Industry AnalysisEvery care has been taken in the preparation of this study to ensure that the information contained herein is accurate, factual and correct to the best of our knowledge,

8/14/2019 Industry AnalysisEvery care has been taken in the preparation of this study to ensure that the information contain

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CELL PHONE INDUSTRY ANALYSIS

by

Joshua Chan

Zhisui Chen

Irene Cormane

Nou Her

Renie Thomas

MGMT 182

May 12, 2006


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Table of Contents


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Table of Contents


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1

Introduction

The following report details cell phone industry analysis, which deals with cell phone

manufacturers as well as cell phone services. This analysis includes the dominant economic

characteristics, Si !orces of "ompetition #$orter%s !ive !orces of "ompetition&, driving forces

of the cell phone industry, strategic mapping of company strengths, the ease entry and eit into

the cell phone industry, and the overall industry outloo'.

Dominant Economic Indicators

1. Market Sie!

The cell phone industry is one of the fastest growths besides the (nternet. "ell phones

have gone through a huge change and its mar'et has epanded globally. Since 1))*, the cell

phone industry has increased from 2* million to about 1+2 million in wireless phone and related

devices operating in the nited States with some 162-million mobile-phone users in the nited

States alone.

The cell phone mar'et is increasing very fast with today%s ever-emerging technology and

innovation in improving cell phones. Today, society is living with advance technology and

everyone wants to 'eep pace with the new technologies. "ell phone industry is growing larger

because it has become a necessity. $arents are getting mobile phones for their teens becausethey want to communicate in case of an emergency and the wireless carriers have made it easy to

add users to their eisting plans. nd carriers are becoming successful in getting parents to

epand their plans to include their teens. This increases buyers and increases mar'et si/e

worldwide.

2. S"o#e of Com#etiti$e Ri$alr%!

The cell phone industry has become increasingly larger within the last three years as a result

of more affordable cellular phones as well as lower service costs. "ompanies are competing in

an advance technology and communication sector in which success attracts customers to buy

their products and services. The mar'et is very competitive because they offer the same products

and services, but has different physical attributes to the phones and different costs, which buyers

have choices to choose from. "ompanies want to provide the best products and services to


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attract buyers by lowering cost and improving products, which ma'es the cell phone industry

very competitive.

ere are the main factors of competitive rivalry

"ell phone cost "ustomers wants better services and products at a lower cost.

undle functions into 3ust one cell phone !or eample 4-mail, tet messaging, internet

5ew technology improvement !or eample camera phones

etter landline services

&. Sta'e in (ife C%"le!

The cell phone industry is in the Mature ife "ycle Stage, where nearly all-potential

customers are already users of the industry%s product. The cell phone industry%s growth and

profitability depends entirely on its ability to attract new customers. y increasing and

improving the cell phones and services, it will attract more potential buyers, because technology

alone will not attract buyers, instead companies want value-added services for mobile-phone

securities.

"ell $hone companies attract buyers in two ways during the Mature ife "ycle State

Service Ma'ing cell phone more affordable will attract buyers to buy more cell phones

and increase competition between companies to lower service fee.

(nnovative $hone Style The new designs and improvement in the physical appearance

of the cell phones, and more add-on features attracts customers to buy it at a higher rate.

). Numbers of Com#anies in the In*ustr%!

There are over 70 companies with only si top companies in the cell phone industry that

controls +0 percent of the mar'et. 4ven though there are emerging new companies into the

mar'et, they are relatively small. The si top companies are ran' as follow as the largest to the

smallest cell phone company

1. 8eri/on 9ireless

2. "ingular 9ireless

:. T;T 9ireless

*. Sprint 9ireless


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7. 5etel 9ireless

6. T-Mobile 9ireless

8eri/on is the number one largest company having :+.) million .S. customers. Some

companies have suffered low profitability for merging with another company, which resulted in

only four of the si companies that controls +0 percent of the mar'et. The following companies

merged resulting in only four companies< Sprint merged with 5etel, and "ingular bought

T;T.

elow are financial highlights showing how well the four cell phone service companies that

are occupying the mar'et are faring.

!inancial ighlights Sprint 8eri/on "ingular T-Mobile=evenue #2007& :*6+0.00 M 2>662.00 M 1)*:6.00 M ):66.00 M

=evenue ?rowth #1 yr& 26.*0@ 2:.00@ 27.70@ 12.10@

4mployees #2007& >),)00 *),+00 >0,:00 22,616

4mployee growth #1 yr& ::.*0@ 1:.*0@ >+.*0@ 7.10@

+. Customers!

"ell phones are attractive targets that are small, epensive, and useful. Today there are

approimately 162 million mobile-phone users in nited States alone. 9ith the list of features

and data applications available on mobile phones, which is continuing to grow and emerge< cell

phones are not only a luury but also necessity. "ell phone users use cell phones for more than

3ust tal'ing< the mobile services consumer wireless usage study found that 76 percent of

customers used their cell phones as cameras, cloc's, calendars, music players, and other non-tal'

functions. lso, most cell phone owners are between the ages of 1+ to :*. owever,

consumers% dependency on cell phones can pose a threat that force users to be victims of paying

too much for cellular phone services.

There are numerous complaints about low Auality service in the industry due to thecompetition between companies. y lowering costs for the services, the company will lose

profits and reduce their shares. "ustomers today, typically complain about the high cost for the

services of having to stay on a contract for a long time and paying an early cancellation fee.

lso, with low service line, customers rather pay higher price for better services such as

receptions.


