Maxis Essay

IntroductionMaxis communication theory Berhad is a prima(p) mobile ph peerless service provider in Malaysia. Maxis Communications Berhad was established in the aboriginal 1990s and commenced mobile tele talks operation in August 1995. It was then listed under the first board in Kuala Lumpur Stock Exchange (KLSE). At present Maxis Communication Berhad is the biggest telecommunication provider in Malaysia. The c exclusivelyer-out has primitive subscribers at 13.95 million as of December 2010.Maxis Communications Berhad, through its secondary, Maxis Berhad, engages in the pro plenty of mobile, fixed line, and internationalistic tele communication theory services in Malaysia. It also provides mesh and broadband services and wireless multimedia related services, as well as owns, maintains, builds, and kneads radio facilities and associated switches. The company was founded in 1995 and is based in Kuala Lumpur, Malaysia. Maxis Communications Berhad is a subsidiary of Binariang GSM Sdn Bhd.It uses the dialling prefix identifier of 012, 017 and 0142. In 2002, Maxis purchased TimeCell, a rival mobile service provider, from Time dotcom Berhad. Prior to the purchase, Maxis sallyed retrieve numbers beginning with 012, and TimeCell 017. Now, subscribers dope choose between the cardinal. Maxis provide a variety of mobile communication products and services. They offer prepaid call syllabuss, monthly subscription plans, global roaming, MMS, WAP ( all oer both GSM and GPRS), Residential Fixed Line services, Broadband Inter shed light on plans, and as of early 2005, 3G services to both prepaid and post-paid subscription customers. Maxis Broadband make consumer can winder internet access in outdoor or indoor. It can go online at speed oer 15 times faster than traditional dial up and do to a greater extent, much more over the internet.ProfileMaxis Berhad, with its consolidated subsidiaries (together, Maxis), is the take mobile communications service provider in Malaysia.Maxis were granted licences to operate a nationwide GSM900 mobile network, a domestic fixed network and an international gateway in 1993. It commenced its mobile operations in August 1995 and launched its fixed line and international gateway operations in early 1996.Since its establishment, Maxis has been providing a full suite of services on multiple platforms to fulfil the telecommunications needs of psyche consumers, SMEs and big(p) corporations in Malaysia.Maxis mobile service is offered on a post-paid basis under the Maxis nonice and via a prepaid format under the Hotlink brand. The use of these two distinct brands, underpinned by synergistic values, has enabled Maxis to larn its prepaid business sector successfully part maintaining growth in its post-paid segment.Maxis has also pioneered and led the Malayan commercialise in delivering innovative mobile products and services. It was the first to launch 3G services in Malaysia known as Maxis3G in July 2005, a nd in September 2006, it became among the worlds first to use HSDPA, a high-speed progress of its 3G network, to provide wireless broadband services. It was the first operator to bring the BlackBerry and Apple iPhone smart phones to Malaysia. The company in April 2009 unveiled the first commercial NFC-powered service in Malaysia.Maxis provide enhanced post-paid packages to corporal and SME customers, based on its highly successful consumer post-paid plans. These plans be custom-made to meet the needs of enterprises, curiously improved communications within and beyond their compound. Maxis international gateway services include termination of concern into Malaysia from international telecommunications companies, supporting Maxis own outbound international direct dial (IDD) traffic, collecting international cover traffic and bandwidth leasing services. Maxis presently maintain bilateralconnections with more than 95 carriers in 38 countries and let capital of the United States investments in a number of submarine cable systems to carry its international phonate and data traffic.Maxis substantial growth and strong track record of bringing innovation, excellent customer experience and value to stakeholders has won the company numerous awards over the years. The latest awards includeMalaysias Top Ten Companies Ranked 1 Asias 200 Most Admired Companies, The Wall Street Journal Asia, 2006 Asian Mobile actor of the Year Asian Mobile News Award, 2007 Fourth Most Valuable grease in Malaysia Brand Finance, 2008 and 2009 Service Provider of the Year (Malaysia) freezing & Sullivan, 2008 Mobile Data Service Provider of the Year (Malaysia) Frost & Sullivan, 2009 Recipient of the Asia Pacific Super Excellent Brand Award Asia Pacific International Brands Summit Malaysia, 2009Maxis vision is to bring advanced communications services to enrich its customers lives and businesses, in a manner that is simple and in the flesh(predicate)ised, by efficiently and crea tively harnessing leading edge technology, and delivering a brand of service experience that is reliable and enchanting. abridgment of Market StructureMarket structure classifies some of the divulge traits of a securities industry, includingNumber