Module: Design Management

Assignment 3: Market Strategy For Teletalk

M.Des 1.1

Name: Harshal Desai

Lecturer: Dr Kelvin Lee

Date of Submission

9/30/2011

Word Count: 4405

TABLE OF CONTENTS

Executive Summary .................................................................. 3

Teletalk Pvt. Ltd. ........................................................................ 4

Spice Mobile .............................................................................. 5

P.E.S.T.E.L. Analysis .................................................................... 6

Political Trends ........................................................................ 6

Economic Trends .................................................................... 7

Social Trends ........................................................................... 9

Technological Trends ............................................................ 9

Environmental Trends .......................................................... 10

Legal Trends .......................................................................... 11

Market Research .................................................................... 12

Market Dynamics ................................................................. 12

Competitive Landscape .................................................... 14

Macro-Economic Outlook .................................................. 15

S.W.O.T. Analysis ................................................................... 16

Strategic Proposal .................................................................. 17

Tactical launch plan ........................................................... 17

Products and services ...................................................... 18

Pricing ................................................................................. 18

Brand Communication AND ADVERTISING ................... 23

Sales and distribution channels ...................................... 23

Contingency plan................................................................ 24

Conclusion ............................................................................... 25

Works Cited ............................................................................. 26

APPENDIX ................................................................................. 28

EXECUTIVE SUMMARY

With the Telecommunication sector booming in Nepal, the industries

compete in terms of introducing new features and cheaper costs of mobile

handsets. The market is nearly saturated with cell phones ranging from prices

of Rs 2000 to Rs 65000, catering to all types of consumers.

The overall economy is still quite low with nearly 25% of the nation living below

the poverty line and a vast majority of the people earning a bare minimum of

$1500 annually.

While reducing the price of mobile handsets is one strategy, it is not a truly

effective one.

Our report focuses on examining the Nepal market in depth, analysing the

political, economic and social trends, researching on an average consumer

and eventually giving out a more effective holistic solution.

Based on our research, we aim to increase market revenue for Teletalk and

expand their consumer base, and at the same time, create new job

opportunities in the market to contribute towards the betterment of the

country’s economy.

TELETALK PVT. LTD.

Teletalk is a fast growing Telecommunication and IT Company in Nepal. It is

also a licensed supplier of BlackBerry, Spice and Colors handsets in the Nepal

market, the latter being an in-house brand, and functions through several

retailers set up across the country. The current supply chain network has

allowed Teletalk to venture into CDMA mobile handsets in Nepal. They have

a strong business ties with trader bases in China namely Lenovo, Konka,

Inventec Appliances for obtaining mobile handsets and other accessories for

Nepal market.

Teletalk works with both CDMA and GSM telecom operators in Nepal,

exploring possible corporate opportunities, and provides the operators with

feedbacks and recommendations to strengthen the industry and keep up

with the global technology. The firm is associated with one of the country’s

leading telecommunication organisations, Nepal Telecom that has a

customer range of 4.02 million subscribers. (Teletalk: Company Background)

Teletalk’s vision is to manufacture, deal and supply quality mobile handsets

and service for telecom and IT sector in the country. They intend to

revolutionize the market with their superior telecom services and venture into

new quality electronic and telecom products. With integrity and honesty at

the heart of their business, they are determined to attain distinction in Nepal.

(Teletalk: Mission & Vision)

SPICE MOBILE

Spice Mobile is a global organisation and one of the leading mobile handset

brands in the Indian market. With over 30 years of experience, they have built

few of Asia’s most successful joint venture partnerships in innovative

technologies. They were the first Indian company to market high-end printing

systems, manufacturing 3.5” floppy disks, setting up private telecom services,

launching a handset for less than Rs.1000 ($24.5 SGD), another first in creating

a dual mode handset and recently launching India’s first 3D cellphone.

Their brand promise is to deliver quality and use their intelligence and

familiarity to discover innovative means to revitalize the market and delight

people by providing them reasonable value for their services. (Spice: About

Us)

Teletalk launched Spice Mobile in the Nepal market in mid-2008. It rapidly

grew in the market offering mid and premium level mobile phones. Teletalk

imports these handsets from India and has currently brought over fifty models

in the Nepali market. (Teletalk: Spice Mobile)

P.E.S.T.E.L. ANALYSIS

Before recommending any market recommendations, we need to

investigate at the current trends in the Nepali market. These will provide

better clarity on the overall telecommunication market and allow us to

compare whether Teletalk is keeping pace with current trends or has fallen

behind.