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"ell phone companies 'now that consumers disli'e mobile-phone services. (n fact, mobile

phone services were the second lowest-ran'ed industry. Mobile companies were also the

number two sector in complaints in 2007. Many companies claim that consumers love their cell

phones and that they%re very happy with the services, which is a half truth. "onsumers complain

freAuently about dropped calls, lousy customer service and eorbitant penalties from eiting a

contract.

new option in cell phone usage has come into being, which lets subscribers 'eep their old

numbers when switching carriers. bout *> percent of all cell phone customers would switch or

consider switching cell phone service carriers 3ust to get a lower rate and better service so they

do not have to pay an average fee of B1>0 to cancel their service contract.

9ith a poll during 2007, here are some 'ey findings about consumers% response to cell phone

services and early termination fees

The fees for switching to a new cell phone company that provides lower rates and better

services discouraged :6 percent of cell phone customers from switching.

+) percent agrees that early termination fee is a penalty to discourage switching cell

phone companies.

"ell phone early termination fees costs consumers more than B*.6 billion from 2002 to

200*

*> percent of consumers would consider switching if early termination fees were

eliminated

ere are the primary conclusions regarding cell phones

"ell phone companies% early termination fees creates captive customers

The fees inhibit competition in the cell phone industry

"ustomers are well aware of the early termination fees as penalties rather than rates.

,. Te"hnolo'%-Inno$ation!

Technology and innovation are advanced every year ma'ing the industry even more competitive.

"ell phone companies that design and ma'e evolutionary upgrades are emerging into the mar'et

to be more competitive.

ere are some new technology and innovations on cell phones


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nlicensed Mobile ccess #M& will help those who have high-speed 9i-!i routers

overcome poor reception coverage in their houses or apartments. This is also a way for

mobile carriers to epand without spending a lot of money on new infrastructure. (t

enables lots of users who use handsets to wirelessly download content at broadband

speeds while traveling.

"ell phone tour guides $rovides buyers with guides of places they want to see. !or

eample. 9eaver%s and Stiller%s voices are used as narrators in Tal'ing Street that shows

a series of cell-phone tours from Manhattan to the 9orld Trade "enter. The technology

is meant to be more vivid and more eciting than boo's or live tours. Some in the

industry believe that this new technology saves time and money. lso, not all mobile-

phone tour services charge a fee for using the service.

Motorola iTunes phone is basically a hundred-song i$od shuffle built into it. This is

'illing the i$od mini because it is a value-added upgrade in which you get both the cell

phone and songs together.

5ear !ield "ommunication #5!"& technology lets wireless devices connect to other

devices nearby and transfer data, which ranges from payment information to digital

pictures. uilding cell phones with embedded 5!" chips could double when used as

debit cards or electronic (Cs. !or eample, in Dapan and Eorea, users can charge their

phones with virtual cash< by waving their cell phones near an 5!"-enabled machine to

buy anything from a soda to lunch. This means 5!" devices from different

manufacturers must be interoperable and integrated to wor' with the credit card

infrastructure and also, it reAuires wor'ing with 8isa to encourage support of the new

technology.

new launch for S'ype(n and S'ype 8oicemail are built by the same company, which

ma'es the S'ype software, and it allows internet users call one another for free anywhere

in the world. 9ith S'ype(n built into the latest version of software, it allows users to getregular phone numbers and can receive calls from landline or mobile phones without

having to pay roaming charges. sers can purchase up to three numbers in their home

country. S'ype 8oicemail allows users receive voicemail message for up to ten minutes

from any user or traditional phone. These two technologies enhance the basic free S'ype


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and gives friends, family, and colleagues not connected to the internet an inepensive and

convenient way to contact each other in their global base.

8F($ on mobile phones will help cut cell-phone bills most of all for international users

based on the assumption that if consumers are already paying for a data plan, will route

international calls over their phone%s data connection using 8F($ and can save

considerable money. Mino 9ireless offers 8F($ calls at 2.2 cents a minute to *0

countries and is the first to introduce 8F($ on mobile phones in the .S. mar'et. (t

mainly targets travelers, immigrants, and students from overseas. sing Mino,

consumers should have services from "ingular, 5etel or T-Mobile, a data plan, and an

up-to-date phone that can run Dava. The company claims to have 20,000 users since they

are launching their service in Danuary. There is a lot of competition in 8F($ as well

because cell phones carriers are interested in 8F($. 8F($ can be implemented but the

common concern about implementing 8F($ is voice Auality and the ability to provide

value-added services such as voice mail.

. /ro*u"t Chara"teristi"s!

(n the cell phone industry, the products and services are highly standardi/ed. (n the past, the

products differentiated in cell phones and services. Today, with more technology enhancement,

the products in different companies are essentially similar. Since this is a cell phone industry,there is a maimum amount of products and services that consumers can choose from. Get,

consumers do not want to purchase cell phones at a higher price value unless the companies are

able to ma'e it attractive.

Camera cell phones:

The 'ey factor consumers consider when choosing a device is their contet. $hones with the

ability to ta'e images, both still and video have captured about *0@ of the wireless phone

mar'et. ut despite the product%s popularity, customer users want higher resolution, the ability

to use storage media, and many other state of the art features found in modern digital camera.

9ith consumers% desire for high resolution digital camera, the mar'et for camera and camcorder

phones will pea' in 200>.

