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 $20.00
Offer many of the same devices
Similar contract agreements
Similar termination fees
TACIT COLLUSION CONTINUED
Verizon – 36.5% Market Share AT&T – 32.1% Market Share Possible reasons:
Network externalitiesGeographic advantages
TACIT COLLUSION CONTINUED
ANALYSIS & RECOMMENDATIONS
INDUSTRY CURRENTLY Industry is thriving and experiencing fast
rates of growth
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 20110.00
50,000.00
100,000.00
150,000.00
200,000.00
250,000.00
Industry Revenue ($million)
Year
Reve
nue
in M
illion
s
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
50,000.00
100,000.00
150,000.00
200,000.00
250,000.00
300,000.00
Industry Revenue Outlook
Reve
nue
in M
illion
s
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?