Ais_Thailand_-_Strategic_Management

AIS - Advanced Info Service Public Company Limited: 1. Vision/Mission Statement 2. External Audit (EFE/CPM) 3. Internal Audit (IFE) 4. AIS - Final Word 5. References 1. Vision & Mission Statement: AIS will lead and shape the multi-media communications market in Thailand through innovation, customer experience, technology and people & culture. “With our superior network, dedicated service quality, and continuous innovation, AIS is confident to cater whatever technology the future presents. We will make every possible effort to quickly bring the technology to the customers. AIS will always be a leader to “Bring You the New Era”.” 2. External Audit: 1. External Factors & External Factor Evaluation Matrix (EFE-Matrix): 1. – Thailand Telecommunication Background, summarized [pic] 2. – EFE-Matrix [pic] [pic] 3. – Support –EFE (Opportunities/Threats: political, economical, social and technological) Opportunities - Political, Economical, Social, and Technological: Nr.1 - Development and affordability (decreasing prices) of smart mobile phones (e.g. broadband compatible, social networking, etc.) – No additional support necessary… Nr.2 - Value Added Service Provider market growth (parallel to the development of smart phones and changing society…) – No additional support necessary… Nr.3 - Global and domestic economic recovery - [pic] [pic] Nr.4 - Barriers of entry - Fact is that only three organizations (AIS, DTAC, and TrueMove), each with well-established brand image, share the majority of Thailand’s wireless telecommunication market. Further, the slow development of regulatory bodies, creeping implementation of new technologies (especially in the ICT-sector), and political instability and uncertainty, leaves the country unattractive and “too expensive” for new foreign investment or small companies. Nr.5 - New Customer Markets - AIS identified new customer markets which consisted of: 1. Multiple SIM Users who are mostly urban population and tend to carry multiple SIMs for different purposes such as one SIM for low cost calls and a standby SIM for receiving calls as resulted from pricing strategy and special promotion for on-net calls (calls originated and terminated within the network). 2. Teenager group which extends to the pre-teen group, of which the user penetration remains relatively low. 3. Emerging market or rural market which mostly uses mobile to receive calls. AIS not only proposes price plan that respond to mass customers but also provides differentiation. The key concept to pricing targets at the various usage behaviors of each target group, e.g. student, provincial customer, tourist, etc. Further, the lack of sufficient infrastructure on the fixed line network and hence the limited availability of fixed-line internet connection became a driver to the rise of mobile internet connectivity through various mobile devices such as smart phones and wireless data cards. Nr.6 - Growing experience on mobile internet - [pic] Nr.7 - Issuance of 3G License - 3G Technology – 3G technology will serve as a stepping stone for higher consumption on mobile data as it offers higher speed of data transmission. The technology allows AIS to deliver the mobile internet broadband service, along with the flagship video call which cannot be served under lower technology due to its high capacity consumption. Therefore, issuing a 3G license is from upmost importance for AIS to maintain its power and strategy. At AIS, “we are committed to preparing the company for the next wave of technology trends and changing consumer lifestyles through investment in several telecommunication infrastructures. These include technologies such as fiber optic transmission, international gateways and mobile service platforms, for example, mobile banking and mobile airtime refill.” For further information about the importance of acquiring the 3G license refer to Nr.9 and Nr.10… [pic] [pic] Nr.8 - Diversification, thru Acquisitions – AIS acquaint or forms subsidiaries for several reasons, such as value added service. Following list provides information about AIS’s subsidiaries: 1800 MHz GSM Network Digital Phone Co., Ltd. (DPC) (98.55% owned by AIS) operates under a 16-year BTO contract with CAT Telecom Public Company Limited (CAT), which started in 1997 and will end in 2013. Under the terms of this contract, DPC is required to pay revenue share to CAT, currently at the rate of 25% of its revenue from its mobile phone operation. DPC also has a network roaming agreement with AIS to enable nationwide service to both the GSM 1800 customers as well as the GSM 900 customers in order to provide better network service quality for both networks     International Direct Dialing Service  AIN GlobalComm Co., Ltd. (AIN) (99.99% owned by AIS) was awarded a 20-year license from the National Telecommunications Commission (NTC), which started from 2006 and will end in 2026. This license allows the service to operate its own international gateway facility. Under the license terms, AIN is required to pay an annual regulatory fee of 6% of its revenues; 2% of which is an Annual License Fee and the balance 4% is a Universal Service Obligation (USO) fee.   