Report on 2Degrees Mobile Limited, New Zealand
Two Degrees Mobile Limited is one of the leading full service telecommunication providers of New Zealand. It was launched in 2009. The company has earned the trust of its customers by providing a world class customer service along with high quality product and service offerings. In order to cope up with the increasing demand from customers for value offerings in the present competitive landscape, the company needs to reinvent itself with substantial investment in technology to facilitate innovative product and service offerings and the digital inclusion of the common citizens of New Zealand.
Two Degrees Mobile Limited is one of the leading full service telecommunication providers of New Zealand. Launched in 2009, the company has invested nearly $550 million in order to build a world class network and it has 1/3rd of the entire population covered by 4G LTE service. It has a 24/7 customer service that enhances the customers’ experience over a multitude of services. Its broadband service is recently made available to the customers. On 28th July, 2015, the company has launched its first customer plans in the broadband segment (2degrees, 2015). The company also entered into a strategic partnership with Sky NEON to provide customers unlimited access to content for the initial period of six months. The report presents a thorough analysis of the industrial landscape of the telecommunication industry and reflects various strengths, weaknesses, opportunities and threats to 2degrees with respect to its competitors.
TWO DEGREES MARKET OFFERINGS
2degrees also offers specially customized innovative mobile and fixed network solutions designed to suit a particular business. Some of the largest clients of 2degrees include District Health Boards (DHBs), national retailers and tertiary providers. The tailor-made enterprise solutions include cloud, voice, data and mobile products. Recently, 2degrees received the accolade – Canstar Blue’s 2016 “Most Satisfied Broadband Customer” award (2degrees, 2016). It is the only company to have been awarded a 5 star rating in any of the categories and emerged as the crowd’s favorite measured over the categories – value for money, customer service, network performance, flexibility of contract, clarity of contract terms, and bill clarity.
It also provides the lowest casual Australian roaming rates in the market in over 100 nations. The mobile network is compatible with GSM-900, UMTS-2100 and UMTS-900 mobiles.
Diversification strategies such as the Re:Mobile or the Mobile Phone Recycling Scheme are also key revenue and growth drivers for the telecom operator and it has been accredited by the Ministry of Environment, New Zealand.
INDUSTRY OVERVIEW & COMPETITOR ANALYSIS
The telecommunication industry in New Zealand has seen an increased investment of NZ$1.5 billion in capital in 2014-15 (Saunders, Bajaj, Minogue, & Wise, 2015). Significant capital investment has been in infrastructure development of 4G LTE, Rural Broadband Initiative (RBI) and Ultra-Fast Broadband (UFB). However, the telecommunications industry in New Zealand has been shrinking in the recent past. As per the IDC forecast, the telecom industry revenue is expected to shrink with a CAGR (Compounded Annual Growth Rate) of 2.3% over the next five years of forecasted period. 2014 has been a year of fierce rivalry among key players in the industry over acquiring new customers through cheaper rates and delivering more value to them. Evidently, this intense competition has forced telecom operators to differentiate their products or come up with more innovative offerings while fighting for retaining existing customer base.
Another key factor that has contributed significantly towards reshaping the industrial landscape of the telecom industry in New Zealand is proactive government regulations. New Zealand is one of the leaders in terms of e-governance (Euromonitor International, 2015). Ministry of Business, Innovation & Employment holds responsibility of maintaining a regulatory environment for the ICT (Information and Communications Technology) sector in New Zealand (Ministry of Business, Innovation & Employment, 2016). Various regulations governing the telecommunication sector restrict the operations and product offerings of the key players in this sector.
The overall cost of various services offered in the telecom industry in New Zealand has steadily decreased since 2011 (Ministry of Business, Innovation & Employment, 2015). In fact, the trend slowly picked up since 1999. This is actually in contradiction with the rise in cost of other core sectors. The telecommunications sector is presently the cheapest compared to electricity and oil sectors. The telecommunication industry in New Zealand is fiercely competitive with multiple players trying to differentiate their product and service offerings to gain the share of the pie. 2degrees (LTE, GSM and UMTS), Vodafone New Zealand (LTE, GSM, UMTS and HSDPA), and Spark New Zealand (LTE, UMTS and HSDPA) are the major competitors in this segment.