POLITICAL TRENDS

In 2004, the government introduced open licensing and restructuring of the

Nepal Telecommunications Corporation as part of its Poverty Reduction

Strategy. Global firms received trade prospects including provision for

infrastructure to set up an expanded GSM network and to install a new

CDMA network. Nepal has been a difficult market due to political instability,

having gone through 15 governments in the last 14 years, and subjected to

an eight year long “People’s war” launched by Maoist insurgents in February,

1996. This affected the speed of globalization and Nepal fell back in the race.

While the government is open to foreign investments, the bureaucratic

suspensions, disorganisation and widespread exploitation delayed

implementation of these policies. (Zita, 2004)

Apart from inconsistent government policies, foreign companies need to

factor in the political risks during the eight-year-old Maoist insurgency as

many organisations, specifically from U.S. were often extorted and faced

intimidation threats. (Zita, 2004)

The political instability still exists as the Nepali public felt like “the government

is at best, useless”, stating that the politicians are obsessed to achieve power,

forcing the public to make their own arrangements to supply homes with

water, electricity, to fix the local roads and maintain the drain pipes. The

public tends to favour the private sectors rather than the government. This

realization came during January 2011 when political candidates were more

concerned about the vacant Prime Minister’s seat rather than preparing for a

potentially devastating earthquake. (Panday, 2011)

To sum up, due to the disorderly political segments it is hard for businesses to

stick with the plans within the specified period. Thus, the bureaucratic systems

of the government greatly hamper the growth of the service sector.

ECONOMIC TRENDS

Nepal's gross domestic product (GDP) for 2008 was assessed at USD $12 billion

making it the 115th-largest economy in the world. Nepal is isolated from the

world’s major land air and sea routes, having just one main airport in

Kathmandu. Their ideal trade route is by road from India and the only possible

entry by sea is via Kolkata. Currently India is Nepal’s largest foreign investor

and trading partner, greatly increasing the potential market and

development of the telecommunication sector in Nepal. Internally, there is a

lack of a developed road system, with 22 out of 75 districts lacking road links.

This makes it difficult to distribute products within the country. (Zita, 2004)

Nearly 86% of the population still lives in rural areas and depends on

agriculture as their primary source of income, though only 20% of Nepal’s

terrain is suitable for growing crops. (Rai, 2004)

A long-standing economic treaty reinforces a close affiliation with India. The

country obtains foreign relief from India, Japan, the UK, the US, China,

Switzerland, and Scandinavian countries. Poverty is severe in the country with

the per-capita income being roughly USD$1,000. (CIA World Fact Book :

Nepal Economy)

On the fiscal side, the government commenced numerous transformations

on revenue utilisation, including the introduction of an income disclosure

scheme and execution of a performance-based encouragement system for

tax officers. This resulted in 32% growth and was the first time income tax

collection exceeded customs revenue. External grants also expanded up by

70% as donors supported Nepal during the political transition. A majority of

this money was directed towards raising salaries and wages of civil servants

and security forces, while the remaining was invested in the IT and Telecom

sector (Acharya, 2010)

Figure 1: Revenue Indicators in 2009 1

The gross national income (GNI) based on Purchasing Power parity (PPP)

ranks Nepal as the 30th country with the lowest GNI, with the comparable

average income of a Nepali citizen being USD$1471 annually. (Nations

Online: Countries by Gross National Income)

Most of Nepal’s economic trends have the lowest percentage worldwide.

Almost 40% of its population have no access to healthcare and education;

nearly half the children under the age of five are malnourished; 38% of the

population is living below the poverty line earning barely Rs 150($4 SGD) a

day. With little to no access to proper education, science or technology, the

literacy rates in the country are low at only 53.7%, although these do not

include literacy in Information and Communication Technologies (ICT). (Zita,

2004)

1 Image retrieved from http://www.adb.org/documents/books/ado/2010/NEP.pdf

SOCIAL TRENDS

Socio-cultural trends consist of various class, structure, principles, morals,

social institutions, etc. Nepal has a multicultural society, with the dominant

religion being Hinduism at 81%, Buddhism at 10.7% and other minorities at

8.4%. (Zita, 2004)

The telecom industry must take note of the socio-cultural environment for

expanding its policy and strategy. Socio-cultural environment influences the

demand and supply of goods and services, particular mobile handsets as

new features at a cheaper rate are in constant demand.