Data Communications Service   Super Broadband Network Co., Ltd. (SBN) (99.99% owned by AIS) provides data service on a fixed line facility. In 2007, SBN acquired a license from the NTC to be a network operator and a telecom service operator. SBN offered various services that include an internet (ISP), international & national internet gateway, International Private Leased Circuit (IPLC), Internet Protocol Virtual Private Network (IP VPN), a voice over IP, and an IP television.   Advanced Datanetwork Communications Co., Ltd. (ADC) (51% owned by DPC) is a joint venture between DPC and TOT Corporation Public Company Limited (TOT) with the contract period ended in 2022. ADC provides data communication via a telephone line network and an optical fiber service which offer varied services that include web hosting, data back up and integrated internet services.   Call Center Service   Advanced Contact Center Co., Ltd. (ACC) (99.99% owned by AIS) provides a call center service that is focused on customer care. The call center is the key differentiator for AIS as its services have evolved from simple after-sales and customer service maintenance to providing a much more proactive and customer-oriented approach, as well as promoting new marketing campaigns and suggesting new products and services to both existing and new customers. ACC also creates job opportunities for the sight-impaired and hearing-impaired community by employing them as members of the call center staff and providing them with the same full employment benefits as all regular employees.   Sales and Distribution of Handsets, SIM cards and Refill cards   Wireless Device Supply Co., Ltd. (WDS) (99.99% owned by AIS) sells and distributes handsets, SIM cards and refill cards. The handset sales and distribution business is not only specifically for AIS customers but all other potential customers through general dealers. SIM cards and refill cards are distributed through over 350 authorized Telewiz shops, 280 Telewiz Express outlets and more than 10,000 general and sub-dealers nationwide.   Mobile From Advance Co., Ltd. (MFA) (99.99% owned by AIS) is currently not in operation. Mobile Payment Service  Advanced MPAY Co., Ltd. (AMP) (99.99% owned by AIS) received a license from the Bank of Thailand (BOT) to provide payment service based on the electronic cash card under the brand “mPAY”. mPAY enables AIS’s customers to conveniently and securely engage in various financial transactions via     mobile phone. The services cover many daily-life transactions including online shopping, bill payment, recharge of prepaid phone credit as well as payment for goods and services.   Advanced Magic Card Co., Ltd. (AMC) (99.99% owned by AIS) renders cash card retail operation. Others  Advanced Wireless Network Co., Ltd. (AWN) (99.99% owned by AIS) Renders telecommunication services, network and computer system services. AWN receives a license type-I to be an internet service provider (ISP) and license type-III from the NTC. AWN has 2 subsidiaries, Mobile Broadband Business Co., Ltd. and Advanced Mobile Broadband Co., Ltd. Nr.9 - Data service growth (wireless broadband) - "Online" society to promote data revenue growth– The increasingly advanced features of cheaper smart phones and the surge of inexpensive netbooks are also driving wireless user penetration and a growing demand for data usage technology and tools. In fact, increasing numbers of consumers are opting for mobile connectivity because fixed line network expansion is developing relatively slowly, resulting in limited availability of high speed internet, even in urban areas. In many countries where consumers are well-adopted to wireless data connectivity, the data revenue contribution is as high as 20-30%. The number of internet users is another factor reflecting the potential market size of data users to be tapped by wireless broadband technology. In 2009, the number of internet users in Thailand was estimated to be 13.5 million, a 20% growth from 2008, representing 21% out of a population of 65 million people. The double digit growth of users reflects consumer demand for internet connectivity and its potential growth once the wireless technology is available as another choice for broadband access. Today, a large number of internet users still rely on narrow-band connection access at work or school, while broadband access is also limited because of an under-developed