U FONE (TELECOM)

Strategic Management Plan

Executive Summary: Ufone (official name: PTML) is a PTCL company, PTML (Ufone) a wholly-owned subsidiary has improved its financial performance commenced its operations on 29th January 2001 as a GSM 900 service provider. Since the outset, it has expanded its coverage and customer base at a rapid pace and established itself as one of the leading cellular service providers in Pakistan.

During the last year Ufone successfully completed the launching of sites under Phase V in existing as well as new cities and towns by investing more than US$ 525 million. This has increased the asset base of Ufone from rupees 20 billion to 27 billion. To further enhance the subscriber base and strategically position the company in the growing telecom market, Ufone has finalized a network expansion for Phase VI contract amounting to about US$ 170 Million. Ufone currently, has network coverage in more than 4,745 locations throughout the country.

Ufone's operational performance has been very encouraging despite stiff competition in Pakistan telecom market which has led to reduction of prices to bare minimum level. Ufone managed to improve its revenue and after tax profit by 87% and 54% respectively, as compared to the last year through aggressive policies and exercising strict control over expenses.

Introduction:

Ufone GSM is a Pakistani GSM cellular service provider. It is one of six GSM Mobile companies in Pakistan and is a subsidiary of Pakistan Telecommunication Company. The company commenced its operations under the brand name of Ufone from Islamabad on January 29 2001. Ufone expanded its coverage and has added new cities and highways to its coverage network. After the privatization of PTCL, Ufone is now owned by Etisalat. PTML is a wholly owned subsidiary of PTCL. Established to operate cellular telephony. During the year 2001, as a consequence of PTCL’s privatization, 26% of its shares were acquired by Emirates Telecommunication Corporation (Etisalat). Being part of PTCL, the management of Ufone has also been handed over to Etisalat. During the year July 2005 to June 2006, Ufone continued on the path to success. The Company further expanded its coverage and has added new cities and highways. Ufone has network coverage in more than 750 cities, towns and across all major highways of the country. During the year Ufone successfully completed the network expansion of Phase 4 in existing as well as in new cities and towns which amounted to more than US Dollar 170 million. As a result the asset base of the Company has increased from Rs. 20 billion to Rs. 27 billion.

Vision Statement: “To be the leading telecommunication service provider in Pakistan by offering innovate communication solutions for our customers while exceeding shareholder value & employee expectation.”

Mission Statement: To become the best cellular communication option available in the country for “U”……………. At Ufone we aim to provide you with wider coverage, superior connectivity, clear signals & voice quality. Wherever you are, Ufone keeps you connected

INTERNAL & EXTERNAL ANALYSIS INTERNAL ENVIORNMENT Human Resource Management Marketing Department Commercial Department Sales Department Finance Department Payroll Department Information Technology Department Engineering Department Administration Auditing Department Customer Care

EXTERNAL ENVIORNMENT

Economic Conditions Social Conditions Culture Demographics Environmental Competitive Technological Consumer Attitude Globalization

SWOT ANALYSIS STRENGTH

Ufone has Network Coverage in more than 750 cities, towns and across all major

highways of the country.

Ufone provides International Roaming facility with more than 150 international

operators across 79 countries.

Ufone has always believed in a solid Commitment to growth, security and reliability.

Therefore, Ufone has always balanced its expansion efforts and quality of service. With

a total current investment of $400 Million.

Ufone has maintained itself as the 2nd largest cellular operator in Pakistan with a

subscriber base of around 16.5 million and a market share of nearly 25%. Ufone has

seen a subscriber growth rate of over 200% in the last year, and since the start of 2005

Ufone added nearly 5 million subscribers onto its network. A remarkable achievement

indeed, especially considering the fact those two new international players also entered

into the market in 2005.

Ufone increased its Focus on the youth segment (which comprises 50% of the

population), with the Prepay brand.

Ufone has some exciting and energetic SMS packages that made SMS almost free.

