hunt (1994)
suggested that trust is instilled when a person is confident towards the reliability and
honesty of his counterpart. In other words, customer trust refers to an individual’s
intentional capacity to embrace another person’s weaknesses and vulnerabilities due to a
positive appraisal of the latter’s behaviour and intentions. A study conducted by Kaur and
Soch (2018) has shown that trust is an antecedent of customer loyalty. Hence, in the
context of telecommunications services, we posits that building trust is a cornerstone that
enhances customers’ loyalty towards a particular telecommunication service provider,
which leads to the following hypothesis:
H10 Customers’ trust positively affects customer loyalty.

3.7 Mediating role of customer satisfaction

Anchoring against the S-O-R model, it is logical to postulate that customer satisfaction
may be a mediator for these relationships. In the presence of customer trust, customers
believe in a brand’s reliability and integrity (Anderson and Narus, 1990); therefore
shaping a preference towards purchasing from the said brand. This is consistent with
instances whereby customer satisfaction has been deployed as a mediator for similar
studies, as has been seen in the works of Ahmed et al. (2010) and Cheah et al. (2019).
However, contradictory evidence has been observed, whereby some studies found no
relationship between satisfaction and loyalty (Jones and Sasser, 1995). Such conflicting
results have been largely attributed to the use of varied measures of customer loyalty.
Furthermore, other studies on satisfaction and loyalty, such as the one conducted by
Vesel and Zabkar (2009), suggested that satisfaction is a necessary but not sufficient
condition for loyalty. The preceding discussion points towards the intricacies of the
customer satisfaction – customer loyalty dynamic. In order to deepen the understanding
of this association, we examine the role of customer satisfaction as a mediator across the
various relationships. Consequently, the following series of hypotheses is proposed:
H11a Customers’ satisfaction mediates the relationship between network quality and
loyalty.
242 H. Ting et al.

H11b Customers’ satisfaction mediates the relationship between service quality and
loyalty.
H11c Customers’ satisfaction mediates the relationship between price and loyalty.
H11d Customers’ satisfaction mediates the relationship between corporate image and
loyalty.

3.8 Mediating role of customer trust

The majority of extant studies have conceptualised the direct relationships between
predictors and brand loyalty. However, there are also studies, such as the one performed
by Dimyati and Subagio (2018), that suggests the existence of indirect relationships. The
S-O-R model further endorses this by suggesting the possible existence of other factors
between these constructs. As highlighted earlier, customer trust is pivotal in determining
consumer purchasing behaviour. Customer trust occupies a central position in
engendering a long-term attachment towards a brand (Liu and Tang, 2018). For instance,
Damtew and Pagidimarri (2013) established the mediating role of trust in the relationship
between economic content, resource content, social content and the endogenous variable
of relationship intention. Correspondingly, Zboja and Voorhees (2006) established the
mediating role of trust with regards to repurchase intention. Indeed, individuals move
through a sequential psychological process to establish brand loyalty. The
aforementioned studies have clarified that when individuals experience both the hedonic
and utilitarian aspects of a brand, it forms a connection with the brand through the
increase in trust. This in turn results in an emotional commitment to stay loyal to the
particular brand. Based on the theoretical assumptions and empirical evidence, the final
set of hypotheses is as follows:
H12a Customers’ trust mediates the relationship between network quality and loyalty.
H12b Customers’ trust mediates the relationship between service quality and loyalty.
H12c Customers’ trust mediates the relationship between price and loyalty.
H12d Customers’ trust mediates the relationship between corporate image and loyalty.