The most auspicious festival is the Dashin Festival or Durga Puja Festival, which

lasts for a total of 15 days. It is the ideal time for new market strategies to be

implemented as the festival attracts many Nepalis all over the world to come

back and celebrate with their families in Nepal.

TECHNOLOGICAL TRENDS

Nepal Telcom has suffered from years of administrative uncertainty. Since

there was only one operator, the Nepal Telecommunications Corporation

(NTC), the lack of competition prevented expansion of basic mobile services.

There was one line per 1000 people in the rural regions with over 60% rural

districts having no telecommunication service whatsoever. In contrast,

Kathmandu had 21% telecommunication services with an estimated future

demand for 290,000 lines, which was much more than what the suppliers

could provide. (Zita, 2004)

By early 2007, the NTC and the other private operators set up aspiring

objectives for network expansion, aiming to attain a penetration percentage

of 20% in 2010. By end of 2009, the total telephone penetration had reached

30% having over 7.6 million mobile subscribers. Fixed line growth remained

slow, having just 3% increase in market penetration by 2010.

Despite the mobile handset growth, there was a substantial difference

between the high coverage levels in the cities and in underdeveloped rural

areas. However, the minimum basic access was made available to most of

the rural area with only 306 out of 3914 villages lacking telecom services. To

keep up the pace with future demand, it is estimated that Nepal needs to

invest around US$135 million in the telecommunication sector. (Evans, 2010)

Internet facilities are still inactive, with user penetration at a total of 2% in

2010, and broadband facilities are virtually non-existent. People seem to be

favouring mobile wireless technology more over the fixed lines. (Evans, 2010)

Recently the Nepal Telecommunications Authority (NTA) initiated a study

measuring the feasibility of 4G technology in Nepal. This would allow faster

data transfer speeds and superior quality video conferencing options. 4G

technology can allow users to surf at an internet speed of 100Mbps while

current telecom operators provide only 3.4Mbps under the 3G networks.

NTA Chairman Bhesh Raj Kanel stated the study is at a preliminary stage and

their team is reviewing data from other countries using 4G technology. Once

the analysis is complete, the final report will be submitted to the Radio

Frequency Policy Determination Committee (RFPDC) where they will take

necessary action and meet with the respective stakeholders. (NTA starts study

on 4G technology, 2011)

ENVIRONMENTAL TRENDS

At the 18th session of the United Nations Commission on Sustainable

Development, an official from Nepal stated, “The management of waste has

become further challenging with the increase in hazardous waste as the

situation becomes more complicated, confronting the continuing and

worsening effects of electronic waste” (Pradhan, 2010)

Nepal had expressed a Solid Waste Management Bill in 2008, which provided

instructions for handling and categorizing solid waste types. However, it was

specifically silent about electronic waste management.

Also, the country is highly vulnerable to bad climate, intensive rainfalls,

increasing intensity of floods, glacial lake outburst, dry spells etc. Not only do

these hazards cause damage and loss to human lives, they also hamper

development of the country.

According to (Pradhan, 2010) “ Going by the current rate, in ten years’ time it

can be projected that more than two million Nepali people will be using

computers and the internet. In addition, more than 25 people per 100 or 7.5

million Nepali people will be using mobile phones by 2020.”

A typical mobile phone is disposed quite rapidly as new, better and cheaper

models flood the market routinely, with mobile phone users changing their

handsets roughly every six to twelve months. According to information

available, a typical personal computer has three to five years of good use

before it needs to be replaced, upgraded, or completely discarded. One

can imagine how much e-waste mobile phones will generate in a decade or

so. Nepal needs to quickly adapt its current policies to include the role of ICTs

in a sustainable development and set up a separate division for electronic

waste to monitor and maintain the process.