They are offering Rs. 25, Rs.50, Rs.80 packages which its subscribers really love it.

Variety of Value Added Services.

Established customer base including lower middle class. Fewer rates than competitors.

WEAKNESSES

Ufone does not have the proper lists of its customers. It has the list but this list is not

authentic which is increasing the unauthorized use of its sim specially pre pay. Ufone

have to take serious steps to properly list its customers to ensure that there is no

misuse. Ufone has the problem of voice quality. Though its coverage area is vast and it covers

more than 750 towns and cities in Pakistan but the voice quality is not as good as

it should be. Poor Organizational Structure. Centralized structure failed to provide proper guidance

over instruction and policies

Stagnant Profitability. As compared to financial assets, Ufone is not close to expected

profitability

Its coverage on Southern part of Pakistan is quite good but in northern areas its

coverage is a bit poor.

Ufone is plagued with some internal problems like when it is privatized to Etisalaat

being the part of the PTCL many employees were not happy with the pay scale that they

were offering.

OPPORTUNITIES

Ufone could develop some new and innovative services to attract customers and some

of the suggestions are as under which will help them to increase their revenues:

They should also introduce some International call packages to Middle Eastern countries

because there are lots of Pakistanis who are living in those countries so people will

definitely be tempted towards such package.

Ufone should develop some new franchises in remote areas so that people will get more

and more benefit from it and it will help to increase their customers.

As in Pakistan Youth is almost the 50% of the population so Ufone can take advantage

of this demographic situation and should introduce more and more services and

packages that attracts youth towards it.

Ufone should extend its network coverage area to Northern part of the country as well

because in that part not too many companies are giving services and if Ufone give its

service there then it will definitely attract people and its number of customers will shoot

like a rocket.

If Ufone enhance its voice quality then definitely it would be prefer more by customers.

Ufone should import technological equipments from China because they are giving the

best technology at very low rates so it will not only help Ufone to be ahead

technologically but also will help Ufone to decrease its cost.

Ufone can surprise its competitors by introducing “Ufone kiosk”. These will be ATM like

machines and that will give 24-hour service to Ufone subscribers to load the balance just

like they take money from ATM.

THREATS

As Ufone is cellular company and there is cut throat competition among cellular

companies in Pakistan. There are four other companies also working in Pakistan so

Ufone would have to face some growing competitive pressures.

In Balochistan and FATA where Ufone already has network coverage is in danger

because of critical situation and operation being held there. Investment of Ufone is in

danger.

By the arrival of China Mobile Company (Zong) in cellular industry of Pakistan the

Ufone and other companies now have to face the severe competition. As Zong is

introducing some various attractive packages of both SMS and calls to attract

customers. Ufone have to develop strategies to counter their strategy and to survive in

the market.

The key threat to Ufone is also some adverse Government policies of implementing

Tax on telecommunication industry that will ultimately affect the revenues.

Telenor is giving higher salary to its employees as compared to Ufone so many of its

skillful and competent employees are going there. That will affect the company’s

profitability in the long run.

Another threat is any new company from foreign countries e.g. Orange and Vodafone.

THE STRATEGY FORMULATION ANALYTICAL PROCESS

STAGE 1ST INPUT STAGE Internal Factor Evaluation Matrix (IFE Matrix) A summary step in conducting an internal strategic management audit is to construct an internal factor evaluation matrix (IFEM) this strategy formulation is summarizing and evaluate the major strength and weaknesses in the functional area of a business, and its provide a basic for identified and evaluating relationship among areas. Initiative judgment is required in developing an IFE matrix, so the appearance of scientific approach should not be interpreted in this mean this is an all powerful techniques.