4 Method

4.1 Data collection and sample

The population for this study is comprised of mobile telecommunications service
subscribers in Malaysia. A purposive sampling approach is adopted for this study
whereby the respondents must fulfil the criteria of:
a being Malaysians
b are users of mobile telecommunication services for at least six months prior.
Prior to data collection, pre-testing was conducted with ten senior academics to ensure
that any ambiguity has been addressed. Subsequently, an online questionnaire was
distributed to the respondents via social media platforms (e.g., Facebook). In all, 388
 What determines customers’ loyalty towards telecommunication service? 243

participants responded to the survey. By using G*power analysis, the minimum sample
size required to maintain a power of 80% at an effect size of 0.15 is 85 respondents. This
indicates that this study’s sample size of 388 exceeds the minimum sample size required
and is thereby deemed to be sufficient.
The demographic profile of the respondents is tabulated in Table 1. 62% of the
respondents in this study are females while 38% are males. Respondents ranged in age
from 15 years old and above and the average age was calculated to be 35–44 years old.
The largest proportion of mobile users are from Celcom (38%), followed by Digi (34%),
Maxis (21%) and others (7%). Moreover, the majority of respondents (84%) are post-paid
subscribers while only 16% them are prepaid subscribes.
Table 1 Demographic profile

Variables Frequency Percentage (%)

Gender Male 149 38
Female 239 62
Age 15–24 years old 70 18
25–34 years old 92 24
35–44 years old 114 29
45–54 years old 80 21
>55 years old 32 8
Mobile service Celcom 145 38
Digi 133 34
Maxis 82 21
Others 28 7
Plan Prepaid 61 16
Post-paid 327 84
Total 388 100

4.2 Instruments
Measures of the constructs used in this study were adapted from extant literature. Three
items measuring network quality and service quality were drawn from Abdul et al.
(2014). Five items that measure corporate image were adapted from Abdul et al. (2014),
Ali et al. (2010) and Nasser et al. (2012). Price was measured using four items drawn
from Abdul et al. (2014), and Ali et al. (2010). Satisfaction and trust were measured
based on the works of Liu et al. (2011) and Nasser et al. (2012) using four and five items
from each study respectively. Loyalty was measured based on five items from the works
of Abdullah et al. (2014), Liu et al. (2011) and Wang (2010). Participants responded to
all items in the questionnaire using a seven-point Likert scale ranging from 1 = ‘strongly
disagree’ to 7 = ‘strongly agree’. Demographic questions pertaining to gender, age, type
of mobile service and type of telecommunications plan were placed in the last section of
the questionnaire.
244 H. Ting et al.

5 Research findings

The results of this study were assessed using partial least square structural equation
modelling (PLS-SEM). By using SmartPLS 3.2.8, the data was analysed based on a
two-step approach: measurement model and structural model (Sarstedt and Cheah, 2019).
Table 2 Assessment of loading, reliability and convergent validity

Construct Item Loading Cronbach’s alpha rho_A CR AVE

Corporate Image CI1 0.810 0.87 0.877 0.906 0.658
CI2 0.856
CI3 0.812
CI4 0.747
CI5 0.828
Loyalty LOY1 0.894 0.93 0.941 0.947 0.782
LOY2 0.878
LOY3 0.931
LOY4 0.921
LOY5 0.792
Network quality NQ1 0.948 0.92 0.922 0.949 0.862
NQ2 0.912
NQ3 0.925
Price PR1 0.916 0.761 0.858 0.846 0.591
PR2 0.910
PR3 0.531
PR4 0.643
Satisfaction SAT1 0.908 0.946 0.947 0.961 0.861
SAT2 0.942
SAT3 0.917
SAT4 0.944
Service quality SQ1 0.903 0.803 0.832 0.885 0.721
SQ2 0.729
SQ3 0.903
Trust TR1 0.905 0.939 0.94 0.953 0.804
TR2 0.918
TR3 0.856
TR4 0.92
TR5 0.883
Notes: Composite reliability (CR) and average variance extracted (AVE).
 What determines customers’ loyalty towards telecommunication service? 245

5.1 Common method bias

To reduce common method bias (CMB), statistical remedies were put in place. A full
collinearity assessment shows that the variance inflation factor (VIF) is equal to or lower
than 3.3, therefore indicating that the model is free of CMB (Kock, 2015).

