Generic Characteristics of Telco Industry
Market structure is either a:
Monopoly
Natural monopoly
Oligopoly
Dominated by a handful of big players
High capital expenditure (capex)
Absolute fixed cost is high
But fixed cost per user is very low
Telco may be very cash flow rich if capex is controlled
Low operating expenditure (opex)
Average cost per user is very, very, VERY low.
Generic Characteristics of Telco Industry
Lines of business
Voice
Traditional fixed lines overtaken by mobile
Some households do not even have fixed lines
i.e. M1 gives free fixed line with fibre plan
Lucrative international dialing business is largely gone Replaced by data i.e. Skype, VOIP etc.
Generic Characteristics of Telco Industry
Lines of business
Data
Escalating bandwidth demand (geometric growth)
Some business models have failed as a result
Unlimited mobile data plan replaced by tiered pricing plans
Reasonably priced unlimited fixed broadband/fibre still available in some countries (not so in the US).
Price differentiation between home and business data plans Sub segment differentiation exists – gamers (low latency) Telcos need data to make up for loss revenue in voice business Generic Characteristics of Telco Industry
Lines of business
Pay TV
Telcos offering pay TV not common for all countries. Exists in Singapore.
Always a balancing act between controlling cost of content and charging viewers more
Cost is increasing for developed countries
» Not so for developing countries…..
Video on-demand new business model
Don’t pay for a whole channel, just pay for the
TV program you want
Mio TV vs Cable TV
Generic Characteristics of Telco Industry
Strategy for non-saturated markets
Build out infrastructure and coverage while controlling capex
Gain market share by grabbing customers
Especially in underserved markets
Attempt to lock in existing