A: Internal Factor Evaluation Matrix (IFE Matrix)

Key Internal Factor Weight Rating W. score Internal Strength Network coverage .08 3 .24 Unique offers & packages .12 4 .48 Marketing & Advertising .10 3 .30 Financial position & sales Depts. .10 3 .30

Payroll Department & HRM .05 3 .15 Latest Technology Adoption .06 3 .18 Administration .04 2 .08 Customer Care & Feedback .10 3 .30 Internal Weaknesses Lack of Franchises .04 2 .08 Network problem on special occasions .04 3 .12 Behind on Excessive Demand .05 3 .15 Poor Organizational Structure .04 2 .08 Global Expansion (Less coverage in remote areas).

.10 2 .20

Northern areas coverage .08 1 .08 Total: 1.00 2.74 Interpretations: IFE score of 2.74 indicating that the Ufone is an internally strong organization, it represent that it is excellent in its overall internal strategies when it come to explore strengths and weaknesses. Overall the main strength is financial support by the Ufone.

Total weighted score for the Ufone internal factor is 2.74 which is above average. So it is internally strong and aggressive approach

B: External Factor Evaluation Matrix (EFE Matrix)

Key External Factor Weight Rating W. Score

External Opportunities Globalization .12 4 .48 Publicity & Marketing .06 3 .18 Can target Corporate .08 3 .24 Develop New value Added services .10 4 .40 Extend Coverage to Northern Areas .05 3 .15 introduced International SMS packages like local SMS & call package

.06 3 .18

develop some new franchises in remote areas .08 4 .24 Introducing “Ufone kiosk”. Just like ATM .05 3 .15 External Threats Old Stable Companies & arrival of China Mobile Company .10 2 .20 PTCL cellular license .08 2 .16 3 Price War .05 3 .15 Government Interference .12 3 .36 Pressure groups & health issues due to towers in residential areas.

.05 2 .10

TOTAL: 1.00 2.97 Interpretations:

Total weighted score for the Ufone external factor is 2.97 which are above average. So it has aggreSssive strategy.

Competitive Profile Matrix (CPM) Competitive profile matrix is an essential strategic management tool to compare the firm with the major players of the industry. Competitive profile matrix show the clear picture to the firm about their strong points and weak points relative to their competitors. The CPM score is measured on basis of critical success factors, each factor is measured in same scale mean the weight remain same for every firm only rating varies. The best thing about CPM that it include your firm and also facilitate to add other competitors make easier the comparative analysis.

C: Competitive Profile Matrix (CPM)

MOBILINK TELENOR ZONG UFONE Critical Success Factor (CSF)

Weight Rating W. Score Rating W.

Score Rating W. Score Rating W.

Score

Market share 0.10 3 0.30 3 0.30 1 0.10 4 0.40 Growth rate 0.12 3 0.36 3 0.36 1 0.12 3 0.36 Financial strength 0.13 3 0.39 3 0.39 3 0.39 3 0.39

Management 0.09 3 0.27 3 0.27 3 0.27 3 0.27 Coverage 0.11 3 0.33 3 0.33 3 0.33 3 0.33 CCS 0.05 2 0.10 2 0.10 2 0.10 3 0.15 Advertising Marketing 0.05 3 0.15 3 0.15 2 0.10 3 0.15

Brand Name 0.05 2 0.10 3 0.15 2 0.10 3 0.15 Product Quality 0.05 3 0.15 2 0.10 3 0.15 3 0.15 Price 0.10 3 0.30 2 0.20 3 0.30 3 0.30 Customer Loyalty 0.05 2 0.10 2 0.10 2 0.10 3 0.15

Global Expansion 0.10 3 0.30 3 0.30 2 0.20 3 0.30

TOTAL: 1.00 2.85 2.75 2.26 3.10 Interpretation:

A Ufone GSM Telecom Company is dominating in the industry as compared to local players. There are several competitors like Mobilink GSM, Telenor and Zong etc but above competitors are the major ones.

CPM scores for Ufone showing aggressiveness as compared to the Mobilink GSM, Telenor and Zong.

Ufone GSM is number one company with in the local environment; it is basically leading the industry in the following aspects:

Product design. Research and development Persistence in product quality. Trained Manpower.