5.2 Assessment of measurement model

Assessment of the reflective measurement model focuses upon convergent validity and
discriminant validity. The convergent validity of the measurement model was examined
based on items loading, Cronbach’s alpha (), rho_A, composite reliability (CR) and
average variance extracted (AVE) (Hair et al., 2016). As shown in Table 2, all of the
constructs with loading, , rho_A and CR exceeded the threshold value of 0.70, while
only AVE achieved the minimum value of 0.50 as suggested by Hair et al. (2016).
Table 3 Assessment of discriminant validity using HTMT

Construct 1 2 3 4 5 6 7
1 Corporate image
2 Loyalty 0.390
3 Network quality 0.715 0.318
4 Price 0.827 0.360 0.768
5 Satisfaction 0.435 0.799 0.420 0.412
6 Service quality 0.850 0.358 0.879 0.869 0.444
7 Trust 0.492 0.829 0.449 0.441 0.856 0.451
Note: HTMT < 0.90.
Source: Gold et al. (2001)
Discriminant validity examines the degree to which an item is distinct from another.
Using the heterotrait-monotrait ratio of correlations (HTMT) criterion, Table 3 shows that
the values obtained for every construct do not exceed 0.90, thus fulfilling the requirement
of HTMT0.90 (Gold et al., 2001).

5.3 Assessment of structural model

It is critical to address the collinearity issue for each set of predictors before assessing the
structural model. Table 4 shows that the VIF scores are below the threshold of 5,
therefore it can be surmised that multicollinearity issues are absent in this model (Hair
et al., 2017).
Next, using the bootstrapping technique with re-sampling set at 5,000, the path
coefficient and t-statistics were calculated for the hypothesised relationships. The
analysis revealed that network quality ( = 0.157, p < 0.01) and corporate image
( = 0.192, p < 0.001) were positively related to satisfaction. However, service quality
( = 0.081, p = 0.138) and price ( = 0.066, p = 0.159) had no impact on satisfaction.
Similarly, network quality ( = 0.192, p < 0.001) and corporate image ( = 0.273,
p < 0.001) were both found to exert a positive influence on trust. Conversely, the
hypotheses relating service quality ( = 0.002, p = 0.488) and price ( = 0.065, p = 0.181)
246 H. Ting et al.

to trust were disproven. The hypotheses predicting a relationship between satisfaction and
trust towards loyalty were accepted ( = 0.358, p < 0.001 and  = 0.493, p < 0.001,
respectively). Overall, Hypotheses H1, H2, H7, H8, H9 and H10 were accepted. Results
suggest that the mediating effect of satisfaction were significant for the path between
network quality ( = 0.056, p < 0.05) and corporate image ( = 0.069, p < 0.05) towards
loyalty. Moreover, trust was found to mediate the relationship between network quality
( = 0.095, p < 0.05) and corporate image ( = 0.135, p < 0.01) towards loyalty. Hence,
Hypotheses H11a, H11d, H12a and H12d were accepted.
Next, the coefficient of determination (R2) was examined. Overall, 19.5% of the
variance for satisfaction and 22.8% of the variance for trust were explained by network
quality, service quality, price and corporate image. Besides that, the model shows that
47.5% of the variance for loyalty was explained by satisfaction and trust. The effect size
(f2) was examined using the guideline set by Cohen (1988), whereby the obtained values
of 0.35, 0.15, and 0.02 indicated a large, medium, and small effect size, respectively.
With regard to satisfaction, networking quality (f2 = 0.011), service quality (f2 = 0.011)
and price (f2 = 0.002) exhibited infinitesimal effect sizes while corporate image
(f2 = 0.019) showed a small effect size. In determining the R2 values for trust, small effect
sizes were recorded for network quality (f2 = 0.02) and corporate image (f2 = 0.039) while
miniscule effect sizes were indicated in the case of service quality (f2 = 0.000) and price
(f2 = 0.002). Similarly, in the process of establishing the R2 values for loyalty, it was
determined that satisfaction (f2 = 0.129) and trust (f2 = 0.245) showed small and medium
effect sizes, respectively.
Table 4 Assessment of structural model

