UFONE

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Assignment topic

is:

Price War in Pakistan Cellular Industry

Submitted By: Name: Muhammad Aftab Ahmad

Course: MBA (Banking & Finance)

Roll No: 1632-211004

Study Batch: 14-SU

Session: Su-2011-2014

Submitted To: Sir Shahrukh Salman

PIMSAT INSTITUTE OF HIGHER EDUCATION

http://www.studymode.com/essays/Price-War-In-Pakistan-Cellular-Industry-184795.html

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Research Background and

Organization:

Telecom Infrastructure and Economic Development

of Pakistan:

Role of telecommunication sector is indispensable for economic development.

Telecommunication infrastructural investment can lead to economic growth in

several ways: transaction cost of data collection, placing and receiving orders

have greatly reduced due to the availability of advanced telecommunication

infrastructure. It has put a positive effect on the output of individual firms and

in aggregate overall economy.

In the beginning of 1960 researchers started to study the effects of

telecommunication infrastructure on economic output. There are a lot of studies

[Jip (1963), Riaz (1997), Norton (1980)] that empirically prove the positive

relation between telecommunication infrastructures and economic growth

Communication tools such as internet and telephone are progressively more

important for the economic development. No one can ignore the importance of

internet for the society. The internet provides all types of information related to

the business, health, education, culture. This study is organized as follows:

Review of literature.

Description of research methodology.

Interpretation of regression results and analysis.

Questionnaire to Ufone employees.

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Literature Review

Here I take review of few important studies:

Jipp (1963) used following model to see the relationship between teledensity

and GDP in less developed and industrially advanced countries.

Dit= α Yβit (1) or LnDit = α + β lnYit (2) Where Dit = telephone density in DEL/100 Yit = GDP for the country in year

Results revealed positive and significant relationship between GDP per capita and

telephone density indicators.

Alleman (2003), developed following two models to show the relationship

between telephone penetration and GDP in 9 countries of Southern Africa.

ln (GDP)= α +β ln (DEL-1) (1) ln (DEL)= α +β ln (GDP) (2)

By applying the data they proved positive relationship between

telecommunication investment/ telephone penetration and GDP in both cases.

Riaz Ahmad (1997, a, b), studied the effect of telecom sector on economic

development in Malaysia and found that advancement in telecommunication

infrastructure resulted in overall economic development of the country.

Hardy (1980) studied 15 developed and 45 developing countries for the

period from 1960-73 to find the impact of telecommunication on economic

growth. He concluded the positive and significant impact of telephone per capita

(teledensity) on economic growth while, other communication tool like radio

showed its insignificant contribution.

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Nortan (1992) empirically investigated the role of telecommunication

infrastructure in the economic development for the period from 1957-1977. He

took the data of 47 countries. He concluded the positive and significant

relationship of telecommunication infrastructure with economic development. He

further argued that telecommunication infrastructure reduces the transaction costs

since output rises.

Roller and Waverman (2001) empirically studied that investment in

telecom sector fosters growth, estimating a structural model that endogenizes

telecom investment, a data from 21 OECD countries over a 20 year period. They

showed that there exists a significant positive relation between investment in

telecom sector and economic growth.

Ding and Haynes (2004) investigated the role of telecommunication

infrastructure on long run economic growth in China for a sample of 29 regions

for the period from 1986-2002. They used following model:

GRTH it =ά + ή + β1 GRTH i, t-1 + β2 Ln (GDP) i, t-1 + β3 POP it + β4 INVit+ β5TELit+ ut Where GRTH it = annual growth rate of real GDP per capita GRTH i, t-1 = lagged growth rate of real GDP per capita GDP i, t-1 = lagged real GDP per capita POP = population growth rate INV =share of fixed investment in GDP TEL =teledensity

Results revealed the positive and significant impact of teledensity and the

percentage of telecom sector investment in GDP on economic growth. While the

impact of population was negative on economic growth. Results reveal

investment in telecommunication sector is most successful in those countries

which are in the process of development.

Datta and Agarwal (2004) empirically investigated the role of telecom

infrastructure on economic growth. In his study he took the data of 22 OECD

countries, considered14 years period from 1980-1992. They proved the positive

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and significant impact of telecommunication sector on economic growth.