Moreover, Mobilink GSM is resides at the second number and leading industry in effective management style.Then Telenor GSM comes at number 3rd with leading position persistence in quality and market segmentation and finally Zong is last one.

The rating values as follows:

1. Major weakness 2. Minor weakness 3. Major strength 4. Minor strength

As indicated by the total weighted score of 2.35, Zong is weakest. Because it is at its initial position as compare to competitors. With the point of Ufone 3.58 is leading. Only eight critical success include for simplistic.

STAGE: 2ND MATCHING STAGE A: SWOT MATRIX

Strength (S) Weaknesses (W)

Capital & financial position Network Coverage &

voice quality Resources Trend setter Unique offers & packages High Growth Rate Advertising & marketing Focus & retain customers

Northern areas Coverage Subsidiary of PTCL Low Market Share Weak MIS Old Staff Less motivated

& unfamiliar to IT.

Opportunities (O) (SO) Strategies (WO) Strategies Globalization Publicity Can target corporate

Expand Increased coverage &

franchises

Enhance coverage &

market share Acquisition

New value added services

Covering Northern Areas New Product (Ufon kiosk) Penetration

Penetration Acquisition & Make the

post paid package more attractive

Increased loyalty & brand image

Attract new customers

Threats (T) (ST) Strategies (WT) Strategies Old Stable Companies Attractive Packages By

Competitors Price War Government Interference Pressure groups & health

issues

Cost Leadership Penetration & co branding

with others like banks Market Leader Introduce new packages &

services.

Downsizing

Interpretations: Cr i t ic a l Re g ion is WO. U f o n e G S M T e l e c o m c a n i m p o r t n e w t e c h n o l o g y t o reduce its cost of production. Company can thus be able to penetrate in the market and capture more shares by improving quality of goods and services, and provision of goods at lower prices.

B: BOSTON CONSULTING GROWTH (BCG MATRIX)

Companies that are large enough to be organized into strategic business units face the

challenge of allocating resources among those units. In the early 1970's the Boston Consulting

Group developed a model for managing a portfolio of different business units. The BCG growth-

share matrix displays the various business units on a graph of the market growth rate vs. market

share relative to competitors.

BCG Growth-Share Matrix

On the vertical axis, market growth rate provides a measure of market attractiveness. On the horizontal axis, relative market share serves as a measure of company strength in the market.

The growth-share matrix defines four types of SBUs:

CASH COW (Low growth, High market share)

A business unit that has a large market shares in a mature, slow growing industry. Cash cows

Require little investment and generate cash that can be used to invest in other business units.

STAR (High growth, High market share)

A business unit that has a large market shares in a fast growing industry. Stars may generate

Cash, but because the market is growing rapidly they require investment to maintain their lead.

If successful, a star will become a cash cow when its industry matures.

QUESTION MARK? (High growth, Low market share) A business unit that has a small market shares in a high growth market. These business units

Require resources to grow market share, but whether they will succeed and become stars is

unknown.

DOG (Low growth, Low market share)

A business unit that has a small market shares in a mature industry. A dog may not require

Substantial cash, but it ties up capital that could better be deployed elsewhere. Unless a dog

has some other strategic purpose, it should be liquidated if there is little prospect for it to gain

market share.

C: SPACE MATRIX Financial Strength (FS) Rating Environmental Stability (ES) Rating

Revenue 5 Technological Change -3 Rate of Return 4 Rate if Inflation -4 Working Capital 4 Demand Verbiality -3 Govt. Interference -1 Tough Competition -2 Average 4.33 Average -2.6 Y-axis 1.73 Competitive Advantage (CA) Industry Strength (IS) Resource & Assets -2 Financial Stability 4 High Growth Rate -1 Resource Utilization 4 Advertising & Marketing -2 Profit Potential 4 Competition Capacity Utilization -3 GPRS Technology 5