5owadays camera phones are the rage in mar'ets all around the globe because consumers are

attracted to the convenience of having an imaging device with them at all times. The business


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model is focused on users displaying and sending images wirelessly. s advanced :? networ's

are implemented in the coming years, the advance higher resolution camera phones will li'ewise

become very popular. There are three critical pieces to this type of phone

1. The device #phone&

2. The application #picture ta'ing&

:. The networ' #:?&

The introduction of :? networ' will accelerate the adoption of the camera phones. 9hyH

ecause the timing is right for digital imaging to become part of the cell phone industry,

especially in new cell phones and new networ's. "amera phones would not wor' with older

phones and networ's, because there are small monochrome displays and little storage, and the

speed to transmit a digital photo would ta'e a long time. Dust as important is improvement to

camera phones, new advanced third generation wireless networ' #:?& will enable the cost

effective transmission of these higher-resolution images. $urpose of migrating to :? is to enable

users to spend more time using their multimedia phones every day by en3oying the world and

'eeping in touch with their friends and families.

ere are characteristics of the :? networ' on cell phones

The :? networ's are able to transmit at :+0 E bps.

There is also improvements on the image to ::0,000 piels

(nternal storage grew so consumers could store a do/en photos on their phone

This means better pictures, better eperience, and consumers bought them I by tens of millions

of cell phones around the world.

"onsumers do not have to pay etra for the camera features< they will get the camera as part

of the phone. lthough camera phones are great to ta'e pictures, consumers use them as

wallpaper and screensavers instead of printing. This is how consumers change the way they

interact with digital technology. Today, camera phones are so popular that every cell phone

company or provider offers them. !eatures on all cell phones are similar. (f consumers were to3ust buy cell phones for their features, consumers can find a similar phone in other companies as

well. This ma'es the industry very competitive which drives companies to lower product cost

and service cost in order to bring large volumes of consumers.

lthough camera phones are very popular, one factor that ma'es consumers dissatisfied is

the picture Auality, which is limited when these images are printed or sent


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8. S"ale 0"onomies!

There are two types of economies of scale pertaining to the cell phone industry. They are the

internal and eternal economies.

i% Internal

(nternal economies of scale are economies made within a company as a result of mass

production. So as a company produces more and more products and services to consumers,

the average cost begins to fall so the companies should focus on the following si factors

technical economy when the companies use its entire means to generate revenues

and increase profitability. This includes spending a large amount of money on capital

to start the company.

Managerial economies when the company splits up managerial duties to meet

specific company goals and values. This in turns helps to complete specific tas's and

improve the company to better service consumers.

!inancial economies cell phone companies borrow lots of money to purchase capital

in order to create products for consumers.

Mar'eting economies where cell phone companies spends a lot of money to advertise

their products and services on television and in newspapers everyday to reach

consumers across nations. "ompanies resorts to mar'eting in hope of attracting more

consumers to try their products and to generate higher profits and revenue.

"ommercial economies cell phone companies order their products and supplies in

bul' at a lower rate rather than buying them separately.

=esearch and development economies the cell phone companies are continuously

developing new and advance technology cell phone to be in pace with the competitive

mar'et.

ii% E&ternal The eternal economies are made outside of the company as a result of its location. Most

cell phone companies have a corporate headAuarter that concentrates on the following to

'eep trac' of the company%s progress.

"ell phone companies have licensed franchises that operate to sell products and

services to consumers. They have a networ' that connects them to manufacturers,


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service carriers, and main corporate officer that is the bac'bone of the stores and

products it sells.

The cell phone companies wor's closely with service carriers to provide phone

service such as clear phone calls, not lost calls, and good receptions.

The companies wor' and communicate directly with manufacturers reputable for the

new phones enhancement, upgrades, and features.

. (earnin' 03#erien"e 0ffe"ts!

The ma3or complaint found in the cell phone industry was cost and services. So to improve

their service, the company has increased the training for customer service employees to 10 days a

year, and introduced a new plan to address common complaints< also tied eecutive

compensation to customer satisfaction.

There are more options that buyers can choose from, whether it be the actual phone itself or

the service plan. "ompanies are now giving customers a series of contract terms and costs as

well as giving them a sample of how their first bill will loo' li'e so they understand the contract

before signing it.

Service carrier is a very important factor to maintaining consumer satisfaction and to 'eep

consumers. 9ith that, companies are all pushing new data services for business customers to

increase new revenue sources.

14. Ca#ital Re5uirements!

The cell phone companies reAuire large capital to enter and remain in the mar'et

successfully. "ompanies reAuire capital to create products that attracts consumers and for total

assets and revenues to enlist other products and services that are featured with cell phones. "ell

phone companies wor' with manufacturers to create new technological and innovative cell

phones in the mar'et today to attract consumers. valuable capital in the cell phone industry is

the consumers because revenue and profits depends on them who buy the companies% cell

phones.

5ew products are introduced continually, technology evolves on a daily basis, and customers

are eager to become part of the future of a wireless society. This ma'es the mar'et very

competitive and large companies that have big economies of scale provide a highly automated


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service to a large number of customers, and have the financial resources reAuired in building and

maintaining a large networ' of communications devices. Smaller companies can also compete,

but only in small mar'ets or by provide specialty services.

Total capital reAuirement to start a business in selling cell phones reAuires a capital

investment between B70,000 to B)0,000, and liAuid capital reAuirement ofB*0,000 to B70,000. (n

addition, companies spend millions of dollars on developing brand name recognition, and

promoting and mar'eting their products. "ompanies also want to spread their companies out

through franchises, because more offices mean more visibility in drawing consumers in to

buying their products and services.

11. In*ustr% /rofitabilit%!

The cell phone industry will remain a competitive mar'et and will increase continuously with

a total of 1,200 wireless companies with total annual revenue of B100 billion. The profitability

of individual companies is driven mainly by their ability to develop new products, providing

better service, ma'ing their products affordable for consumers. $rofitability of companies is

achieved also by ta'ing advantage of mar'eting their products, have access to capital, and by

inAuiring the epertise to improve the cell phones.