infrastructure; therefore, wireless broadband, especially through a 3G platform, can fulfill this important gap. [pic] [pic] Nr.10 - Substitution of fix-line internet in suburban and outskirt residential areas – AIS plans to exploit wireless technologies to capture data business opportunities in a response to the global trend and fill the gap in the digital divide. In particular, AIS aims to target not only the urban community but also rural areas where fixed-line investment is relatively expensive and slower to implement. In the long term, AIS expects to realize benefits from utilizing advantages on both existing 900MHz and future 2,100MHz (radio) frequencies to provide the best services for their customers. This approach is considered to be more investment efficient as 900MHz provides wider network coverage and, so, is extremely important for Thailand’s rural market. However, investment and business models will depend on the terms and conditions of each contract/license as 900MHz is currently based on existing build-transfer-operate (BTO) contracts, while 2100MHz will be newly licensed. [pic] Nr.11 - Increased postpaid subscriptions – Postpaid subscriptions result in higher average revenue per user (ARPU). In a well developed country, the ratio of postpaid to prepaid subscribers differs at least by 180°, but in emerging countries like Thailand, majority of the population tends rather to pay first, than getting in a difficult situation if they don’t have money left by the end of a month… Threats - Political, Economical, Social, and Technological: Nr.12 - Mobile Number portability regulation – In 2009, the NTC issued regulations requiring telecom operators to provide number portability (MNP) service which allow a subscriber of one service operator to move to another service provider without the need to change the phone number. To implement this service, mobile operators need to made additional investment to adjust their mobile network as well as jointly invest in a central clearing house to handle the service. With MNP, customer relation management undoubtedly becomes an essential tool in preventive strategy to cope with the risk of losing subscribers. The new law of mobile number portability imposes a threat to AIS as switching costs for consumers sink, while operating costs for operators (AIS, TrueMove, DTAC) rise. AIS responds by increasing retention programs in pipeline to enhance customer privileges and strengthening brand loyalty, and by increasing marketing spending. Nr.13 - Political uncertainty and instability (e.g. red shirts 2010) – No further support necessary… Nr.14 - Unresolved regulatory power - Slow development of governmental bodies (NTC - National telecommunications commission; NBTC - National broadcasting telecommunications commission) – In conclusion, 2.1 GHz licensing timeframe is ambiguous mainly due to the unresolved regulatory power. In AIS’s view, there are the following possibilities. 1. The court permits the continuation of the 3G licensing (auction) process, despite the future (not yet established) controlling and responsible regulatory body, NBTC. 2. The court prohibits NTC to continue with the implementation and drops the 3G licensing progress; the key milestone is the establishment of NBTC. The FAA will need to be passed and mark the beginning selection process of the new NBTC, of which the timeframe remains unknown. Nr.15 - 3G License delay – [pic] Nr.16 - High bargaining power because of lower switching cost – No additional support necessary. Nr.17 - Long-lasting delays implementing 3G --> TOT to have the sole rights and responsibility over the 1900 MHz frequency… - Mobile Virtual network Operators (MVNO): On 26 August 2008, the Cabinet approved TOT to have the sole rights and responsibility over the 1900 MHz frequency. As a network provider, TOT will operate 3G service on 1900 MHz frequency under two main strategies including doing its own marketing campaigns and allowing opportunity to interested private companies to rent this network for its own marketing purpose. Currently there are five operators who are interested in becoming MVNO. AIS, as the leading service provider with over 28 million customers, views the changes in consumers’ behavior and market situations as a business opportunity to introduce innovative products and services including price plan, Value Added Service (VAS), smart solution, mobile internet and mPAY; those help customers better manage their daily life. Nr.18 - Change in consumers' behavior - Service providers also offer wider choices of products and services – No additional support necessary. Nr.19 - 3G license & prior spectrum re-auction: The economics of conversion value including the current unknown "upfront fee" - Handling of prior BTO – Question on spectrum re-auction after all BTO contracts expire. This clause is stated in the current draft FAA which is under parliamentary process. Furthermore, the technical issue of equal reallocation of existing spectrums. Nr.20 - Voice revenues stagnate – Voice service which is the main income source and contributes over 80% of total telecom revenue is expected remain stable. However, the potential change in interconnection rate could adversely affect the pricing level of the current voice market. Nr.21 - Aggressive price plans of competition to capture mobile voice and emerging mobile broadband market share (but their capacity is limited) – No additional support necessary. 