2nd Cellular Company in Pakistan -1 Scope in Rural Areas 3 Good Speed & Superior Voice Quality -3 Growth Potential 3 Customer Focus -3 Computerized Complaint cell -3 Successful Brand -2 Attractive Package -3 Average -2.3 Average 4.6

X-axis 2.3

FS average is 13/3 = 4.33 CA average is -23/10 = -2.3

ES average is -13/4 = -3.25

IS average is 23/5 = 4.6

Directional Vector Coordinates: x-axis: 4.6+ (-2.3) = 2.3

Directional Vector Coordinates: y-axis: 4.33+ (-2.6) = 1.73 The Strategic Position and Action Evaluation (SPACE Matrix) The Strategic Position and Action Evaluation (SPACE) Matrix is another important Stage 2 matching tool of formulation framework. It explains that what is our strategic position and what possible action can be taken. It is not closed matrix. It is prepared on graph. It is closed matrix. This follow counter clockwise direction. It contains four-quadrant named aggressive, conservative, defensive, or competitive strategies. The axes of the SPACE Matrix represent two internal dimensions financial strength [FS] and competitive advantage [CA]) and two external dimensions (environmental stability [ES] and industry strength [IS]). These four factors are the most important determinants of an organization's overall strategic

position.

The UFONE should peruse Aggressive strategies.

SPACE MATRIX FOR UFONE FS

Aggressive strategies of Ufone are: Integration Intensive Related diversification.

D: The Internal External Matrix (IEM): The Internal-External (IE) matrix is another strategic management tool used to analyze working conditions and strategic position of a business. The Internal External Matrix or short IE matrix is based on an analysis of internal and external business factors which are combined into one suggestive model.

The IE matrix is a continuation of the EFE matrix and IFE matrix models.

Aggressive Conservative

Defensive Competitive

(2.3, 1.73)

Aggressive

IS CA

ES

The IE matrix belongs to the group of strategic portfolio management tools. In a similar manner like the BCG matrix, the IE matrix positions an organization into a nine cell matrix.

The IE matrix is based on the following two criteria:

1. Score from the EFE matrix this score is plotted on the y-axis 2. Score from the IFE matrix plotted on the x-axis

The IE matrix works in a way that you plot the total weighted score from the EFE matrix on the y axis and draw a horizontal line across the plane. Then you take the score calculated in the IFE matrix, plot it on the x axis, and draw a vertical line across the plane. The point where your horizontal line meets your vertical line is the determinant of your strategy. This point shows the strategy that your company should follow.

On the x axis of the IE Matrix, an IFE total weighted score of 1.0 to 1.99 represents a weak internal position. A score of 2.0 to 2.99 is considered average. A score of 3.0 to 4.0 is strong.

On the y axis, an EFE total weighted score of 1.0 to 1.99 is considered low. A score of 2.0 to 2.99 is medium. A score of 3.0 to 4.0 is high.

Your horizontal and vertical lines meet in one of the nine cells in the IE matrix. You should follow a strategy depending on in which cell those lines intersect.

The IE matrix can be divided into three major regions that have different strategy implications.

Cells I, II, and III suggest the grow and build strategy. This means intensive and aggressive tactical strategies. Your strategies should focus on market penetration, market development, and product development. From the operational perspective, a backward integration, forward integration, and horizontal integration should also be considered.

Cells IV, V, and VI suggest the hold and maintain strategy. In this case, your tactical strategies should focus on market penetration and product development.

Cells VII, VIII, and IX are characterized with the harvest or exit strategy. If costs for rejuvenating the business are low, then it should be attempted to revitalize the business. In other cases, aggressive cost management is a way to play the end game.x

E: Grand Strategy Matrix (GS Matrix) In Grand strategy matrix Ufone lie in 1st quadrant because it has strong competitive position and rapid market growth

Suitable strategies of quadrant 1st for Ufone are

1. Market Development

2. Market Penetration

3. Product Development

4. Horizontal Integration

5. Forward Integration

6. Backward Integration

7. Related Diversification

STAGE: 3rd DECISION STAGE

A: Quantitative Strategic Planning Matrix (QSPM) The last stage of strategy formulation is decision stage. In this stage it is decided that which way

is most appropriate or which alternative strategy should be select.