The profitability of the cell phone industry is dependent on the volume of consumer they can

attract. The profitability of companies has increased drastically since 2002 and will continue to

increase as new cell phones are improved. Since 200*, the financial mar'ets of cell phone

companies seem to increase fast because of the new technologies and services that companies are

offering consumers, and at the same time they compete for customers. lthough there are

complaints and dissatisfaction from consumers, cell phone and the service along with it has

become a necessity which companies use as an advantage by charging consumers higher price.

s in any industry, there are declining and inclining profits. The cell phone has eperienced

a slight decline< worldwide shipments of cell phones rose 26 percent in the first Auarter of 2006

compared with the same period last year. "urrently today, the global mar'et continues to thrive

on consumers replacing older phones with new purchases, a total of 226.> million mobile

phones. !or individual company profitability, 5o'ia is listed at the top, retaining a third of the

global mar'et share and en3oying a :).6 percent growth. Motorola also had a high increase of

60.6 gains and is controlling 20.: percent of the mar'et. Samsung has shipped over 2) million


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phones and is in third place with a decrease in sale to only 1+.* percent growth. ? came fourth

for mar'et share with 6.) percent and eperienced an operating loss for the Auarter due to

mar'eting epenses and fewer sales.

The cell phone industry loo's strong and competitive between the companies and service

they provide. 4ven more as new options are in place, such as, allowing consumers to 'eep their

numbers while switching carriers.

Si& 'orces o Competition

9hen compared to the general environment, the industry environment often has a direct

effect on the firm%s strategic actions. Fur tetboo' discusses $orter%s five forces of competition

in most industries. owever, in analy/ing the "ell $hone (ndustry, not only do we cover the

five forces model which includes #1& the threat of new entry, #2& the power of suppliers, #:& the

power of buyers, #*& productKservice substitutes, and #7& the intensity of rivalry among

competitors, we are adding the sith force of another sta'eholder group I the nions.

1. Threat of Ne6 0ntrants

The cell phone industry is highly concentrated. !ollowing the recent SprintK5etel merger,

only four firms actually control +0@ of the current mar'et.

Since start-up costs for a cell phone service provider are etremely high, the threat of new

entrants is low. great sum of money must be invested to attain the economies of scale, and it is

difficult to enter the mar'et with eisting firms already operating on cost and differentiation

strategies.

2. 7ar'ainin' /o6er of Su##liers

"ell phone operators provide such high volume orders that suppliers have been cautious not

to temper with the relationship and ended up being in a low bargaining position. lready

dragging with the specter of gadget gridloc', carriers continuously see' for ever more features in

the handsets and threaten to increase the pressure on suppliers with the Lreverse e-auction.

T-Mobile is the first carrier, who has staged an online bidding war, as'ing si vendors to bid

against each other online for a contract to build cell phones for one handset segment. "hristian

Cupont, director of Teas (nstruments (nc. refers reverse e-auctions as Ldevastating for


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technology companies. e comments that this trend hinders operators and handset vendors to

build trust and 'eep companies that thrive on innovation from Lbringing value to the industry.

&. 7ar'ainin' /o6er of 7u%ers

(n ugust 2007, the !lorida $(=? 4ducation !und =eport revealed how cell phone early

termination fees hurt customers. Their research showed that half of cell phone users would

switch carriers if they did not have to pay contract termination penalties. !eeling loc'ed in a

cell, most consumers resent the B170 - B2*0 penalties per phone, should they consider changing

to another carrier for lower rate or better service.

The report also indicated that B*.6 billion have been paid in the last : years due to

penalties I that%s B2.7 billion in actual penalties and B2.1 billion in lost services from consumers

who either cannot afford the penalty or didn%t thin' it%s worth paying. This clearly suggests that

buyersKconsumers have little bargaining power in this end.

). Threat of Substitute /ro*u"ts-Ser$i"es

lot of active research and development into mobile phone technology has been underway

Fperators are upgrading their networ's to advanced wireless and other third-generation

#:?& services, many new entertainment and communications services are becoming

available, including new broadcast-type operations on spectrum formerly occupied byTelevision channels 72-6). 9ith downlin' speeds close to that of wireline CS, mobile

service can now provide music download and streaming video sharing. Services such as

MobiT8 or Duice "aster are some applications that leverage these new networ's.

Cevelopment in miniaturi/ed hard dis's and flash drives to solve the storage space issue

are already surfacing, therefore opening the possibility for phones to become portable

music libraries and players similar to an i$od.

Some cell phones already have ?$S positioning. (n the future, this may be coupled with

accelerometer positioning, to cover underground or indoor positioning. This would lead

to maps and help finding group members nearby, or identifying strangers. 9hen coupled

with camera phone, the ?$S technology may also allow users to ta'e a picture or snap

the eact location and angle at which the picture was ta'en.


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+. Intensit% of Ri$alr% amon' Com#etitors

The landscape of mobile wireless industry has changed much in recent years. ast year

perhaps is better described as the mating season for .S. phone companies

Sprint and 5etel "ommunications (nc. together created a leading carrier augmented by a

global ($ networ' that offers consumer, business, and government customers% broadband

wireless and integrated communications services.

The two companies combined as Sprint 5etel has a combined eAuity value of about B>0

million and serve over :7 million wireless customers on their networ's and 7 millions additional

customers through affiliates and partnership. The merger covers directly nearly 262 million

customers, more of .S. population than any other carrier.

little earlier, T;T (nc., formed by S" "ommunications% purchase of T;T "orp.

created the then largest wireless phone company. "ingular 9ireless won that distinction in 2007

after its ta'eover of T;T 9ireless for B*1 billion.

