Mobilink Assignment

MOBILINK: PRICING UNDER
COMPETITION
Assignment# 3
Muhammad Usman Mursaleen

F2022273001
Q#1 What factors have led to Mobilink’s success in the cellular market in 2005?
Ans:
First to provide GSM Technology:
Mobilink were the first cellular provider to offer 100% GSM technology in the country when
earlier entrants were using older technologies. Modern technology, wide network and focused
marketing led Mobilink success despite being a late entrant.
Expanding of Mobile Phone Industry:
Cellular customers in Pakistan had changed in much the same way as the market had evolved in
the developed world. By 2005, however, the mobile phone industry had started to penetrate
the middle classes rapidly. Most of the growth was expected to come from individual customers
as more intense competition and consequent lowered prices would allow affordability to lower
socio-economic classes as well. So, Mobilink took advantage of that and target individual
customers (Prepaid) rather than corporate clients (Postpaid). That was one of the main reasons
that led to Mobilink success in 2005.
Massive Growth Programme:
After studying the market for a while, Mobilink initiated a massive growth programme in 2003
and hundreds of millions of dollars were invested in state-of-the-art network expansion. That
was one of the main reasons that led to Mobilink success. Mobilink was betting on aggressive
expansion of the market where mobile phones will be used by the masses. Hence, management
talent from leading universities and well-known fast moving consumer goods companies were
hired and provided a culture of excellence. All of these efforts resulted in Mobilink taking the
lion’s share of market expansion in the coming years and by early 2005, it had obtained a
commanding 63% market share. Mobilink’s brands, Indigo in the post-paid segment and Jazz in
the prepaid segment, dominated the market in their respective segments. Its network covered
275 cities which represented about 85% of the urban Pakistani population.
Low Churn Rate:
Secondly, In Pakistan, a large majority of subscribers were prepaid customers and hence churn
rates were high. Mobilink, however, estimated its churn rate to be around 12% per annum in
2005. Similarly, Mobilink’s customer acquisition cost was low as prepaid customers were not
provided any handset subsidy.
Q#2 Why are the cellular prices so complex and volatile?
Ans:
In 2005, competition in the cellular industry was heating up. Everyone wanted to grab the
maximum market share. Due to this, the prices of cellular market were so complex and
witnessed many price wars. The following are the reasons for complex and volatile cellular
prices,
High cost of customer acquisition:
One reason for this was the relatively high cost of customer acquisition coupled with high churn
rates experienced by most players. This led most companies to closely monitor the life-time
value of acquired customers. See (Graph 1)
Nature of costs:
The cellular industry resembled several other services industries– like airlines and hotels – in
that it coupled a high initial fixed investment with a relatively small running cost of a perishable
commodity, i.e., time. This created tremendous pressure on operators to use all of the available
airtime as well as opportunities to benefit from economies of scale.
On the other side, the pricing of cellular services was broken down to various elements
depending on whether the call was,
 On-net/ Off-net Prices:

On-net prices were lower than the off-net prices. This was due to the interconnect fee
of Rs 2 per call that was paid by the network initiating a call to that terminating it. This
interconnect price was determined by the PTA.
 Peak/Off-peak Time:
The price of a call made during this time was higher than that made during the off-peak
time. This was primarily to reduce traffic congestion, and consequent poor connectivity,
during the busy business hours.
 Local/Nationwide Call:
Following in the footsteps of landline tariffs, cellular tariffs also charged lower rates for
local calls as compared to long-distance calls within Pakistan
Q#3 What pricing option would you select? Why?
Ans:
In my opinion, they need to target low prices so that customers should strict to their services
rather then shifting to other networks which are offering low prices. Like, removing peak/Off-
peak time factor, flat rates for on-net/ off-net calls, local or nationwide calls should be charged
equally, packages like getting free minutes on XYZ charge or maintain XYZ amount of balance to
get free minutes.
Secondly, according to Mobilink survey with 350 Mobilink customers randomly selected from
the Mobilink subscriber database, Price is an important concern for the customers. As they
have a few unhappy customers who may want to switch and some of them are high ARPU ones.
So, with low prices they need to give them the reassurance that staying with Mobilink will
always get them the best value on the market. If they don’t respond quickly then this first move
will set the scene for all future moves not only for Telenor but also for Warid and it may cost
them in losing market leadership.
Graph 1
Graph 2

Mobilink Assignment

Uploaded by

Mobilink Assignment

Uploaded by

MOBILINK: PRICING UNDER

Muhammad Usman Mursaleen

First to provide GSM Technology:

Expanding of Mobile Phone Industry:

Massive Growth Programme:

Q#2 Why are the cellular prices so complex and volatile?

High cost of customer acquisition:

 On-net/ Off-net Prices:

Q#3 What pricing option would you select? Why?

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