Ufone Pakistan Strategic Analysis

Date:         20 September 2014[pic 1]

To:         CEO, Ufone

From: Waqas Ahsan, GM Business Development

RE:         Strategic Analysis

In response to our discussion on 1st September I have prepared a strategic analysis of the Mobile operator business in Pakistan to assess Ufone’s competitive position in the market along with a set of recommendations for improvement. As you are aware the Pakistan cellular market has become highly competitive after Paktel/Zong, Telenor & Warid entered the market in 2005/06. Ufone is currently 3rd in the market with a market share of 19% and as Exhibit 1 demonstrates the top players are in neck-to-neck battle to win over customers.1

Ufone has made name in the industry focusing its marketing and products around the youth and prepaid line of products. This has been a successful strategy as youth represent more than 50% of the target market but has also resulted in a missed opportunity in the other demographics.2 The current fast lifestyle has turned mobile connectivity into a commodity instead of a luxury and people demand 24/7 connectivity with the increase of mobile/home office and work from home trend. Increased Broadband penetration in Pakistan has also increased the demand for mobile internet and there is a great opputunity for Ufone with the 3G market now open in Pakistan. However competition for the customer is strong with a churn rate of roughly 18-20% of the total industry base. Out of this rate, approximately 55-60% of subscribers churn before the 180 day break even period.3 For more information on factors affecting the industry refer to Exhibit 2.

Exhibit 3 shows an analysis of the dynamics within the industry. The mobile industry is highly competitive with low Average revenue per user (ARPU) and low margins. In this capital intensive market high volumes are the only way to ensure operating profits. The customer is highly informed and with the introduction of Mobile Number Portability (MNP) cost of switching is low. The market is highly price sensitive with the customer brand loyalty at an all-time low. The only way to keep the customer engaged is to provide superior service at a competitive pricing. The cellular industry has also taken a hit from the rapid increase of social media and smart phones in the market. SMS service was once a major source of revenue but has now been served a severe blow by smart phone messaging applications and social media services. The suppliers are also a major expense for the telco industry as we are highly dependent on them for managed services which are a specialized field for each supplier.

Ufone has historically competed in the market by playing on its strengths. Exhibit 4 showcases Ufones core competencies. Ufone has spent 14 years building consumer confidence and visibility of its “U” brand. The “U” brand has built a subconscious affiliation with Youth in the mind of the customer. Innovation and making the first move is a part of Ufones culture. Ufone has always been the first to introduce new features and services to the customer. 14 years in the industry has also given Ufone a well-trained and experienced staff that associates with the market and can respond well to its challenges.