LEGAL TRENDS

Nepal had developed two liberal policies and authorized framework for the

Telecommunication sector: - the National Communications Policy in 1992,

and a Telecommunications Act in 1997 that established the Nepal

Telecommunications Authority (NTA). A new draft was adopted in early 2004

to remove the restrictions on investment and accelerate a broader market

opening. The policy introduced a multi-service and multi operator

environment and to liberalise the telecommunication sector completely so

that it can be open for new operators without limitations. It also

commercialized the NTC, reducing the government ownership, being

restructured to keep pace with the increasing demands. (Zita, 2004)

MARKET RESEARCH

MARKET DYNAMICS

As of 2011, the country’s population was roughly 29 million, out of which only

18 million people had a source of income. The agriculture work force

constitutes 75% of this labour with industry and services being the remaining

25%. Nearly a quarter of the population is below the poverty line. (CIA World

Fact Book : Nepal Economy)

With an average income being roughly $1500 annually, the cost of living

expenses in Nepal is shown below:

Figure 2: Distribution of cost of living expenses in Nepal2

Based on the statistics, an average consumer spends only 11.6% of the $1500

or approximately $175 on other markets, which fall in our category.

As of December 2010, there are only 841,698 subscribers for fixed line

telephones whereas mobile handset subscribers range at 9.19 million. Nepal

Telecommunications is leading with 5.11 million subscribers and Spice Nepal

Pvt. Ltd, which is rebranded to NCell Pvt. Ltd, has a market penetration of

4.08 million subscribers. (Federation of Nepalese Chambers of Commerce

and Industry: Industrial Factor Costs , 2010)

2 Image retrieved from

http://www.numbeo.com/cost-of-living/country_result.jsp?country=Nepal

Teletalk Pvt Ltd rapidly expanded its market by providing quality mobile

handsets to middle and lower-middle class individuals at a much cheaper

rate than their competitors provide. Since Spice cell phones are widely

popular in India, the brand carried enough recognition to be purchased by

the local Nepal Population.

Sanjay Agrawal, director of Teletalk Pvt. Ltd. stated there is a vast market for

the mobile phone industry in Nepal as people living in the rural regions have

begun embracing the new mobile technologies that help them be

connected and increase business ventures.

TeleTalk is the first cell phone company in Nepal to introduce Indian mobile

phones in the Nepal market and to introduce both CDMA and GSM handsets

to consumers. Teletalk supports three major brands, namely, Spice mobile

phones that are priced between Rs 2,200 to Rs 25,000 with sales growth rising

at an annual rate of 15%, while handsets by Colors are available in the range

of Rs 2,100 to Rs 10,000, with sales growth rising at a 5% annual rate. HTC

handsets cater towards businesspersons and high-income people, priced

between Rs 17,000 to Rs 55,000. (Teletalk: Bringing mobile Technology to Rural

Folk, 2010)

Recently Teletalk introduced a new scheme in conjunction with their new

Colors X-9 mobile phone. These scheme gives you a cash offer on every X-9

cell phone purchase, along with a scratch coupon with a potential to win up

to Rs1000. It will be valid only through the Dashain Festival and will end on 1st

November. (Teletalk Dashain Offer, 2011)

COMPETITIVE LANDSCAPE

Current competition among the telecommunication operators is based on

wider network coverage, a variety of prepaid service plans, GPRS facilities,

increasing purchasing power of people by reducing costs of mobile handsets

etc.

Rival telecom operator NCell, has already revealed its strategy of wanting to

upgrade their networks to 4G once the government grants the licensing.

Ncell is asking for frequencies ranging from 700-2600MHz for this service. NTA

currently has recommended WiMax(Worldwide Interoperability for

Microwave access), a protocol that can allow up to 40Mbps and is awaiting

the committee’s decision on frequency allocation for the service. (NTA starts

study on 4G technology, 2011)

Phones have also become a status symbol in Nepal. For the people, flaunting

stylish expensive phones gives them confidence while meeting and talking

with others. They consider an expensive phone flaunts the success they have

attained in life. Nokia recently sold two of its most luxurious cell phones in the

Nepali market, the 8800 series, at Rs. 100,000 each. The features of these

models are out-dated by modern standards, but it is the sapphire studded

joystick and a titanium casing that boosted the price. While those who use

cell phones purely as a means for communication don’t see any difference

between a plastic joystick and a sapphire one, for some men mobile phones

are akin to what gold or diamond jewellery are to women. As new phones

enter the market with latest technologies, with an added demand for style,

the resources used in developing the phones and the money invested into

giving them a luxurious look are increasing the average market price.