Mergers lead to concentrated pricing power in the hands of fewer companies. 9hen one

phone company owns another phone company, the total savings to the company through the

Lsynergies are substantial, but the potential for competition is undermined.

,. nions

Fn pril 2*, 2006, 9alt Cisney "o. announced that it has reached a deal with the ollywood

unions that will put the Lmobisode spin-off of the " hit series Lost 8ideo Ciaries bac' on

trac'. The series will air as mini-episodes on mobile phones, with distribution via 8eri/on,

Cisney%s mobile partner, by the year-end.

The Screen ctors ?uild #S?&, The Cirectors ?uild of merica #C?& and the 9riters

?uild of merica #9?& all submitted an agreement for establishing a template to ensure

compensation of future programming on new digital platforms. The agreement calls for residual

payments once the mobisode has been available for over 1: wee's on cell phones. The C?

and 9? members will get a pay residual similar to the T8 residual in their main contracts - it

wor's out to the 1.2 @ license fee for use on cell phone.

s far as actors are concerned, the contract provides an escalating minimum wage that starts

at B*27 per +-hour day, dating bac' from pril 1, and increases to B*70 in a year. Fn the day

before the epiration, the rate Auic'ly 3umps to B>7), enabling S? to bargain further from the


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higher rate. The contract will epire the same time as S?%s Television greement and

"odified asic greement, potentially giving the union more leverage. s C? president

Michael pted epressed, LThis deal mar's the first of many to come and illustrates how by

wor'ing together with producers, we will achieve agreements that are mutually beneficial. y

any measure, the cell phone industry is one huge success story of the digital age< who wouldn%t

want a piece of this rich pieH

Competitive Position o aor obile Phone anuacturers

5et (ncome

Mar'et "apital

:

:.7

*

*.7

0ri"sso

n

Siemens

Motorola

Nokia

60 >0 +0 )0


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The vertical ais represents the total amount of 5et (ncome earned by each mobile phone

ma'er.

The hori/ontal ais represents the mar'et capital each company has worldwide.

The circles represent the total assets each mobile phone ma'er has. The figure represents

financial position of each company.

Nokia 0ri"sson Motorola In*ustr%Market Ca#ital )*.06 76.+2 76.:* 1>).::M0m#lo%ees 7+,+>* 76,077 6),000 2609trl% Re$

Gro6th :%o%;

2+.70@ 17.+0@ 22.>0@ 17.)0@

Re$enue :ttm; *6.2: 20.>+ :+.>0 +1.02MGross Mar'in

:ttm;

:*.:*@ *7.>7@ :1.*+@ :>.>2@


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Motorola

Motorola is the 5o. 2 manufacturer of wireless handsets after global leader 5o'ia. fter

a previous reorgani/ation, its remaining operations have been focused in four business segments

connected home solutions< government and enterprise mobility solutions< mobile devices< and

networ's. The company generates nearly 60@ of sales through the manufacture and sales of

wireless handsets and related products.

Eey 5umbers

Com#an% T%#e $ublic #5GS4 MFT&

=is"al >ear?0n* Cecember

244+ Sales :mil.; B:6,+*:.0

1?>ear Sales Gro6th 1>.6@244+ Net In"ome :mil.; B*,7>+.0

1?>ear Net In"ome Gro6th 1)+.+@

244) 0m#lo%ees 6+,000

1?>ear 0m#lo%ee Gro6th #22.>@&

Source: Hoovers Company Recors. http://hoovers.com/motoro,a/""#$%%''*)-""/free"co"

factsheet.+htm,

Eey $eople

Chairman an* C0< 4dward D. #4d& Pander

0@/ an* C=< Cavid 9. Cevonshire

0@/ an* CT< $admasree 9arrior

S@/ an* CI< $atricia . #$atty& Morrison

S@/ an* Bire"torAGlobal Go$ernment Relations


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1)

4ricsson, a company base in Stoc'holm, Sweden, is the world%s leading ma'er of

wireless telecom infrastructure eAuipment. 4ricsson is also a top cell phone ma'er and seller

through its 3oint venture with Sony, Sony 4ricsson. The companyNs other products include

corporate networ'ing gear, cable, defense electronics, and software for mobile messaging and

commerce.

Eey 5umbers

Com#an% T%#e$ublic #5SCJ 4=("G QC=R)+.+ million
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23/40

20

#oovers&. The ?roup and its former partner, ?S oldings, are headed towards a competitive

showdown in the fuel cell and rechargeable battery mar'ets.

Samsun'

Samsung 4lectronics "o., td. is the worldNs top ma'er of dynamic random-access

memory #C=M& and other memory chips, as well as all sorts of electronic gear including "C

panels, C8C players, and cellular phones. The Eorean company%s sales in 200* have reached B>+,270.1 million #oovers&, a number that worth a big celebration.

Competitive Position o aor +ireless Service Providers


24/40

21

The vertical ais represents the total amount of 5et (ncome earned by each wireless

service provider.

The hori/ontal ais represents the mar'et capital each company has.

The circles represent the total assets each wireless service provider has. The figure

represents financial position of each company.

