WIRELESS SERVICE PROVIDERS

Kasey HarbesElizabeth KelleyDylan HullZachary West

WHY WIRELESS INDUSTRY? Access to communication services has

become a necessity in America Growing online business has increased

demand for wireless internet access Households with only wireless phones

doubled from 2007 to 2010 from 15.8% to 29.7%

Number of pricing plans available is incredibly high

THE INDUSTRY Industry Description Industry Structure Markets Competition Key Success Factors Main Competitors HHI

DEFINING THE INDUSTRY

SMS and MMS Wireless telecommunications

equipment rental Operation and maintenance of

switching and transmission facilities

Wireless internet services and other non-messaging data

Selling cell phones and other wireless devices

Wholesaling wireless infrastructure capacity to telecommunications resellers

Local, long distance and international calling

Main Segments Main Activities

Percent of Industry Revenue

MAJOR MARKETS

Percent of Industry Revenue

INDUSTRY STRUCTUREElementLife Cycle Stage Growth Revenue Volatility MediumCapital intensity HighIndustry Assistance NoneConcentration Level High

Regulation Level MediumTechnological Change HighBarriers to Entry HighIndustry Globalization LowCompetition Level High

COMPETITIVE LANDSCAPE High competition with a steady trend

Internal competitionService BasedProduct innovationGeographic coverageExternal

KEY SUCCESS FACTORS Developing close relationships in

complimentary industries Access to capital investment for funding Ability to quickly adapt to technology

changes Brand recognition Exclusive product sales contracts Economies of a scale

MAJOR COMPETITORS

Market Share

HHI Verizon: (36.5)2

AT&T: (32.1)2

Sprint Nextel Corporation: (15.4)2

T-Mobile: (10.7)2

Other: (5.3)2

1,332.25 + 1,030.41 + 237.16 + 114.49 + 28.09

= 2,742.4 = HHI Recall: HHI > 1,800 is a highly concentrated

market

PRICING STRATEGIES Second Degree Pricing

Penetration Pricing

Locking-in

Tacit Collusion

TWO PART TARIFF Service composed of two parts

TWO MAIN PRICING MODELS

SUBSIDY MODEL Mainly used by

major competitors

What factors influence subsidy?

Upgrade fees on subsidized phones

Source: http://www.verizonwireless.com and www.att.com

TRANSPARENT COST (PREPAID) Serves a niche market Pay as you go or by days No contract commitments Savings roughly = subsidy

Verizon 2 Year Contract

GoPhone Prepaid

GoPhone Pay by

DayContract Savings

450 Min. $40 $50 n/a 240Unlimited $50* n/a 1.99/day 252.7

Source: www.verizonwireless.com

OTHER PRICING STRATEGIES

PENETRATION PRICING High fixed cost industry and heightened

barriers 2nd Tier firms can undercut competition Low variable costs

UNLIMITED INDIVIDUAL PLANS Verizon - $120/month

(36.5%)

AT&T - $120/month (32.1%)

Sprint - $99.99/month (15.4%)

Virgin Mobile - $55/month (<5%)

Lock – In Costs Verizon

AT&T Sprint Virgin Mobile

Termination Fee2- year contract

Standard Phone $175 $150 $200 $100 or $20/month

Advanced Phone $350 $325 $350 $100 or $20/month

LOCK IN COSTS

Two firms agree to play a certain strategy without explicitly saying so.

TACIT COLLUSION

IDENTICAL PRICING PLANSAT&T Verizon

Individual Plans450 minutes $39.99 $39.99900 minutes $59.99 $59.99Unlimited $69.99 $69.99

Family Plans700 minutes $69.99 $69.991400 minutes $89.99 $89.99Unlimited $119.99 $119.99

Messaging1000 Msgs $10.00 $10.00Unlimited $20.00 $20.00

Offer many of the same devices

Similar contract agreements

Similar termination fees

TACIT COLLUSION CONTINUED

Verizon – 36.5% Market Share AT&T – 32.1% Market Share Possible reasons:

Network externalitiesGeographic advantages

TACIT COLLUSION CONTINUED

ANALYSIS & RECOMMENDATIONS

INDUSTRY CURRENTLY Industry is thriving and experiencing fast

rates of growth

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 20110.00

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INDUSTRY OUTLOOK Increased demand for wireless data services Wireless has started replacing land lines Expanding demand for wireless data services

will offset declining voice-only service demand

Tablet Computers E-Readers

WIRELESS DATA SERVICES Verizon’s early adoption of LTE technology

will soon be followed by AT&T and Sprint Consumer experience dependent on several

factors Verizon’s upcoming mobile video network

may put strain on broadband data allocation

INDUSTRY OUTLOOK Revenue outlook predicts continued growth

2011 2012 2013 2014 2015 2016 20170.00

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100,000.00

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300,000.00

Industry Revenue Outlook

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Year

ADVERTISING EXPENDITURES VS. MARKET SHARE

INDUSTRY RECOMMENDATIONS Invest in data intensive infrastructure Bundle data plans across devices Worldwide plans via strategic alliances Move towards less costly mobile devices Partnerships with other companies?

Verizon Wireless and Time Warner Cable Potential Partnership

QUESTIONS?