(Republica: Business and Economy, 2009)

MACRO-ECONOMIC OUTLOOK

Nepal’s macroeconomic stability is sustained over the past few years, but the

recent global crunch is has slowed down the progress of Nepal’s economy

and exposed its structural weaknesses. Increasing fees and cost have

resulted in growing foreign exchange investments despite the lacklustre

export performance. Recently, however, international capitals have dropped

considerably due to a slowdown in transfer of funds and accelerating imports

partly because of continued rapid credit growth in the second quarter of

2009/10. (Sharma)

Nepal currently faces issues of increasing inflation. The annual average

consumer inflation has increased by 13% in 2009. Secondly, the high rate of

unemployment and loss of trade has set back the standard of living in many

districts. The ultimate goal of a government should be to generate economic

growth that favours the public.

The macroeconomic complications are sure to give rise to cost of living at the

household level unless the short-, medium- (Three Year Plan under

preparation) and long-term policies are prepared based on professionally

acceptable economic forecasting. (Pyakuryal, 2010)

While the country’s potential is quite high, progress is delayed due to poor

business climate, power shortages, infrastructure needs, weak governance

and difficult employment associations. These issues need to be addressed

immediately. (Sharma)

S.W.O.T. ANALYSIS

Strengths Weaknesses

Caters to all classes, lower,

middle and upper class.

Wide range of handsets

available from Spice

Dual-Sim Handsets

Average price range of Rs

2000- Rs15000

Associated with the NTA, has

over 9 major service centres

across Nepal.

Introduction of new Colors

Handsets every 4-6 months.

Customer complaints about

terrible network service (Towers

or New Services?, 2010)

No licence to distribute Nokia,

Sony Phones

Limited options for the Niche

market

Opportunities Threats

Assembling Spice phones in

Nepal

Introduction of instalment plans

Promoting in-house brand,

Colors

Expanding cell phone variety in

in-house brand to reduce

import costs

Eco-friendly initiatives

4G expansion

Better promotion offers than

competitors in terms of pricing.

Setup cellular service at Mt

Everest.

Rival company already

developing strategies for 4G

technology.

Difficulty introducing new

features, product saturation

imminent.

STRATEGIC PROPOSAL

TACTICAL LAUNCH PLAN

We are proposing a business strategy to increase market share of Teletalk

and simultaneously benefit the public and the government by boosting the

country’s economy and creating new job prospects for the people.

The strategy involves setting up an assembly base for Spice Mobiles in Nepal,

having just the spare parts imported from India, and selling them at a low

interest rate on a 12-month instalment plan so mid-range phones are

available to the lower-middle class target audiences.

We are choosing Spice Mobile over Colors because of its wider brand

awareness and diverse product range.

PRODUCTS AND SERVICES

While this strategy can be applied to mid-level phones of all ranges, for sake

of clarity our data focuses on the absolute low end and a middle price range

of cellphones, costing Rs 2000 and Rs 5000 respectively.

Importing just the spare parts allow greater quantity of parts to be traded into

the country. This also decreases the cost in terms of tax by an estimated 40%

since it is cheaper to export spare parts rather than the complete product. By

establishing an efficient assembly building, the sector introduces new job

prospects within the industry, increasing employment rates. It would also

boost the repairing service since people are more aware of the construction

of the product. This would create an higher overall revenue in the market

The phones would be sold at a 12% interest from the current market rate,

however the money could be paid in a twelve month instalment. This allows

the lower-middle class ability to afford mid-range cellphones.

PRICING

The following figures have been derived from the Federation of Nepalese Chambers Of

Commerce and Industry, with a copy of the Industrial Factor costs report attached in the

appendix for reference.

Current Population of Nepal is 25,000,000, out of which 18,000,000 people

have a net income above the poverty line. Approximately 500,000 are using

Nepal Telecom while 400,000 use the rival company Ncell. This still leaves

9,000,000 people who can be potential targets as our secondary market.

For implementation of our scheme, first we would need to look at the

industrial area and construction costs to set up an assembly division in

Kathmandu. We have picked Kathmandu since it is the primary trade city of

Nepal.