Vodafone New Zealand offers carious customized broadband and mobile network services to its clients. ADSL and advanced VDSL packages are major broadband connections offered along with ultra-fast optical fibre connections. Apart from these, it also provides broadband connections to smart TVs by the product line Vodafone TV in high definition (HD). Promotional offers include “Fantastic Friday” movie options along with sport, music and other prepaid deals.
Spark NZ on the other hand, is a telecom player with broadband and mobile services. Spotify and Spotify premium are their music player that is offered with various music value packs. It also offers Ultra-Fast Fibre broadband services.
These companies are threat to 2degrees as they offer a similar range of solutions targeted to the same value segment.
STATISTICAL DATA & MARKET TRENDS
Key statistical figures and trends include tripling of the total fixed broadband connections from 0.48 million in 2005 to 1.59 million in 2014 (Ministry of Business, Innovation & Employment, 2015). New Zealand has a broadband penetration rate of 31.2 connections per 100 population units, earning the country a rank of 15 out of the 34 OECD countries. In 2014, there were approximately 46,000 fibre optic connections in New Zealand. The country also experienced a significant rise in broadband speed in terms of both browsing and download speed. This rise in speed is governed by upgrading the existing broadband network and customers slowly migrating towards high speed fiber optic connections. As per the MBIE report, the country has mobile connections amounting to 5.3 million as on 30th June, 2014 with a population penetration rate of 118%. With the advent of 4G technology, nearly 50% of the population have already migrated towards 4G LTE connections as mobile data usage grows within the customer base.
Figure 1: Residential (household) broadband connections by data cap (2012-14)
Figure 2: Business and government broadband connections by data cap (2012-14)
To keep up with the increasing speed requirements, Crown Fibre Holdings has taken a new initiative called Ultra-Fast Broadband (UFB) that delivers broadband over a speed of 25 Mbps. This mammoth project is expected to reshape the industrial structure of the telecommunications industry in New Zealand. Crown Fibre Holdings has entered into partnerships with Northpower Limited, Enable Services Limited, Chorus, and Waikato Networks Limited to roll out the project countrywide.
CFH has also partnered with the Internet Service Providers Association of New Zealand (ISPANZ) and the Telecommunications Carriers' Forum (TCF) to design the Ultra-Fast Broadband standards, products and services in accordance with the customer demands and the market trends. In addition to facilitating the household customers and businesses, this Ultra-Fast Broadband has lot of positive benefits in the health, education and other government sectors in New Zealand.
ENVIRONMENTAL SCANNING – PEST ANALYSIS
The political and legal, economic, socio-cultural and technological environments define the overall environment in which industry players operate. The environment surrounding the telecommunication industry in New Zealand is as follows –
Political-Legal Environment: The government and the telecom regulatory authority, the Ministry of Business, Innovation & Employment, are enterprise friendly. Although government regulations are there to put restrictions on the telecom networks and broadband service providers over tariffs. Also by government legislation, Internet Service Providers (ISPs) or Internet Content Hosts (ICHs) will be prosecuted for posting objectionable contents or contents that are unsuitable for minors. The censorship guidelines mostly apply to films and videotapes, computer games and static images that are shared over the internet. The states and territories have incorporated some changes but nonetheless the law is expected to protect minors from cyber-crimes, hoaxes and spams. There are different set of laws and regulations that apply to contents hosted within New Zealand and contents hosted outside of New Zealand. Government regulations are also there to preserve the privacy and safety factors for all telecom service subscribers, be it mobile or broadband. Digital literacy campaigns hosted by the regulatory authorities in collaboration with telecom partners have made a lot of progress in making minors and common people aware of the threats and govern meaningful usage of telecommunication products and services. Internet Service Providers Association of New Zealand (ISPANZ) and the Telecommunications Carriers' Forum (TCF) also play major roles in defining the regulatory environment for the telecommunication sector.