@erion TT 96est S#rint Ne3tel In*ustr%Market Ca#ital ):.07 101.:0 12.1> >2.)> :70.:>M0m#lo%ees 21>,000 1+),000 :),000 >),)00 +009trl% Re$ 27.10@ 7*.70@ 0.+0@ 66.70@ 2.)0@

5et (ncome

Mar'et "apital

->00 M

2

*

6

96es

t

TT

S#rint Ne3tel

@erion

20 70 +0 110


25/40

22

Gro6th :%o%;

Re$enue :ttm; >).6+ *).*7 1:.): :).2) 2:>.2*MGross Mar'in

:ttm;6*.>*@ 76.07@ 7+.2:@ 7).:*@ 77.1)@


26/40

2:

Eey 5umbers

Com#an% T%#e $ublic #5GS4 8P&


244+ Sales :mil.;B>7,112.01?>ear Sales Gro6th 7.*@

244+ Net In"ome :mil.; B>,:)>.0

1?>ear Net In"ome Gro6th #7.7@&

244+ 0m#lo%ees 270,000

1?>ear 0m#lo%ee Gro6th 1).0@

Eey $eople

Chairman an* C0< (van ?. Seidenberg

@i"e Chairman an* /resi*ent awrence T. abbio Dr.0@/ an* C=< Coreen . Toben

0@/ /ubli" ffairsA /oli"%A an* Communi"ations Thomas D. #Tom& Tau'e

0@/ Strate'%A Be$elo#mentA an* /lannin' Dohn 9. Cierc'sen

Source: Hoovers Company Recors. http://hoovers.com/veri0on/""#$%%'*'12""/free"co"

factsheet.+htm,

TT

The company was founded in 1+>+ when a do/en customers signed up for the first

telephone echange in St. ouis. S" acAuired T;T "orp. in 2007 and too' that companyNs

more well-'nown name as T;T (nc. T;T holds a 60@ sta'e in "ingular 9ireless, which

has acAuired T;T 9ireless in a cash deal valued at B*1 billion. The deal has created the

leading S wireless operator with *6 million customers in *) states.

Some of the "om#an%Ds sele"te* subsi*iaries an* affiliates in"lu*e!

T;T "orp.

T;T "ommunications of "alifornia, (nc.

T;T "ommunications of (llinois, (nc.

T;T "ommunications of 5D, $

T;T "ommunications of the Mountain States, (nc.
http://hoovers.com/verizon/--ID__10197--/free-co-factsheet.xhtmlhttp://hoovers.com/verizon/--ID__10197--/free-co-factsheet.xhtmlhttp://hoovers.com/verizon/--ID__10197--/free-co-factsheet.xhtmlhttp://hoovers.com/verizon/--ID__10197--/free-co-factsheet.xhtml


27/40

2*

T;T "ommunications of the Southern States, "

Teleport "ommunications 5ew Gor'

"ingular 9ireless #60@, 3oint venture with ellSouth&

(llinois ell Telephone "ompany #T;T (llinois&

Eey 5umbers

Com#an% T%#e $ublic #5GS4 T&


244+ Sales :mil.; B*:,+62.0

1?>ear Sales Gro6th >.7@

244+ Net In"ome :mil.; B*,>+6.0

1?>ear Net In"ome Gro6th #1+.>@&

244) 0m#lo%ees 162,0001?>ear 0m#lo%ee Gro6th #:.6@&

Eey $eople

Chairman an* C0< 4dward 4. #4d& 9hitacre Dr.

S0@/A 7usiness Be$elo#ment Dames 9. #Dim& "allaway

C


28/40

27

Eey 5umbers

Com#an% T%#e $ublic #5GS4 S&


244+ Sales :mil.;B:*,6+0.01?>ear Sales Gro6th 26.*@

244+ Net In"ome :mil.; B1,>+7.0

244) 0m#lo%ees 7),)00

1?>ear 0m#lo%ee Gro6th #10.7@&

Eey $eople

03e"uti$e Chairman Timothy M. #Tim& Conahue

/resi*entA C0


29/40

26

used by one carrier, 5etel. The other smaller and regional carriers such as 8irgin Mobile, .S.

"ellular, Metro$"S, and lltel use "CM.

The newest trends plan to integrate their technologies in the cell phone industry. 8oice over

(nternet $rotocol #8o($& allows you to ma'e telephone calls using a computer networ', or a data

networ' li'e the (nternet. 8o($ converts the voice signal from your telephone into a digital

signal that travels over the internet then converts it bac' at the other end so you can spea' to

anyone with a regular phone number. This new networ' may also allow you to ma'e a call

directly from a computer using a conventional telephone or even a microphone. ltra-9ideband

#9& also wor' with the $" or laptop and offers a cost effective, easy way for consumers to

wirelessly transfer data, images or audio from their phone to another source, such as the laptop.

?lobal $ositioning System #?$S&, this service is already eAuipped in most motor vehicles, and

will soon be a feature provided by cell phone service providers enabling users to find the their

own location, or access a mapping service. lthough the system currently uses satellites, it is

preparing to use eisting T8 antennas to send out signals. This service is set to hit the mar'et by

Dune through Cisney, so parents can electronically locate their children.

9ith all these emerging and current wireless systems in place, the wireless phone

companies are panic'ing in preparation for a ma3or shift in the cell phone industry. They are

worried their customers may start using 8o($ services li'e S'ype, as 9i-!i-enabled phones

become more common and are lining up behind nlicensed Mobile ccess #M&. M would

allow calls to move seamlessly from the ?SM cellular networ' to 9i-!i networ's. Most

important to the cell companies, it would let the operators retain control over the call and charge

the customer for the minutes used. ut, with S'ype and some other 8o($ services, customers

would be able to call for free once their phone is connected to a 9i-!i networ'. Some .S. cities

are now proposing free citywide 9i-!i services, which could mean billions in lost revenue for

the cell phone industry.

/hone Besi'n

"ell phones will become much more powerful, and designs will continue to morph into ever

more comple, multi-purpose personal communication devices, including the growing use of the

cell phone as a financial transaction device #see Mobile "ommerce below&. atteries for

wireless devices will begin to last much longer as well.