COST OF OVERALL ASSEMBLY LINE RS

COST OF INDUSTRIAL AREA 5400 SQ.FT 4,200,000

CONSTRUCTION COST ( APPROX RS.1300 P.SQ.FT X 5400 SQ.FT)

7,020,000

TOTAL COST OF INDUSTRIAL AREA AT 5400 SQ.FT

11,220,000

Table 1:COST OF ASSEMBLY LINE (SOURCE: APPENDIX POINTS 1 & 2)

In a 5400 sq.ft. plot, we can accommodate 450 employees, giving

approximately 10 sq. ft. space for each employee, with the remaining

amount excluded due to construction of walls, pillars etc.

By creating a job opening for 450 people, their annual salaries would be

differentiated according to skill level. Teletalk will also provide a 30% bonus

p.a. (assumed estimate) to boost employee morale and to generate interest

in the brand. Based on these estimates, the total salary cost for employees is:

LABOUR NO.OF EMPLOYEE

AVG SALARY P.M.

TOTAL SALARY

P.A

BONUS 30% P.A. SALARY

TOTAL COST OF LABOUR INCLUDING

BONUS

HGHLY SKILLED

100 4,950 495,000 148,500 643,500

SKILLED 250 4,760 1,190,000 357,000 1,547,000

UNSKILLED 100 4,600 460,000 138,000 598,000

TOTAL 450 14,310 2,145,000 643,500 2,788,500

Table 2: SALARY COSTS OF EMPLOYEES (SOURCE: APPENDIX POINT 5)

Let us assume that the company wants 10% profit on the manufacturing cost

of the mobile phones and the total sales demand from both, existing

subscribers and new consumers (Total consumer target: 9,500,000) is 200,000

mobile handsets per year, with a majority being sold at Rs 2000. We

conducted a comparison analysis between profits made while using the

instalment scheme and profits made without using the instalment scheme.

WITHOUT INSTALMENT

SCHEME

NO. OF HANDSET

MADE P.A

COMPANY COST PER HANDSET

PROFIT 10% PER

HANDSET

RETAIL PRICE PER HANDSET

TOTAL COST

PRICES P.A.

TOTAL RETAIL

PRICE P.A.

RS RS RS Rs Rs

HANDSET AT RS. 2000

150,000 1,800 200 2,000 270,000,000

300,000,000

HANDSET AT RS.5000

50,000 4,500 500 5,000 225,000,000

250,000,000

TOTAL 200,000 6,300 700 7,000 495,000,000

550,000,000

Table 3: PRICE STRUCTURE WITHOUT INSTALMENTS

Now, considering the 12-month instalment scheme, if Teletalk charges 12%

interest p.a. on the existing retail price of the mobile handset, the overall cost

structure changes to :

WITH INSTALMENT

SCHEME

NO. OF HANDSET

MADE P.A

COST PER HANDSET

PROFIT 10% PER HANDSET

RETAIL PRICE PER HANDSET

12% INTEREST

ON RETAIL PRICE

TOTAL RETAIL PRICE PER

HANDSET

TOTAL RETAIL PRICE P.A.

RS RS RS Rs Rs Rs

HANDSET AT RS. 2000

150,000 1,800 200 2,000 240 2,240 336,000,000

HANDSET AT RS.5000

50,000 4,500 500 5,000 540 5,540 277,000,000

TOTAL 200,000 6,300 700 7,000 780 7,780 613,000,000

Table 4: PRICE STRUCTURE WITH INSTALMENTS

To calculate the total net profit, we factor in the manufacturing costs and

annual salaries from our data. We also estimate 10% additional cost for

insurance for employees in case of accident at the workplace. Based on the

Industrial factor costs report, we estimate the industrial bank loan to have 10%

interest rate (Appendix point 10), and another 10% to serve as

commercial/industrial insurance in case of earthquakes, fire hazard, riots etc.

Water and electrical charges are also assumed from the report at their

maximum value (Appendix points 3 & 7) along with transportation charges

from Mumbai (Appendix point 8) since Mumbai is the leading trade city in

India. Since there is always a chance of damage to products or wastage, we

estimated a further 10% cost on manufacturing the handsets.

