Overview of Telecommunication Industry

The market for mobile services in Malaysia is highly competitive. Prior to the liberalisation of the telecommunications industry in Malaysia, Telekom Malaysia had a virtual monopoly on telecommunications services in Malaysia. In recent years, the Government has taken steps to introduce managed competition in the industry by awarding various telecommunications licences. To date, the Government has awarded eight mobile licences to operators in Malaysia. Maxis’ competitors in this segment are Celcom, Telekom Malaysia (through its TMTOUCH, Mobifon 018 and ATUR011 brands), DiGi and TIME. Maxis believes that the main competitive factors in the mobile services market are network coverage, service quality, pricing and brand. The two largest participants in Malaysia’s mobile market, Maxis and Celcom, are considered by many customers to their more extensive network coverage and higher service quality. In addition, the introduction of equal access and the licensing of by-pass operators have further increased competition in the Malaysian telecommunications industry.

Michael Porter five forces are used to analyze the attractiveness of the telecommunication industry.

Michael Porter Five Forces

Entry Barrier

a) Base station

Given the rapid deployment of base station sites required to support network growth, Maxis has a significant number of base stations which have been installed. Meanwhile they are also some pending submission to wait approval from the local authorities. This is the common practice among mobile operators in Malaysia given the long lead time generally required for the approvals. The lack of approvals and the long waiting time had resulted a high entry barrier for new company.

b) Technology

The types of technologies employed by Maxis include the GSM standard for its mobile network, operating in the 900MHz frequency band. Maxis’ mobile and fixed networks use a mix of Synchronous Digital Hierarchy and Plesiochronous Digital Hierarchy microwave links for most of its transmission systems. For its core data network, Maxis deploys Internet Protocol based technology use of DSL technology. The advanced technology which required in the telecommunication industry incurred high capital investment and also needed professional knowledge in relevant sector to success in the industry. It was not easy copy or imitate by competitor.

c) Regulatory Policies

Telecommunication operating landscape is largely shaped by the country’s regulatory environment. Often, the regulatory policies, the number and type of licences awarded by the Government are view as the entry barrier for the development of the industry. The existences of various regulatory such as interconnection fees between operators, call tariffs and the degree of foreign participation. Meanwhile, it is not so easy for a company to apply for a new licence to operate legally in this industry. The process is complex and high cost.

Bargaining Power of Supplier

Generally, the telecommunications industry in Malaysia is dependent on imports for the majority of its network components as most of the network equipment cannot be sourced locally. Maxis’ networks utilise standard equipment which is available from a limited number of suppliers. Most of the GSM equipment for Maxis’ mobile network operations is purchased from Motorola, Siemens and Trisilco Folec, and Maxis maintains close working relationships with its key network equipment suppliers.

Maxis has been purchasing from these suppliers for approximately six years. Maxis also purchases certain network components from various other key suppliers, including Nortel and Cisco. Maxis has been dealing with substantially the same group of suppliers since commencement of operations in 1995. Bad news was, Siemens is now a sub-contractor to Motorola for network switching systems. Maxis left only one main supplier- Trilsilco Folec. The bargaining power of their supplier becomes strong. Moreover, their supplier is from overseas. In future, Maxis believes that comparable equipment and support is available from other established suppliers.

Bargaining Power of Buyer

Information technology increase the bargaining power of buyer, high available of information make it easier for buyer to evaluate sources of materials about telecommunication. There are many alternatives product such as fax, email, and internet which enhance the bargaining power of buyer to the mobile service provider. Meanwhile, high level of competition between the major telecommunication companies that exists in current market leads to low switching cos for the buyer to change their mobile service provider. Customers are high price sensitivity, easy to switch brand.

Threat of Substitutes

There are many substitutes for mobile services such as a very traditional way- letter, fixed home line telephone, fax, and email. From the year of 2000 onwards, broadband Internet services, which enable faster and always-on connection to the worldwide web, offer more promising growth potential.In addition, the pressure on the very low cost to use the phone calling through internet or communicate through online messenger had threated the mobile service industry,

The attractiveness of internet services making it more affordable to the masses.

Rivalry among Competitors

Telecommunication industry in Malaysia is oligopoly structure nowadays. Maxis have two main competitors, they are Celcom, Digi. Maxis lead this telecommunication industry. They are largely compete on differentiate their product and services on how to improve their features and implementing innovation. Moreover, company in this industry will certainly compete on the call rates, package price and so on. They try to gain competitive advantage through low call rate and proce. Each of them invests a lot on advertising to promote their product. There is high exit barriers in this industry due to the high investment budget and responsible to customer will make campanies strive to survive in the industry. Technology advanced leads fast industry growth and opporturnities, increase the competition among companies.

Bibliographics

http://www.maixs.com.my

http://www.celcom.com.my