2. Competitive Profile Matrix (CPM): 2. – CPM [pic] 2.2.3 – Support –CPM Critical success Factors – Competitive Profile Matrix (CPM): Nr.1 - Market share (by revenue) – [pic] [pic] [pic] Nr.2 - Free Cash Flow (FCF) – • AIS: [pic] • DTAC: [pic] • TrueMove: [pic] Nr.3 - Subscriber Net Additions yoy (Advertising; Promotion & Privileges effectiveness) – • AIS: [pic] • DTAC: [pic] [pic] • TrueMove: [pic] Nr.4 - Average revenue per user (ARPU) incl. interconnection revenue (blended) – • AIS: [pic] [pic] • DTAC: [pic] [pic] • TrueMove: [pic] Nr.5 - Network Coverage & Quality – [pic] • Network Coverage & Quality: Low frequency bands provide better network quality, while high frequency bands provide better network speeds… [pic] • DTAC Cell Sites(Network coverage & capacity DTAC) Nr.6 - Customer Service (relationship to customers) – (more information in the next point, Nr.7) Nr.7 - Brand Reputation – [pic][pic] [pic] • The battle of DTAC in Thailand's mobile phone operator market. Strategic question How can DTAC gain higher market share by focusing on customers in Bangkok' Reference: http://www.eki.mdh.se/uppsatser/foretagsekonomi/VT2008-FEK-D-2010.pdf Nr.8 - Value Added Services – Nr.9 - Research and Development (activity & implementation) – Nr.10 - Corporate Social Responsibilities – Nr.11 - Competitive flexibility for future investments (e.g. 3G) – Nr.12 - Interconnection & Revenue Sharing Handling – [pic] [pic] [pic] 3. Internal Audit: 1. Internal Factors & Internal Factor Evaluation Matrix (IFE-Matrix): 1. – IFE-Matrix [pic][pic] 2. – Support –IFE (Strengths/Weaknesses: Marketing, Finance/Accounting, Production/Operations, R&D, Management Information Systems (MIS)) Strengths – Finance/Accounting Production/Operations, R&D, and MIS: Nr.1 - AIS is confident it can manage the optimization of both frequencies to best serve their customers. In 2009, the telecom regulator, NTC (National Telecommunications Commission), issued a 3G Information Memorandum (IM) to seek feedback from interested parties at a public hearing. Terms and conditions were stipulated in the IM, so that stakeholders could understand the preliminary 3G business landscape in the near future. AIS had already prepared operationally and financially for the 3G licensing. AIS emphasized its readiness on 3G service by expanding the Super 3G network using HSPA technology on 900 MHz frequency at Hua Hin, following the successful launch in areas such as Bangkok Metropolis, Chiang Mai and Chonburi provinces. AIS was the first to launch HSPA service to consumers in Thailand, that allowed AIS gaining first experience on the consumers’ usage pattern and behavior which differ among the various areas. [pic] Nr.2 - In 2009, AIS developed several new services and experiences to respond to new lifestyles to actually meet the customer’s requirement, such as: • 24h reliable service • AIS Call Center entertainment direct line *888 • Speech Recognition 1185 • GSM e-Service • “Delivering customers experience throughout their lifecycle”, by analyzing an in-depth detail throughout customer lifecycle. To ensure that all requirements of each group of customers in each period during lifecycle are met, AIS focuses on responding to their requirements since the first date, such as, help finding the best pricing package that suits their usage behavior during the first 6 months, providing suitable promotion when it comes to expiry, providing mobile handset replacement in substitution for a lost one, monitoring and warning upon abnormal high usage or delivering special privileges as a birthday gift, etc. • Uplifting service standard at Telewiz shops (key exclusive dealer of AIS products and services), by training staffs, implementing technical systems and assessing performance in 4 aspects: service operation, knowledge & skill test, customer satisfaction survey, and number of complaints and positive feedback. • “AIS plus” brand (since 2009) privileges include: Daily specialty of AIS customer, AIS Reward Program, Exclusive Privilege for Serenade customers… Nr.3 - …AIS ranked number 6 from 10 (Forbes Magazine) of the leading companies in Thailand, in which AIS was the only Thai