This gives us a final net profit comparison of

WITHOUT

INSTALMENT WITH INSTALMENT

TOTAL RETAIL PRICE P.A 550,000,000 613,000,000

SUBTRACTING COSTS:

COST OF MANUFACTURING -495,000,000 -495,000,000

ANNUAL SALARIES -2,788,500 -2,788,500

INSURANCE FOR EMPLOYEES -278,850 -278,850

INTEREST ON INDUSTRIAL 10% ON RS 11,220,000 -1,122,000 -1,122,000

COMMERCIAL/INDUSTRIAL INSURANCE 10% -1,122,000 -1,122,000

WATER CHARGE P.M RS. 25000 -300,000 -300,000

ELECTRIC CHARGES P.M RS.50000 -600,000 -600,000

TRANSPORTATION CHARGES P.M RS. 100000. -1,200,000 -1,200,000

DAMAGE/WASTAGE 10%TOTAL COST OF MANUFACTURING

-49,500,000 -49,500,000

TOTAL PROFIT 47,588,650 61,088,650

Table 5: NET PROFIT COMPARISON

In conclusion, using the instalment scheme, Teletalk can earn an estimated

net profit of Rs 61 million in their first year of business.

BRAND COMMUNICATION AND ADVERTISING

Teletalk Pvt Ltd would be the first company to sell their Spice Mobile Handsets

on a 12-month instalment basis. The company, under the NTA, already has

nearly 5.1 million subscribers. Still approximately 9 million consumers are not

using any form of mobile communication. By using the 12-month instalment

program, our primary consumers would be interested to purchase a higher

quality cell phone, and the potential secondary market would get an

incentive to purchase newer models at a lesser cost than provided by the

competitors.

The scheme could be introduced after the assembly setup is completed,

which would take roughly six to twelve months depending on the speed of

construction. If we assume a maximum of twelve months, then the scheme

could be introduced at an opportune moment during the next Dasain

Festival in October 2012, which is the most auspicious festival in the Nepalese

annual calendar. During this time, people often return from different parts of

the world to celebrate the festival together in their country. The instalment

plan would serve as an ideal gift during this fifteen-day festival.

SALES AND DISTRIBUTION CHANNELS

Current sales and distribution channels could remain as they are since the

market penetration through the channels is providing a satisfactory result.

Research would need to be undertaken in order to find out estimated

demand of the handsets under the instalment scheme to check if the

distributors can handle the quantity of the orders. In the event that demand

rises beyond amount of distribution, then there would be a need to set up

additional sales and distribution centres across the city in the form of smaller

retail outlets.

CONTINGENCY PLAN

In the event that the 12-month instalment plan does not appeal to the mass

market, additional schemes could be implemented to further entice the

target consumer.

One such scheme could include group purchasing where a family or a group

of friends can get 10% discount on the retail price under the instalment plan

should they purchase a mobile handset together. This would especially be

successful during the festival as it is a common occurrence to provide gifts for

an entire family.

Another scheme could be a good faith policy where if the instalments are

paid within the allotted time then the final month payment receives a refund

of Rs 100, which is still affordable and does not consume too much of the

company’s profits, and at the same time, makes the consumer happy.

There would be instances where consumers may stop paying altogether due

to numerous circumstances. To prevent a loss, countermeasures could be

placed within the phone, effectively locking the SIM card similar to T-Mobile

in the USA. The instalment plan could also be backed up by a bank, ensuring

that if the consumer does not pay up the charges, the amount will be

undertaken by their bank.

However, based on current projections, even if the instalment scheme does

not work, Teletalk still makes enough profit just by setting up an in-house

assembly line for Spice Mobile handsets.

CONCLUSION

By successfully penetrating the market with this new offer, Teletalk should

boost up market revenue, and follow their vision to revolutionize the Nepal

market with superior telecom services.

The reduced cost of expenditure, in terms of importing parts, could be used

by the government to invest in other sectors such as land development,

military, architecture etc.

Setting up just one assembly chain opens up roughly 450 job prospects. By

having a network of assembly chains across the country, the number can

greatly increase giving even unskilled workers an opportunity to work on a

decent job with insurance and bonus plans.

The knowledge of the IT and Telecom sector would improve since Teletalk is

actually manufacturing the Spice mobile phones. This has potential to

increase more service centers, further increasing job growth.

By adopting this strategy, Teletalk could effectively slash their competition

and commendably contribute towards a part of the solution for the

economic instability within the country.

It would open the market to many more consumers and significantly increase

the overall GDP of the telecommunications industry.

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APPENDIX

The following is a partial report for Industrial Factor Costs from the Federation

of Nepalese Chambers of Commerce and Industry (FNCCI).

The full report is available on the FNCCI website at :

http://www.fncci.org/text/ind_fact.pdf