Colin (2003) stressed the importance of ICT and explained existing barriers

to universal access. He was in view that market inefficiency and misappropriation

of fund for investment in telecommunication sector negatively effect the

development of telecom sector. He concluded that liberalization of telecom sector

can have more positive effect on economic growth.

Easterly and Rebelo (1993) investigated that investment in

telecommunication is significantly related with economic growth.

Research Methodology

This work is based upon the model of Alleman et. al (2003) who studied

the relationship between telephone penetration and GDP in 9 countries of South

Africa. Here it is used in modified form. For this study time series data have been

taken for the period from 1968-2007.The functional equation is based on

theoretical formulation, developed earlier in this section. The equation is given in

log –linear form as:

GDP = β0+ β1 LTEL + β2 L IT+ ut Where GDP = Gross Domestic Product TEL = Teledensity IT = Investment in Telecommunication Sector ut = the stochastic disturbance term, capturing left over effects, having zero mean and constant variance. It is hypothesized that ∂L GDP / ∂ L δ1 L TEL > 0 ∂L GDP / ∂ L δ2 L IT > 0

Gross Domestic Product (GDP) is taken as dependent variable. To show

the values of economic development GDP was taken. It is expected from the past

studies that both independent variables will have positive relation with GDP.

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Teledensity (TEL) is an independent variable. It is calculated as the total

number of fixed telephone and mobile phones per population (in millions) of the

country.

Investment in Telecommunication Sector (IT) is also taken as an

independent variable. Investment in transport and communication sector is taken

as a proxy for investment in telecommunication sector. Data for all dependent

and independent variables have been taken from various issues of Economic

Survey of Pakistan (1987-88, 2001-02, 2003-04, 2005-06,2007-08)

Regression Results and Analysis

This section deals with the results and interpretation of the impact of telecom

infrastructure on economic development. Various summary statistics, correlation

table, results of Augmented Dickey Fuller (ADF) test and regression results are

given below:

RESULTS OF ADF TEST

Variables Level/Difference Without trend Conclusion

GDP

TEL

IT

Level

First difference

Level

First difference

Level

First difference

0.49328

-5.6218

1.1287

-13.2337

0.37109

-5.5738

I(1)

I(1)

I(1)

95% critical value for ADF Statistics for all variables: -2.9422(without trend)

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Ufone Introduction:

Ufone GSM is a Pakistani GSM cellular service provider. It is one of six

GSM Mobile companies in Pakistan and is a subsidiary of Pakistan

Telecommunication Company. It is currently owned by United Arab

Emirates based Etisalat.

PTML is a wholly owned subsidiary of PTCL. Established to operate

cellular telephony. The company commenced its operations, under the

brand name of Ufone from Islamabad on January 29 2001.

During the year, as a consequence of PTCL’s privatization, 26% of its

shares were acquired by Emirates Telecommunication Corporation

(Etisalat). Being part of PTCL, the management of Ufone has also been

handed over to Etisalat. During the year July 2005 to June 2006, further

expanded its coverage and has added new cities and highways. Ufone has

network coverage in more than 750 cities, towns and across all major

highways of the country.

During the year Ufone completed the network expansion of Phase 4 in

existing as well as in new cities and towns which amounted to more than

US Dollar 170 million. As a result the asset base of the Company has

increased from Rs. 20 billion to Rs. 30 billion.

Since its inception, Ufone has focused on the people of Pakistan,

empowering them with the most relevant communication modes and

services that enable them to do a lot more than just talk, at a price that

suits them the most. Along with the claim of lowest call rates, clear sound

and best network, during the year Ufone adopted the policy of simplified

tariffs with no hidden charges, which resulted in positive impacts on the

usage trends of subscribers as well as total subscriber base.

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Ufone introduce 3G in 2014 and currently caters for international roaming

to more than 288 live operators in more than 160 countries. Ufone also

offers Pakistan’s largest GPRS & BlackBerry Roaming coverage available

with more than 200 Live Operators across 122 countries. More recently,

Ufone has become a focused and intensive leader in VAS, constantly

introducing innovative services, which have been the first of their kind in

the Pakistani cellular industry.