of theatresSimilarity of the products sellEase of entry into and exit from the marketplace place.Comparison of Market StructuresMarket StructureNo. of SellersTypes of Product incoming ConditionsExamples thoroughgoing(a) argumentLargeHomogeneousVery EasySmall crops, International commodity markets noncompetitive ambitionLargeDifferentiatedEasyBoutiques, Restaurants, motelsOligopolyFewUsually differentiated but sometimes identicalDifficultCar Making, Tobacco Products, OilMonopolyOneUniqueExtremely difficultPublic utilitiesMAXIStelecommunication FIRM.Few Competitors like DIGI, CELCOM, TUNETALK etc.. compliance into Telecommunication is Difficult.It requires a queen-size amount of capital.Perfect contestPerfect Competition Market has very large number of small firms, which acts independently rather co-coordinating decisions centrally. Perfect Competition is Price takers due to Huge Competition. Perfect Competition chiefly deals with Homogenous Products.Homogenous mean Goods from one firm cannot be differentiated from other. equivalence Maxis with Perfect CompetitionPerfect CompetitionMaxis1. It has very large Number of firms.2. Entry Requirement is very easy.3. Very less amount of Capital is enough.1. It has few Competitors in the Market likeDIGI, CELCOM, OKTEL etc..2. Entry Requirement is Difficult.3. It requires large amount of Capital.On Comparing Maxis with Perfect Competition market structure. Maxis do not start under Perfect Competition.Monopolistic CompetitionMonopolistic Competition Firm has many Small Sellers.They involves in differentiated Product.It is free from Price Competition.It has Easy Entry as well as Exit.Comparing Maxis with Monopolistic CompetitionMonopolistic CompetitionMaxis1. It has ma ny small sellers.2. Entry requirement is easy.3. Its free from Price Competition.1. It has a few Competitors in the Market.2. Entry requirement is difficult.3. It has contention in charge with their competitor.On comparing Maxis with Monopolistic Competition market structure. Maxis do not come under Monopolistic Competition. MonopolyMonopoly is a Single Seller in the market.It deals with unique product.Entry Barriers is very difficult.Comparing Maxis with MonopolyMonopolyMaxis1. It has Single Seller in the market (free from Competitors). 1. Ithas its Competitors in the market.On comparing Maxis with Monopoly market structure. Maxis do not come under Monopoly.OligopolyIt has very few seller (which is dominated by a few large firms).. It deals with Homogenous as well as Differentiated Product.Entry Barrier is difficult.Comparing Maxis with OligopolyOligopolyMaxis1. It has few Sellers in the market.2. Entry Barrier is difficult.3. It requires a large amount of Capital.1. Maxis have fe w Competitors in the Market.2. Entry obstacle is difficult.3. It requires the large amount of Capital.On Comparing Maxis with Oligopoly market structure. We came to know that Maxis is an Oligopoly.Behaviour of MaxisThe behaviour of Maxis can be identified by considering the number and size distribution of firms (market sh atomic number 18 in terms of subscribers and revenue) in the market the cessation to which products be differentiated how easy it is for other firms to enter the market and the extent to which firms atomic number 18 combine or diversified. However, as in that location are only 3 large cellular communication firms (Maxis, Digi and Celcom), exclusive market shares are used to measure market power.The basic conditions faced by the cellular communication firms areDemand conditionsPrice is relatively elastic as seen by huge swings in net additionsleadership quarters to quarters as different cellular communication firms took on expenditure-leadership. reservoir MALAYSIA TELECOMMUNICATIONS motif Q3 2011Where the actions and the outcomes of these actions are interdependent among several agents and this interdependence is mutually recognized. Neoclassical economics assume perfectly demythologised agents, perfect training and zero transaction costs under perfect aspiration. However, due to limited cognitive capability and/or imperfect information, bounded intelligent agents experience limits in formulating and solving complex problems and in processing (receiving, storing, retrieving, transmitting) information. Routine standard procedures or heuristic approaches to decision-making are employed by bounded rational agents. The sum of the market shares of the n-largest firms.Maxis subscriber net addition dropped to a dismal 120,000 users in 3Q10 before counter to 274,000 users in 4Q10. The relevant substitutes are provided by fixed-line phone companys for local city calls (fixed-line rate of RM0.04/ consequence versus cellular rate of RM0 .15/minute) and Voice-over-Internet-Protocol (VoIP) providers for IDD calls. However, these are not of major concerns currently as the mobile services are cannibalizing/substituting fixed-line services piece the VoIP providers are competing in a value-conscious segment with an inferior product (i.e. poorer voice quality).Supply conditionsThe cellular technology adopted is the European GSM standards. However, due to constant technology changes, both Maxis and Celcom have launched 3G