mobile operator that received a ranking in this survey among 2,000 companies worldwide. The ranking was conducted according to its total sales, net profit, total assets and market capitalization. Nr.4 - AIS was awarded as the top Thai company by FinanceAsia magazine in area of best managed company, best investor relations, and most committed to a strong dividend policy. The Company was also ranked number 2 for the best corporate governance. Nr.5 - No additional support necessary. Nr.6 - AIS together with Population and Community Development built “Children Development Center Sarn Rak 4 at Nakorn Ratchasrima” with the budget of Baht 4 million and gave to the Sub-district Administrative Organization (SAO), Jakkarach sub-district, Nakorn Ratchasrima as the community center for take care and teaching of pre-school children. Further, AIS introduced Thailand’s first Wind Power Radio Base Station at Baan Ampur, Chonburi to help cope with the global warming with a clean energy. [pic] [pic] [pic] Nr.7 - e.g. AIS launched Facebook and Twitter Alert on mobile service for the first time in Thailand in respond to the demand of modern generation. Customers are able to quickly and conveniently receive and post real-time messages via SMS. Nr.8 - Commitment to generate wealth to shareholders [pic] Nr.9 - No additional support necessary. Nr.10 - Business.com magazine conducted a survey on Urban Brand Loyalty and AIS was voted top for mobile phone brand among consumers. Nr.11 - AIS introduced the latest technology "Connect Talk" for the first time in Thailand that customers can have their own number in other countries so that people who live abroad can connect to such number at local rate. Nr.12 -[pic] [pic] [pic] [pic] [pic] [pic] [pic] [pic] Weaknesses – Finance/Accounting Production/Operations, R&D, and MIS: Nr.14 - Dividend policy: min. 40% of net profit – May lead to complications for “necessary” investments on short notice… Nr.15 - Shareholder Structure – No additional support necessary. Nr.16 - AIS is required to build and raise capital for investment in the cellular network and transfer the network ownership to TOT – Assets under the agreements for operation must be increased throughout the contract-period, by a certain investments, while they also need to be “depreciated” by the end of the concession-contract (2015) with TOT. It though, can’t be viewed as a major weakness compared to the competition (DTAC and TrueMove), as these companies operate under similar condition (BTO-contracts, concession-) contracts with CAT… 4. AIS - Final word Q409 yielded some very strong results for Thailand's top three mobile operators, a trend that continued into Q110, at least for market leaders AIS and DTAC. Third-ranked True Move had not published its Q110 results at the time of writing, but all the indications were that it, too, had performed well in the first quarter of the year. Although we have had to estimate the performances of both Hutchison Telecom and Thai Mobile pending the transfer of Hutchison's stake in its Thai business to its partner CAT Telecom and the relaunch of Thai Mobile by incumbent TOT, it is clear that greater pricing competition, the canny bundling of smartphones to both prepaid and postpaid customers alike and efforts to make more effective use of spectrum in order to facilitate better and faster mobile value-added services (mVAS) have all paid dividends, helping subscriber numbers to continue grow, while slowing the mobile ARPU decline. A new regulatory body - governing both the telecommunications and media markets - is to be established later this year, it is reported. This comes after more than a decade of similar announcements, but it is more important than ever that this body be established as it will be charged with licensing 3G and WiMAX service providers as well as converting 'private operators' concessions into full-service licenses, a long, overdue move that will finally bring real competition to the Thai market. 5. References • NTC (National Telecomm. Commission) http://www.ntc.or.th/TTID/ • Stock Exchange Thailand – Homepage http://www.set.or.th • AIS-Homepage http://www.ais.co.th/main/en/index.html • DTAC-Homepage http://www.dtac.co.th/english/index.html • Telenor (DTAC)-Homepage http://www.telenor.com • TrueMove-Homepage http://www.truemove.com/en/index.rails • True Corp.-Homepage http://www2.truecorp.co.th/en/home_flash.aspx • CAT-Homepage http://www.cattelecom.com/site/en/main.php • Hutchison (Hutch) – Homepage http://www.hutch.co.th/index_en.htm • Hutchison CAT Wireless MultiMedia Ltd. ( Note: “Corporate Customer” only in Thai version: http://www.hutch.co.th/business/index_en.htm • Wikipedia: Mobile – Cellular Communications (Group 12): http://cpe.kmutt.ac.th/wiki/index.php/Mobile_:_Cellular_Communications_%28Group_12%29