The Ministry of Business, Innovation & Employment is the key regulatory body in the telecom sector in New Zealand. The legislations (Ministry of Business, Innovation & Employment, 2016) that govern the industry are as follows:
Telecommunications Act 2001 and its associated regulations
Telecommunications (Interception Capability and Security) Act 2013
Electronic Transactions Act 2002
Unsolicited Electronic Messages Act 2007
Radiocommunications Act 1989 and its associated regulations
Postal Services Act 1998 and its associated regulations
The ministry governs the telecommunication policies with a focus on developing reliable, responsive and efficient infrastructure, competitive and productive enterprises, and a world-class business environment.
Economic Environment: The economic environment that affects the telecommunication industry includes various macroeconomic factors such as inflation, sustainable economic growth, interest rate cuts, disposable income of customers, and future growth prospects of the overall industry. In New Zealand, the intensive competition in the telecom industry has forced companies to deliver more value at a cheaper rate. Customers have come up with increasing demands over time and this has resulted in telecommunication industry becoming the cheapest compared to other sectors. Rival players have often gone into price wars, discounts, coupons, rate cuts and various value offerings to retain the existing customer base, let alone acquiring the new ones. With the growth in corporate sector, the economic environment for the high speed broadband sector is expected to become more favorable though. Growing number of households turning towards digital literacy and seeking access to internet are some of the growth prospects in the industry along with the increasing expenditure on smartphones and mobile internet packs.
Sociocultural Environment: The population has become more attention-seekers in terms of social engagement. People all over the globe are following social media platforms and engaging in blogs, microblogs, sharing of images and video clips and online discussions. The virtual get-togetherness of the social networking sites are successful in attracting a large section of the society. Needless to say, people spend a huge chunk of their daily time spent on mobiles in social media engagement. The impact of Facebook, Tweeter, Pinterest, Instagram and chat messengers have been enormous in driving growth for the internet and broadband segment. People are enthusiastically opting for high volume data plans along with high speed to facilitate their daily engagement activities. All of these help creating a favorable atmosphere for the telecom sector and present major potential growth opportunities.
Technological Environment: The telecom sector is largely dependent on technology. Technological excellence also provides the opportunity for network providers to differentiate their product or service offerings. Due to high level of incumbent rivalry within the industry, most telecom companies are looking to achieve continuous growth through operational efficiency and economies of scale. Advanced technologies and network protocols offer cost-cutting solutions to the companies and ensure sustainable competitive advantage. New phone models also highlight the need of faster network services and foster growth in the industry.
SWOT ANALYSIS OF 2DEGREES
The principal strength and the differentiating factor of Two Degrees Mobile Limited is its 24x7 dedicated customer service. 2degrees received the accolade – Canstar Blue’s 2016 “Most Satisfied Broadband Customer” award (2degrees, 2016). It is the only company to have been awarded a 5 star rating in any of the categories and emerged as the crowd’s favorite measured over the categories – value for money, customer service, network performance, flexibility of contract, clarity of contract terms, and bill clarity.
It has also been able to provide differentiated offerings to its target base. Enterprise solutions, which are corporate-friendly, tailor-made to suit the business needs of individual customers and ensure high customer satisfaction, are the major strengths of the firm.
Diversification strategies such as the Re:Mobile or the Mobile Phone Recycling Scheme are also key revenue and growth drivers for the telecom operator. Accreditation by the Ministry of Environment also strengthens the scheme’s potential.
The telecommunication industry is fiercely competitive with multiple players trying to differentiate their product and service offerings to gain the share of the pie. 2degrees need to diversify the business propositions to appeal more to the target market.