services earlier while Digi had its 2.75G (EDGE) services previously and recently added 3G services in order to be able to argue with both Maxis and Celcom. The market structure analysis summary of Maxis is as followsData Observations and/or MeasurementAnalysis/CommentNo. of Firms3Regulated OligopolyMarket ShareCellular intentness subscriber market share (overall)Cellular industry revenue market share (overall)Subscriber/ tax market shareCelcom 33% & 36.0%Digi 25% & 25.3%Maxis 41% & 42.1%There is no si ngle dominant firm.However, Maxis is the leading firm in both revenue & subscriber market share, followed by Celcom and Digi. ProductDifferen-tiationProduct specialism based on calling plans and set structure to appeal to different customer segments. Value-added services (ring-tones, etc.) are quite homogenously provided by 3rd party provider. Minimal product differentiation as airtime is airtime and VAS table of contents are widely available across all 3 firms.Entry barriersLicensing and regulationsHeavy capital investments & stripped efficient of scale required First-mover advantages Network & Lock-in effectsHigh entry barriers mainly due to presidential term regulationsDue to frequent technology changes, incumbents do incur substantial ongoing capital expenditures and face the dangers of beingness leapfrogged by potential entrants Numbers portability not implemented yet to counter the lock-in effects of personalized phone numbers. Exit barriersHuge sunk costsBulk of capital investments are asset specific to phone company operations. Source MALAYSIA TELECOMMUNICATIONS REPORT Q3 2011Price competitionUsing game theoretic model, Telcos are assumed to provide a homogenous product and have sufficient capacity to serve the market demand. It is a non-cooperative game as there werent any enforceable agreements between them as they compete in the marketplace. It is a repeated one-shot simultaneous game as they were driven by quarterly exploit accountable to shareholders. As such(prenominal), they would decide on their secure strategies independently and aware of rivals prices in the market while forming certain expectations about rivals pricing strategies. Actions available are Maintain Price and excision Price.Payoffs are bedded in order of preference ( high number is preferred). The most preferred outcome by firms is where one undercuts price while its competitors maintains price, leading to market share gain at the expense of its rivals. When all firms maintain prices, there is no change in market-share and profitability. When all firms undercut prices, market-share remains with reduced profitability. The strategic-form representation in a simplified 2-player model is as follows Telco2Telco1Maintain PriceUndercut PriceMaintain Price3,31,4Undercut Price4,12,2Example of Game TheorySolving for Nash equilibrium, both players have Undercut Price as theirdominant dodging resulting in a Pareto-inefficient Dominant- Strategy-Equilibrium at (2,2). This is a repeated Prisoners Dilemma game and these interactions are witnessed in the current market through an escalating price-war resulting in reduced Average-Revenue-Per-User (ARPU).Example of Starter pack price wars involving Maxis and DigiLaunch DateMaxis Hotlink 017Digi Beyond PrepaidSep 8, 2005RM20 to RM10Oct 27, 2005RM18 to RM9.90Nov 25, 2005RM10 to RM8.80Dec 10, 2005RM9.90 to RM8.50Average Revenue per UserSource Articles from 2009 to 2011, Press release 2009 to 2011, Maxis reports 20 09 to 2011, Digi Reports 2009 to 2011, Celcom Reports 2009 to 2011. If this game is repeated infinitely, collusive behaviour through the use of Tit-For-Tat strategy may result in non-competitive/monopolistic-like pricing which reduces public welfare. Though Maxis had a higher ARPU previously according to the to a higher place data, Maxis always need to be proactive in monitoring firms behaviour to detect possible still collusion through price-signaling.Product differentiationThe above game theoretic analysis suggests that if the price-war continues,Maxis and the other two firms will eventually be forced to price at their peripheral costs similar to a perfectly competitive firm. Therefore, it is rational to expect Maxis or the similar firms to soften the intensity of the price competition through product differentiation and customer segmentation. It is important to note that traditional microeconomic theory treats all consumers as homogenous. In reality, this is not the case and these firms are thus offering different calling plans, pricing structures (ON-Net/Off-Net), pre-bundled minutes and services, etc.Due to bounded rationality and heterogeneous consumption, consumers find it difficult to make toss-to head cost-benefits comparisons and thus make the products appear to be somewhat non-homogenous and not fully substitutable for one another.These firms are also competing and differentiating through demand stimulation (shifting the demand curve) by organizing SMS contests, sponsoring shows like Malaysian perfection which encourage SMS voting, etc. where the SMS charges are priced much higher than normal SMS charges in order to drive higher non-voice revenue and profitability as