Steps in preparation of QSPM

1. List of the firm's key external opportunities/threats and internal strengths/weaknesses in

the left column of the QSPM.

2. Assign weights to each key external and internal factor

3. Examine the Stage 2 (matching) matrices and identify alternative strategies that the

organization should consider implementing

4. Determine the Attractiveness Scores (AS)

5. Compute the Total Attractiveness Scores

6. Compute the Sum Total Attractiveness Score

Quantitative Strategic Planning Matrix (QSPM) Quantitative Strategic Planning Matrix (QSPM)

SELECTIVE STRATEGIES Product Development Market Penetration Key External Factors Weight Attractiveness

Scores (AS) Total

Attractiveness Scores (TAS)

Attractiveness Scores (AS)

Total Attractiveness Scores (TAS)

Opportunities 1 Globalization 0.10 3 0.30 2 0.20

2 Marketing 0.15 4 0.60 3 0.45

3 Acquisition 0.08 3 0.24 2 0.16

4 New Product Development

0.06 3 0.18 3 0.18

5

Northern Areas 0.10 3 0.30 2 0.20

6

Develop some new franchises in remote Areas

0.12 4 0.48 2 0.24

7 Introducing “Ufone

kiosk”. Just like 0.10 3 .30 2 0.20

ATM.

Threats 1

Old Stable Companies

0.10 4 0.40 3 0.30

2 Attractive Packages By Others

0.10 3 0.30 2 0.20

3 Price War 0.04 3 0.12 2 0.08

4 Government Interference

0.05 3 0.15 2 0.10

TOTAL 1.00

KEY INTERNLA FACTOR

Strengths 1 Investment 0.10 4 0.40 4 0.40

2 High Growth Rate 0.10 4 0.40 3 0.30

3 Advertising 0.12 3 0.36 3 0.36

4 Net Work Portability 0.10 3 0.30 3 0.30

5 Ufone Mobile 0.07 3 0.21 3 0.21

6 Resources Assets And People

0.10 3 0.30 3 0.30

7 Location And Geographical Coverage

0.10

3

0.30

3

0.30

8 Government Dealing 0.09 3 0.27 3 0.27

Weaknesses 1 Lack of Franchises 0.05 2 0.10 1 0.05

2 Coverage 0.08 1 0.08 1 0.08

3 Less Market Share & behind the demand

0.05

2

0.10

2

0.10

4 Weak MIS 0.04 2 0.08 1 0.04

SUM TOTAL ATTRACTIVENESS SCORE

1.00 6.27 5.02

Recommended strategy: We select the two strategies Market Penetration and Product development. There total attractive score is 5.02 and 6.27 respectively. The strategy Product Development has big score that’s why we select it.

Conclusions and Recommendation

Ufone is 2nd largest cellular company in Pakistan. More committed towards growth. Telecom industry is most growing industry of Pakistan and still huge investment required for coverage. The market also has strong competition after the entrance of China Mobile Company. Competitors are hiring professionals to entertain the consumers which is resulting technological implementation and value added services. Consumer searches good service with lowest call rates, although companies are minimizing call rates. This will result more growth in the market. Ufone bring amazing packages to attract the customers. Ufone promote their product through TV commercials, Newspaper, Radio, Internet etc. The choice of people is Ufone because Ufone price level is low and affordable that every one can say “It’s all about U” Ufone could develop some new and innovative services to attract customers to increase their revenues as well as it customers: It should introduced International SMS packages

Ufone has strong financial position & more competitive advantages then other cellular

companies so it should more focus on its strategies.

It should pay more attention towards postpaid services