30/40

2>

Mer'ers

T;T and "ingular merged in 200* and recently the merge of 5etel with Sprint also

created a larger company. Mergers negatively impact customer attitudes and perceptions with

their wireless service in the short term, creating a sense of confusion and uncertainty. 5etel and

Sprint actually eperienced the largest 2007 declines compared to their overall satisfaction inde

ratings in 200*, most li'ely due to the adverse affects of the merge.

Get carriers not involved in mergers also eperienced some decline in overall satisfaction,

with the gap between customer epectations and actual service eperience widening. 4vidence

of this can be seen in the 7@ increase of intent to switch carriers in the coming year, which was a

reverse trend from the past two years, where future switching intent was stable.

Market Gro6th

lthough cell phone mar'ets are relatively mature in the .S. and in ma3or developed nations

everywhere, the number of subscribers nonetheless continues to grow in these countries. (n the

.S., new subscribers tend to be those on lower-cost plans and children. lready, *0@ of 12- to

1*-year-old mericans carry cell phones< the rest of them will be soon to follow. Meanwhile, B1

billion cell phone subscribers are epected to 3oin the cra/e within less developed nations

worldwide. The largest nations include Sweden, the .E, and the 5etherlands followed by

"hina and (ndia.

Se"urit% Issues

Security issues such as eavesdropping on luetooth conversations, hac'ing into 9i-!i

networ's and viruses spread among cell phones will reAuire more attention and investment from

the technology and telecommunications sectors. The estimate is that the global mar'et for mobile

phone security software will reach B1 billion by 200+.

Mobile Commer"e :mCommer"e;


31/40

2+

Mobile "ommerce, also 'nown as m"ommerce, will emerge and create mobile subscriptions

and advertising opportunities for companies ready to embrace mobile subscribers. "onsumers in

nations such as Dapan and South Eorea have already shown that they are more than willing to

access Auality mobile content and net generation services on a subscription basis, including

news, wireless T8, animation and filmed entertainment scripted and adapted for the small

mobile screen.

The cell phone can is also going to be considered a Ldigital wallet. (n 4urope and sia,

many people pay at the register by reaching for their cell phone instead of their wallets. The

phones facilitate transactions between the point of sale and the userNs credit, ban', or cellular

account. $hones from Motorola and 5o'ia plan to implement the system over the net year.

Services will come via partnerships between local ban's partnering with a service provider.

Ne6 Ser$i"e /ro$i*er

There is always the potential for a newcomer to 3oin the crowd to threaten the current

providers by combining the most current technologies, with faster service, and lower prices. $re-

paid phones could become more prevalent with the right service provider that can cater to the

Lpay-as-you-go customers. The collaboration of 9i-!i with the potential spread of longer-

range 9iMU, and the eager adoption of 8o($ will threaten to turn the cell phone and landline

industries upside down.

-e* Success 'actors

There are factors that are necessary to attract customers, compete, and ultimately be

successful in the cell phone industry. !or a company to be successful in the cell phone industry

they can create value by providing the basic features, technical features, and support to bac' up

those features.

7asi"

These features are assumed to be included and epected in a basic cell phone pac'age to satisfy

the simplest customers.

"aller (C ine loc'

"all !orwarding


32/40

2)

"all old

"all 9aiting

"aller (C

5o nswer "all !orwarding

Three-9ay "alling

8oicemail

Te"hni"al

These features go beyond the basics and provide the technical features to attract the savviest

of cell phone subscribers.

(nternet capabilities to receive billing, ma'e payments, and download ringtones.

Cetailed illing either in paper form or downloadable from the internet.

igh-=esolution "amera, most important feature among subscribers.

Tet Messaging, : billion wireless tet messages are sent each month.

9eb ccess to get stoc' Auotes, sports scores, weather, and up to the minute news.

(nsurance to protect yourself in case of malfunction.

4-mail Messaging can now be done from the palm of your hand

5F Comestic ong-Cistance "harges, not available with landlines.

bility to Cownload =ingtones, free is better.

attery $ower is the second most important feature among subscribers.

luetooth is wireless technology that communicates with a wireless hands-free headset.

8ideo capability at least 17 seconds of video is the standard.

$repaid Minutes typically useful for an individual that reAuires minimal tal' time.

Mp: "apable, subscribers want to be able to use their i$od%s with their handsets.

bility to =ecord Music and play it bac' or use as a ringtone.

!M =adio can now be transmitted through a handset.

!S Memory "ards can hold up to 100 songs and are removable.


33/40

:0

Su##ort

4very company can provide the basic and technical features but the ultimate test for success

or failure is decided by the support the cell phone company can provide to their subscribers.

$ricing $lans that provide a reasonable amount of minutes and coordinate with the basic

and technical features. family plan allows the whole family to share their minutes on

one plan.

9ireless Service Satisfaction, a strong signal reception for a networ' is a must to provide

the subscriber with clear call Auality minus the staticKinterference, voice distortion,

echoes, and droppedKdisconnected calls.

9ireless "ustomer "are $erformance, the customer service is as important as the basic

and technical features.

9ireless =etail Sales ocations can provide a physical location to get hands on

eperience with a handset and face-to-face contact with a representative.

9ireless $hone andset Satisfaction can offer multiple options from si/e, weight, design

#folding, swivel, rectangular, or sliding can affect the performance&, and antenna.

Industr* Prospects and .verall Attractiveness

=a"tors Makin' the In*ustr% ttra"ti$e

s reported in S Today, a !ederal "ommunications "ommission report stated that over

the past four years landline usage has decreased by :0 million users. There are great

opportunities right now to get a lower price or a lot more minutes on a cell phone. The cell phone

industry is offering unlimited plans in growing numbers. The word cell phone has become a

familiar usage across the globe, especially in developed countries.

