IUSACell – Case Study

-Group: B- IIM – Ahmedabad- 6th Feb 2010

Participants: Hemendra, Dhruv, Suvadip

Background Mexican Telecom Market About IUSACell

Vision & Strategy Current Environment & Challenges Product Market Mix Measure of Success Vulnerabilities Observed Functional Strategy Gaps Business Plan Going Forward Strategy

Discussion Outlines

Mexico Market Scenario

Monopolistic Market till 1989 - Telemex being the only LL operator

IUSACELL Started Cellular Services in 1989Telecom Regulatory Body, SCT created 9 cellular business regions & Infused competition with 2 licenses per region.

6 Year exclusive rights for public domestic and international long distance services with Telemex

Inadequate & unreliable services of TelemexLow mobile penetration in 1993 – 0.4%High customer dissat with Landline services

Delivery time 6 months & aboveHigh call drop – 14.5%Call success in first attempt– 82.7%

About IUSACELL

1939Founded by Alego

Peralta

1989Incorporated as a wholly

owned subsidiary to market cellular services in

Mexico City area

1957Entered

Telecommunication

Area of Operation4 out of 9 regions

Current market share ranges from

40% to 70%

Service OfferingBasic Telephony , Value Added Service , Roaming

& Telephonic Accessories

199323% stake bought

by Bell Atlantic

Current Vision & Strategy

• Vision: - To be an established player in Telecom services & solutions with a high degree of customer satisfaction.

• Strategy: - Aggressive acquisition thru reducing upfront cost- Addressing the base thru flexible pricing package- Targeting high value new subscribers thru alternative educational tools

- Creating differentiation thru enhanced Value Added Services.- Customer Service Restructuring- Regional Expansion thru acquisitions & JVs

Current Environment & Challenges (SWOT)

STRENGTH WEAKNESS1. Presence in 4 most lucurative markets in Mexcio 1. Poor understanding of Customers requirements2. Region 9- Central Hub for routing calls to the US 2. Targeting Wrong set of customers 3. Highest mobile customer base 3. Decline of APRU and HIGH in Churn4. Wide offering of VAS/ VOICE 4. High on customer dissat (billing & service)5. International partners-Bell Atlantic 5. Dependacy on single operator as a carrier

6. High cost of customer acquisition

OPPORTUNITY THREAT1. Low Mobile penetration 1. Advance Technology2. Growing Economy 2. Competition entry3.Opportunity in NLD/ ILD and BroadBand services 3. Telmex's capacity to cross subsidised mobile business4. Bad Landline services 4. Regulatory environment.5. Digitization of Network 5. Political Uncertainty

Basic

Services

VAS

Roaming

Services

Handset &

Accessories

Current Market Mix

Services

Business &

Personal Users

Professional

SEC C&D

users

Customers

Huge

Untapped

Potential

Duo

Competition

High ARPU /

MoUs as

compared to

US.

Market Scenarios

Subs presence

in 4 key regions

(Central &

North)

Coverage in the

most dense &

lucrative

markets.

Strategic

connectivity with

US markets.

•

Market Presence

0%15%30%45% 38% 37%

25%42% 36%

22%

Socio-Economic Class

IUSACELL Telcel

18-25 Years 26-35 Years 36-49 years > 50 Years0%5%

10%15%20%25%30%35%40%

20%

34%38%

8%

26%

38%

28%

8%

Age-Wise Classification

IUSACELL Telcel

62% of the customers are from Middle & Lower Segment.

Telcel’s customer composition is better than IUSACELL.

Telcel has higher proportion of younger users.

IUSACELL has higher proportion of middle-aged customers.

Customer Profiles

Customer Profiles

0%10%20%30%40% 37%

13%20%

4%11%

35%

12%28%

7% 11%

Occupation-Wise Classifi-cation

IUSACELL Telcel

Business Personal Both0%5%

10%15%20%25%30%35%40%45%

33%27%

39%33%

25%

42%

Usage-Wise Classification

IUSACELL Telcel

Higher proportion of Senior Management users are with Telcel.

Strategy Gaps

• Customer Segment- Customer Profile: ‘Many Free Riders’

- 74% of churn customers stop using cellular services.- 62% of the customers belong to SEC C&D.- 40% customer used less than 100 min- Lower proportion of youth segment.

• Product Strategy- VAS, not appealing customer?- Sub. Rev less than 5%- Poor usage except msg. center- Telephone & Accessories:- Contributing about 2.5 % of rev but attracting risk profile customers.

Strategy Gaps• Distribution Strategy

- Despite CSC relatively lower proportion of SEC A & B but resulting in high cost

- CR (Corp Rep): 75 people but relatively lower proportion of high value customer like President / Director, relatively to Telcel

• Customer Care Management- 35 % of churn to Telcel due to customer service issues- Lack of Retention activities

Vulnerabilities Observed Aggressive Customer Acquisition

- High Cost- Poor targeting of Customer

High Customer Churn- Poor Network Quality- Billing issues- No customer connect

Expanding new business segments with core segment is under strain

Segmented approach for customers

Best Fit Plans For:

- Light Users: 0-300- Medium Users: 301-800- Heavy Users: > 800

Segmented Approach:

- Roamers (Inroamers): Roam Mexico @ IUSA Cell

- VAS: Bulk Minutes/ High Rentals (Built in VAS)

- Data Plans & NLD / ILD- Local Voice Calls- Regionalized Segmentation

- Light Users: 0-300- Medium Users: 301-800- Heavy Users: > 800

Mass Advertising:

- Low ARPU users (Prepaid)- Convenience User

(Advance Rental Scheme)- Productivity (Solutions +

Voice)

Direct Marketing:

- Churn from Competition - Retention Plans- Bill Payment – Loyalty

Points

MoU Usage Pattern

Winback & Loyality

LifeStyle

Strategy….Going Forward

Segmented approach for customers

Best Fit Plans For:

- Light Users: 0-300- Medium Users: 301-800- Heavy Users: > 800

Segmented Approach:

- Roamers (Inroamers): Roam Mexico @ IUSA Cell

- VAS: Bulk Minutes/ High Rentals (Built in VAS)

- Data Plans & NLD / ILD- Local Voice Calls- Regionalized Segmentation

- Light Users: 0-300- Medium Users: 301-800- Heavy Users: > 800

Mass Advertising:

- Low ARPU users (Prepaid)- Convenience User

(Advance Rental Scheme)- Productivity (Solutions +

Voice)

Direct Marketing:

- Churn from Competition - Retention Plans- Bill Payment – Loyalty

Points

MoU Usage Pattern

Winback & Loyality

LifeStyle

Strategy….Going Forward

Measure of Success

• Growth in Revenue Market share• Enhance Revenue Per Subscriber (ARPU)• Increase in Operating Income

Microsoft Office Excel 97-2003 Worksheet

Business Plan for IUSACELL

• Based on status quo

Microsoft Office Excel Worksheet

Thanks !!!

Target Market: Product & Market Mix

Segment Product / Services Value Proposition

Category A – Life Style / Productivity

VAS , Data, Voice Solutions – 20%

Solution / Differential Service Experience

Corporate / HNI / VIP

Voice & VAS – 30% Customized / VAS / Retention

CMS: Category C Segmented Base Voice – 45%

Usage Based Segments

About IUSACELL

Subsidiary of Grupo IUSA- A diversified group- into Industrial Production/ Construction, Telecom, Energy Supply

Established – October 1989Area of Operation - 4 out of 9 regionsCurrent market share - 40% to 64% (in different regions)1993-94 : 43% stake bought by BELL ATLANTICService offering: Basic service, VAS, Roaming and Telephones

accessories.