The intense rivalry and less opportunities for product differentiation implies substantial amount of promotional investments are needed to generate awareness within people. Discounts, coupons, rate cuts and other value-added free offerings are required to entice the customers, who are in general extremely price-sensitive. This, in a way, increase the marketing expenditure of the firm.
High technological, research and development investments may allow 2degrees to come up with innovative and cost-effective solutions which suit the economic conditions of the market far better. The value-segment requires more value at a cheaper rate and only a substantial investment can generate major cost-cutting techniques through economies of scale.
The company has recently stepped into the broadband service and within 1 year of operation it has been able to generate customer satisfaction. This needs to be leveraged to increase the market share over other competitors such as Vodafone, Spark and Callplus in the broadband segment.
Higher operating costs for maintaining a high-quality service is one of the major threats.
External threats would involve high competition from existing players who deliver similar offerings to the crowd such as Vodafone, Callplus and Spark. Also several economic factors such as recession, interest rate cuts, decline in consumer disposable income etc. are the key threats to 2degrees.
The legal threat of the business lies in the laws and regulations that govern the industrial structure. The telecom industry is highly regulated and all the Internet Service Providers (ISPs) and Internet Content Hosts (ICHs) face a substantial threat over posting objectionable contents or contents that are unsuitable for minors.
Cyber threats, frauds, loss of customer privacy etc. are some of the threats that deter people from engaging over the internet in a meaningful way. Lack of digital literacy, hence, can be a major threat to both the network providers and regulatory bodies.
Two Degrees Mobile Limited is one of the leaders in the telecommunication industry in New Zealand and it has acquired a significant market share since its inception. Considering the intense rivalry spanning the industry, the organization must try to differentiate its product and service offerings. Differentiations with respect to dedicated customer service can be one of the major stepping stone for the firm, as it has already managed to earn the trust of the customers in the broadband segment. This competitive advantage over its competitors is sustainable in the long run. The company must look forward to strengthening its human resources, investing in high skilled training and percolating the vision statement of the organization within its people.
In terms of product differentiation, the company may look forward to diversification strategies to venture into other aspects of the telecom business. With the help of advanced technology and substantial R&D investment, it can generate cost-effective and innovative solutions that not only cater to the household customers but also enterprises seeking tailor-made high quality offerings that will add value to their business processes.
2degrees need to look forward to the principles of digital inclusion. Presently in New Zealand, a significantly large section of the society does not have access to the internet. This implies they are deprived from the advantages of being connected to various educational, social and health platforms. Lack of digital connectivity implies severe lack of economic and social participation from the deprived set. In order to narrow the divide, the internet providers such as 2degrees along with the policymakers need to boost the availability and affordability of internet for the common people of New Zealand.
Digital inclusion is about facilitating communication through online and mobile technologies as channels to improve the quality of life, the skillset possessed by the common, and to drive and promote economic wellbeing of all sections of the society.
As the internet becomes the default communication platform, the disadvantages of being offline increase. An individual’s digital engagement also depend on his/her digital literacy level, which includes embracing the potential advantages of staying connected with the rest of the world including serious concerns about security and safety. The manner in which common people engage over the internet largely depends on their skillsets and the confidence with the technology. While the internet has the potential of bridging the information asymmetry and providing a platform for real-time communication, it has certain potential adversities. Hoaxes, internet scams, viruses and various forms of cyber-crime can pose significant threats to vulnerable sections.
2degrees can tie up with regulatory authorities such as the Internet Service Providers Association of New Zealand (ISPANZ) and the Telecommunications Carriers' Forum (TCF), and come up with digital literacy campaigns for the minors, women and senior citizens, who may be reluctant to access the internet due to certain concerns. Digital kiosks can be set up with the help of policymakers that can involve these people and distribute literature to make them aware of the safety and security concerns while engaging them meaningfully on the internet. These methods will also help 2degrees to generate awareness for its products and services and gain new customers.
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