Effect
Std Std Confidence
Relationship t-value p-value VIF size
beta error interval
(f2)
H1 Network 0.157 0.067 2.349** 0.009 (0.052, 2.761 0.011
quality → satisfaction 0.273)
H2 Network quality → trust 0.192 0.067 2.881** 0.002 (0.087, 2.761 0.020
0.306)
H3 Service 0.081 0.074 1.091 0.138 (–0.040, 3.334 0.002
quality → satisfaction 0.206)
H4 Service quality → trust 0.002 0.076 0.030 0.488 (–0.122, 3.334 0.000
0.129)
H5 Price → satisfaction 0.066 0.066 1.000 0.159 (–0.044, 2.548 0.002
0.173)
H6 Price → trust 0.065 0.071 0.910 0.181 (–0.061, 2.548 0.002
0.173)
H7 Corporate 0.192 0.071 2.695** 0.004 (0.078, 2.467 0.019
image → satisfaction 0.309)
H8 Corporate image → trust 0.273 0.076 3.592*** <0.001 (0.152, 2.467 0.039
0.400)
H9 Satisfaction → loyalty 0.358 0.066 5.425*** <0.001 (0.252, 2.895 0.129
0.469)
Notes: ***p < 0.001; **p < 0.01; *p < 0.05; network quality (NQ), service quality (SQ),
corporate image (CI).
 What determines customers’ loyalty towards telecommunication service? 247

Table 4 Assessment of structural model (continued)

Effect
Std Std Confidence
Relationship t-value p-value VIF size
beta error interval
(f2)
H10 Trust → loyalty 0.493 0.067 7.415*** <0.001 (0.375, 2.895 0.245
0.596)
H11a NQ → satisfaction → loyalty 0.056 0.026 2.148* 0.032 (0.013,
0.116)
H11b SQ → satisfaction → loyalty 0.029 0.028 1.034 0.301 (–0.021.
0.091)
H11c Price → satisfaction 0.024 0.024 0.989 0.323 (–0.024,
→ loyalty 0.071)
H11d CI → satisfaction → loyalty 0.069 0.030 2.283* 0.022 (0.021,
0.144)
H12a NQ → trust → loyalty 0.095 0.037 2.555* 0.011 (0.031,
0.177)
H12b SQ → trust → loyalty 0.001 0.038 0.029 0.977 (–0.073,
0.080)
H12c Price → trust → loyalty 0.032 0.034 0.929 0.353 (–0.037,
0.098)
H12d CI → trust → loyalty 0.135 0.044 3.060** 0.002 (0.061
,0.231)
Satisfaction R2 = 0.195
Trust R2 = 0.228
Loyalty R2 = 0.475
Notes: ***p < 0.001; **p < 0.01; *p < 0.05; network quality (NQ), service quality (SQ),
corporate image (CI).
Table 5 Assessment of prediction using PLSpredict