illustrated by Maxis, Celcom and Digis 2010 announcements below.Source DiGi AGM 2011 IRwebsiteOne has to take note that the marginal costs are or so negligible relative to the huge fixed-cost investments required. ON-Net refers to calls within the same providers network. OFF-Net refers to calls made from one provider to another providers network. Decision-making based on imperfect information (uncertainty about future, costly to acquire perfect information) and/or limited cognitive capability.Through product differentiation, all(prenominal) differentiated product is addressing its relevant market instead of addressing a large homogenous market, thus allowing Telcos to raise price above marginal cost (and reduce consumers surplus) without losing its entire market share. Thus, product differentiation can soften price competition and create a degree of marketpower. We find from the above data that Maxis currently have the highest market power and leading company with the highest revenue.However, these showcase of firms balance between the reductions in welfare caused by product differentiation pricing above marginal costs versus the increased in welfare by allowing disparate consumers preferences to be closely met. Each firm also find proper ethical behavi our on the part of the Telcos to ensure that public welfare is protected in SMS contests, SMS voting, etc. to prevent undesirable negative consumption externalities such as encouraging the habit of gambling, excessive spending, etc.AdvertisingMaxis often use advertizement to create brand and/or product differentiation in order to soften the price competition. To the extent that persuasive advertising create customer loyalty through perceived differentiation over essentially identical products, they create market power in the sense that consumers may be willing to settle more for preferred brands, thus allowing these type of firms to raise prices above marginal costs.Following the previous assumptions with payoffs stratified in order of preference (higher number is preferred), the most preferred outcome by firms is where one advertises while its competitors get int, leading to market share and profitability gain at the expense of its rivals. When all firms dont advertise, there is no change in market-share and profitability. When all firms advertise, market-share remains with reduced profitability. Maxis uses similar strategy by advertising less gaining market share and more profit at expense of its rivals which we can see below Advertising Expense of 2005 by Malaysian cellular communications industryCommunications SectorMobile Line ServicesRM(million)Communications SectorMobile Interactive ServicesRM(million) make senseRM(million)Celcom52.3Celcom6.658.9DiGi37.7DiGi5.142.8Maxis47.8Maxis1.949.7Source www.mcmc.gov.my, Reports by Maxis, Celcom and Digi 2005 Customer SatisfactionSource SKMM Consumer Survey 2007 at www.mcmc.gov.myThe Customer-Satisfaction-Index (CSI) for the three firms are almost similar. We find that Maxis performance is satisfactory in the market and can be considered as a leading oligopoly firm among the three.ConclusionMaxis is one of the Malaysian oligopoly cellular communications industry with high entry barriers, mainly due to governm ent licensing restrictions and high exit barriers due to huge capital investments (sunk costs). However, frequent technology changes could potentially allow leapfrogging by competitors or potential entrants. The market share is with intense price-competition as the market gets more saturated. Non-price competitionis also intense, mainly through advertising. However, as price-competition escalates, other cellular communication industries are pricing closer to marginal costs as evidenced by the steady drop in ARPU over the past few years. Consumer satisfaction is high for Maxis though consumers are seeking for even lower communications charges and greater geographic coverage.Maxis is currently doing a good job and should continue to push ahead with its plan to allow greater customer choice. Maxis should also monitor for deceptive advertising, SMS contests & voting, etc. and also possible silent collusive behaviour through price-signaling. It is also recommended that Maxis conducts be nchmarking against regional and international cellular communication industries on key areas like profitability and/or returns on equity to determine fair-returns, service quality, technical efficiency, etc. to determine the success of its policies in future._______Referenceswww.theedgedaily.comDigi gains market share, The Edge Daily, 5 Dec 2005www.osk188.comwww.digi.com.mywww.maxis.com.mywww.celcom.com.myMaxis every quarter 2009 ReportMaxis Quarterly 2010 ReportDiGi 2009 ReportDiGi 2010 ReportCelcom Annual Report 2010Maxis Annual Report 2010DiGi Annual Report 2010www.mcmc.gov.mywww.mobileworld.com.my/ Profit_expense_2005www.boardroomlimited.comDixit, A and Skeath, S (2004) Games of Strategy (2nd Ed), W.W.Nortonwww.wikipedia.orgRosenberg, E.A. and Clements, M. Evolving market structure, conduct and policy in local telecommunications, The National Regulatory investigate Institute. 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