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QUESTIONAIRE FOR UFONE

ORGANIZATION: Introduction:

I am students of PIMSAT conducting a research on "Price War in Pakistan

Cellular Industry". I selected UFONE to conduct the survey. I require your humble

cooperation to fill the questionnaire handed over to you. I assure you confidentiality of your identity for it will be solely used for class project and will not be disclosed. The information will

be carefully disposed after use to ensure confidentiality.

If you would like to contact us for any information or inquiries please don't hesitate to contact me AFTAB AHMAD, +92-323-4939489, [email protected]

Basic Instructions:

- Please fill in all the questions don’t leave blank answers.

- If any question is not clear please leave it and ask our researchers to help you with it.

Name (optional):____________________

Age: ________________

Gender: ________

Designation (post):_____________

Experience at the hospital (in terms of year):_____________

Department: ___________

1.

Your tasks are predefined and outlines like a job description given to

you?

Strongly agree Agree Not Sure Disagree Strongly disagree

2. Every Employee performs their own duties and no one else has to do it?



3.

You frequently have to work over shifts or cover shifts of absent other

employee?




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8.

You are satisfied with your

salary?


9.

You are doing job elsewhere because of

insufficient salary?


10

.

Employees are given various incentives like

transport, bonuses?


11

. Your seniors are supportive and encouraging?


12

. You are appreciated for good job done by you.


13

. Your subordinates are very supportive?

Strongly agree Agree Not Sure Disagree Strongly disagree 14. Your subordinates are efficient in doing the assign task? Strongly agree Agree Not Sure Disagree Strongly disagree 15. The hospital management supports you against quarrelling attendants of patients? Strongly agree Agree Not Sure Disagree Strongly disagree

4. Some employees in your department have high absenteeism rate?


5.

Your weekly and monthly hours of duty are

fixed?


6.

Long working hours affecting your house life

badly?


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16.

People are very

cooperative?


17. Coworkers support you?


18. The rates of Progress is high?


Q#19: What factor of your company differentiates your network from other

networks?

Ans: Brand name and NDC “0333”

Q#20: Why you do so much promotion & how you compensate these costs&

how much this effort attracts potential customers?

Ans: Promotion is made to attract and retain customers. Our marketing campaigns are usually

prepaid and preplanned so we do not have to pay extra cost in terms of launching ads on

television. Most of the potential customers are attracted by our promotional efforts.

Q#21: In which area within your Organization you think need more

improvement?

Ans: Coverage, signal strength, Quality management, Culture and discipline.

Q#22: If you fall in the category of ‘STAR’ then what is the reason behind

this? why you are not an ideal ‘CASH COW’?

Ans: Our some package falls in the category of stars and some in the category of cash cows but

still because our main target market is youth which is increasing day by day we’ve to make

investments on promotion to attract them so we are somehow stars.

Q#23: How much Profit you generate from international customers or how

much it beneficial for you?

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Ans: We do not have international customers. Customers with international roaming are not

considered to be international customers because these are local customers visiting outside

Pakistan for a temporary period of time

Q#24: What types of annual, long run & strategic plans/goals you have?

Ans: Maintaining prominent market presence as well as quality & availability of network. Sales

force automation, U shops and retailer outreach programs and to become a market leader in

terms of MNP.

Q#25: Sometimes your network held, what is the reason behind that and

what kind of planning you’ve to resolve this problem?

Ans: Power shortage is the biggest problem and we have power generators for that.

Q#26: Which Micro & Macro environmental factors influence you the most?

Ans: Employee’s moral, Fragility in operations, Lack of strong corporate culture, Law& order

situation, Political instability, PTA’s Regulations.

Q#27: Don’t you think that your some packages have some social

drawbacks?

Ans: No, I don’t think so. Even if there are some social drawbacks, the target market accepts

these packages because these packages are created for market so it’s up to people how they use

these packages either in negative or positive way.

Q#28: Where do you see yourself after 5 years or where you want to see

yourself after 5 years?

Ans: Somewhere at the same place with a little improvement in market share.

Q#29: Any other thing you want to tell us or any Comment?

Ans: As you know that our slogan is “It’s all about U!!” we always try harder to fulfill our

slogan requirement by putting our customers’ wants on top. There is always room for

improvement so in future as well we’ll try to maintain our slogan by satisfying our customer

well.

Thank you

UFONE

Documents