PLS LM PLS-LM
Item
RMSE MAE Q2 RMSE MAE Q2 RMSE MAE Q2
LOY1 1.263 1.004 0.134 1.312 1.028 0.065 –0.049 –0.024 0.069
LOY2 1.568 1.240 0.099 1.615 1.267 0.044 –0.047 –0.027 0.055
LOY3 1.487 1.159 0.103 1.527 1.186 0.054 –0.040 –0.027 0.049
LOY4 1.423 1.121 0.108 1.458 1.133 0.065 –0.035 –0.012 0.043
LOY5 1.778 1.436 0.022 1.822 1.467 –0.027 –0.044 –0.031 0.049
SAT1 1.313 1.032 0.162 1.336 1.045 0.132 –0.023 –0.013 0.030
SAT2 1.326 1.027 0.148 1.348 1.044 0.120 –0.022 –0.017 0.028
SAT3 1.291 1.013 0.156 1.336 1.045 0.095 –0.045 –0.032 0.061
SAT4 1.378 1.064 0.146 1.427 1.101 0.084 –0.049 –0.037 0.062
TR1 1.316 1.013 0.171 1.370 1.048 0.102 –0.054 –0.035 0.069
TR2 1.260 0.968 0.172 1.289 0.988 0.133 –0.029 –0.020 0.039
TR3 1.286 1.030 0.164 1.312 1.034 0.129 –0.026 –0.004 0.035
TR4 1.308 1.023 0.154 1.349 1.044 0.101 –0.041 –0.021 0.053
TR5 1.348 1.048 0.176 1.366 1.053 0.154 –0.018 –0.005 0.022
248 H. Ting et al.

Finally, predictive relevance was evaluated using Stone-Geisser’s Q2 (Geisser, 1974;

Stone, 1974). The Q2 values for satisfaction (0.155), trust (0.169) and loyalty (0.475) all
exceeded zero. Therefore, the said model possesses sufficient predictive relevance. The
study further applies PLSpredict, otherwise also known as out-of-sample prediction
(Shmueli et al., 2019), in order to determine which promotion method gives provision for
a better prognosis. As shown in Table 5, the Q2 values for the loyalty, trust, and
satisfaction indicators of the PLS model outperform those generated for the LM model
(Q2 values > 0). Additionally, all of the item values for root mean squared error (RMSE)
and mean absolute error (MAE) of the PLS model are smaller than that of the linear
model (LM) in the loyalty, trust and satisfaction constructs. Therefore, it is surmised that
the study has adequate generalisability and based on the findings obtained from the
sample, it is also attributed with good representativeness in relation to the target
population (Shmueli et al., 2019).

6 Discussion

Based on the findings of this study, we observed that customers’ satisfaction is driven by
network quality and price, whereas customers’ trust is influenced by service quality and
corporate image. In addition, satisfaction and trust were found to exert positive effects on
customer loyalty. The aforementioned findings also revealed that the relationship
between network quality and customer loyalty as well as the relationship between
corporate image and loyalty were mediated by trust and satisfaction. These findings
suggest that Malaysian consumers are more concerned about the network quality and
corporate image of telecommunications service providers.
Several insights can be drawn while comparing the results of this study to those from
other sources in literature. First, consistent to Shafei and Tabaa’s (2016) findings, this
study has found that price and network quality are predictors of customer satisfaction
levels. However, service quality, which was found by Shafei and Tabaa (2016) to exert a
positive influence on satisfaction, indicated a dissimilar result in this study. In contrast to
Ali et al.’s (2010) study on the telecommunications market in Egypt, the effects of price
on customer loyalty was noticeably absent in this research. Nevertheless, this study
shares a common finding with the those obtained by Ali et al. (2010), more specifically
that network quality positively influences customer loyalty. However, the path
relationship was stronger when mediated by customer satisfaction.
Based on the above findings, this study concludes that pricing is of secondary interest
to Malaysian consumers because it did not improve customers’ trust towards their service
provider. Moreover, despite the fact that the impact of service quality on customer loyalty
was substantiated in a study by Kim et al. (2004), the results obtained from this study did
not validate a link between the two factors. Additionally, superior customer service is less
appealing to Malaysian consumers, therefore it did not contribute towards
loyalty-building. Malaysian consumers place different emphases on telecommunications
services as compared to consumers from other countries, such as Korea (Kim et al.,
2004), Pakistan (Ahmed et al., 2010; Ahmad, 2011) and Egypt (Shafei and Tabaa, 2016).
Collectively speaking, we attribute the difference in the results obtained to the
maturity of the market. Unlike the Korean market which has a better telecommunications
infrastructure, consumers in developing markets such as Malaysia are facing the
perennial issues of network connectivity and inferior call quality (Kaur, 2017; Kugan,
 What determines customers’ loyalty towards telecommunication service? 249