The "ell $hone Service $roviders have made provisions to allow users to access the (nternet

through the cell phone, without ta'ing the pain to log into their computers. "ell $hones now can

be used as planner, navigation system and for games. lso, Steve Dobs the owner of pple hasenabled the innovative invention of the Motorola hybrid phone, which has an i$od with the cell

phone. The cell phone is one technology where people of different ages can use without any

hesitation. "ell phones are also used as fashion ob3ects, since the styles have been changing

almost every year< for eample, the credit card-si/e VSamsung S?-$:00% or VMotorola lac'

=P=%. lso, now various ring tones of one%s choice can be downloaded to the cell phone. nd


34/40

:1

there is the camera phone, where a camera is attached to the cell phone, and the pictures ta'en

with a camera phone are of good Auality that can be e-mailed or even printed.

The cell phone technology has infiltrated its way through the teenage population very fast.

The national networ', Sprint is on the verge to launch cell phones that are custom handsets,

which contains phone contents such as Cisney ring tones and games. This is a way where the cell

phone industry can open a whole new arena for attracting a mar'et for children. lso, there is the

new culture of SMS #Short Message Service&, which is a new way to send tet messages. SMS is

Auite popular among teenagers and college students, which helps everybody to 'eep in touch

with friends and family. 5owadays all cell phone manufactured supports SMS. (n fact, the use of

(nternet supports the option for instant messaging, such as with merica Fnline%s (nstant

Messenger.

Mergers are another factor that ma'es the cell phone industry attractive. !or instance, among

the cell phone service providers, the Sprint and 5etel merger and again when "ingular and

T;T 9ireless merged. (t facilitates both the companies to combine both their features and

produce attractive products, such as Sprint%s networ' and 5etel%s wal'ie-tal'ie option in the

cell phone.

=a"tors Makin' the In*ustr% nattra"ti$e

Mergers might be good for the cell phone service providers, however, if the nation%s leading

cell phone companies merge, there will be less competition in the mar'et, causing prices to

increase than before. 9ith large mergers li'e "ingular and T;T, there is the ris' of a

monopoly in the mar'et, which can charge the highest possible prices to consumers. This will

definitely pose a threat to consumers, because the number of options of choosing one cell phone

service provider over another is reduced.

S#e"ial In*ustr% /roblems an* Issues

s with new technology, health concerns have risen with the use of cell phones. There are

certain studies that show a few cases of tumors or cancer that develops as result of using cell

phone for long periods of time. ccording to the !ood and Crug dministration, these health

problems are said to be caused due to the radiations emitted from cell phones. lso, these

radiations tend to cause birth defects due to genetic mutation.


35/40

:2

(n addition, many incidents of road ha/ards occur because of the use of cell phones. Many

accidents involving a driver being distracted by tal'ing on a mobile phone have begun to be

prosecuted as negligence similar to driving while intoicated. (n S, many of the state

legislatures, about *0, have passed laws to ban the usage of cell phones while driving.

"ell phones have also been a ma3or threat to security. There have been cases of identity theft,

and also where a third party can intercept in a networ' listen to conversations. lso the

bombings that occurred in 200* at Madrid, was from a cell phone. So there are ma3or security

concerns of the cell phone that has to be loo'ed into.

/rofit .6@ 12.+@

Ericsson 2.0) 16.02@ 22.1@ 11.0@

Siemens 2.)+ 2.61@ ).7@ :.0@

-*ocera :.:0 7.)0@ 7.*@ :.6@

5ow almost every individual thrives to own a cell, especially in developed countries. !or

instance, according to Lindustry statistics #"T(, The 9ireless ssociation& reveal that thenumber of cellular subscribers in the .S. now total nearly 1)7 Million #?oodstadt&. elow is a

graphical presentation of a sample of households that are cell phone users in S.


36/40

::

Growing Percentage of Households with Multiple Cell Phones

46.00%

48.00%

50.00%

52.00%

54.00%

56.00%

58.00%60.00%

62.00%

64.00%

2 2002 4 2002 2 200! 4 200! 2 2004 4 2004 "2 2005 "4 2005

45raph from http://666.icrsurvey.com7

ccording to reuters.com, LCecember 2007, the global cellular mar'et had 2.1* billion

cellular subscribers, up from 2 billion in September 2007. 4perts predict : billion subscribers

before the end of 200+. 5ow cell phone manufacturers are ma'ing phones that are capable of

accessing 8o($ #8oice Fver ($&, which is now a way to ma'e phone calls free of charge, such as

with what eists now S'ype and 8onage. nalysts predict that this new development will help

the cell phone industry profits rise, because of the newer technology< and nowadays consumers

are waiting to acAuire the newest technology that can help them to be more efficient.

Conclusion

(n recent years, cell phones have turned out to be a necessity rather than a status symbol.

5owadays, cell phone manufacturers are producing different phones that fit different needs< and

also, service providers have different plans for customers to choose from. 9ith the advance in

technology, consumers are able to eperience the ease in communication. !rom 1))* onwards,

the cell phone industry has seen great success through the years, and analysts predict that this

growth is only going to increase with the advancement of technology.
http://www.icrsurvey.com/http://www.icrsurvey.com/


37/40

:*

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y ssociated $ress, 9ired 5ews S'ype Ta'es 8F($ pscale, $ublished on Dune 7, 2007.=etrieved on May +, 2006 on the 9orld 9ide 9ebhttpKKwww.wired.comKnewsKtechnologyK0,6>>*+-0.html

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:6

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Industry AnalysisEvery care has been taken in the preparation of this study to ensure that the information contained herein is accurate, factual and correct to the best of our knowledge,