2017; Vijandren, 2017). This explains why Malaysian consumers view network quality as
a key determinant to improve satisfaction and trust. The Malaysian government
acknowledges the aforementioned issues and has pledged to address them in the 11th
Malaysia Plan (2016–2020) by improving infrastructure that will provide enhanced
accessibility to high quality and affordable connectivity to its citizens (Zuhairy and
Rohman, 2017).
Most importantly, this study has shown that corporate image is positively associated
with higher levels of customer satisfaction, trust and consequently customer loyalty. In
other words, Malaysian consumers pay more attention to the corporate image of the
telecommunications company when making purchase decisions. As highlighted earlier,
corporate image is a proxy used by customers to determine level of service, which in turn
influences their level of trust and satisfaction. These findings corroborate with those in
existing literature. For example, a study by Lin and Lu (2010) on travellers in Taiwan
found that corporate image has a positive influence on the trust they have with online
travel agencies. Similar results were observed from Çanakkale and Özkul (2016). In this
regard, a possible reason for this phenomenon is the presence of multiple market players.
While the telecommunications sector in Malaysia is dominated by three players, the
market’s low barrier to entry has brought the number of telecommunications service
providers to a current total of eight. Further coupled with low switching cost, the
competition in the Malaysian telecommunications sector has intensified over the years
(Tripathi, 2017). Therefore, forming the right corporate image is critical to strengthen the
bonds of trust and satisfaction between consumers and service providers.

7 Theoretical implications

The implications of this study are twofold. First, a theoretical contribution has been
established by integrating network quality, service quality, corporate image, price,
satisfaction, trust and customer loyalty into a single model. Thus, this study has
developed a comprehensive model for future studies in the telecommunications sector.
Preceding studies have either treated these variables separately or disregarded them as
constitutive elements. This study has also heeded Shafei and Tabaa’s (2016)
recommendation to examine the roles of trust and corporate image in determining
customer loyalty. To the best of the authors’ knowledge, this study is the first to examine
the constructs comprehensively in the context of Malaysia’s telecommunications sector.
The current body of knowledge is further enhanced as this study utilised the advanced
statistical method of PLSpredict to estimate the in-sample prediction. As highlighted
earlier, PLSpredict is a holdout sample-based procedure that generates case-level
predictions on an item or a construct level. Through it, this study demonstrates the
model’s accuracy when predicting the outcome value of new cases – an area that many of
existing literature are conspicuously missing.

8 Managerial implications

This study also proffers practical implications. Based on the findings of this study,
telecommunications service providers may enhance customer loyalty towards their brand
250 H. Ting et al.

by improving on their network quality and corporate image, which have been found to
exert significant effects on customer satisfaction and trust. Telecommunications service
providers and the authorities should work closely to improve telecommunications
infrastructure, particularly in areas with poor network coverage. By doing so, the
penetration rate of telecommunications services may be distributed on a relatively even
scale in addition to improving the quality of life of its users.

9 Limitations and future research

Future studies may consider validating the research model using a larger sample size,
examining different industries or varying the geographical region in which the study
takes place. To further advance the generalisability of outcomes, future studies should
also consider the inclusion of mobile telecommunications service subscribers in rural
areas. Secondly, future studies could examine how cultural contexts or market saturation
may influence customer loyalty. Furthermore, the demographic characteristics and
intensity of mobile usage of users may serve as potential moderators to the relationships
between variables. Otherwise, demographic characteristics should aid in ruling out
alternative explanation for findings. This suggestion is made in retrospect to address a
particular limitation of this study, namely the fact that no control variables were
introduced. While this study has attempted to provide a holistic explanation to the
phenomenon by integrating network quality, service quality, pricing, corporate image,
customer satisfaction, trust and customer loyalty into a single model, other variables such
as switching cost and perceived value should also be considered for future research.

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