Maxis Essay

presentmentMaxis Communications Berhad is a guide energetic ph angiotensin-converting enzyme service supplier in Malaysia. Maxis Communications Berhad was established in the early 1990s and commenced unsettled telecoms operation in August 1995. It was then listed chthonic the first get on in Kuala Lumpur Stock Ex commute (KLSE). At present Maxis Communication Berhad is the biggest telecommunication plyr in Malaysia. The community has total proofreaders at 13.95 million as of December 2010.Maxis Communications Berhad, through its subsidiary, Maxis Berhad, engages in the provision of rambling, wintry line, and world-wide telecommunications operate in Malaysia. It withal provides Inter unclutter and broadband services and radio receiver multimedia related services, as well as owns, maintains, builds, and operates radio facilities and associated switches. The company was founded in 1995 and is based in Kuala Lumpur, Malaysia. Maxis Communications Berhad is a subsidiary of Binariang GSM Sdn Bhd.It uses the telephone dialling affix identifier of 012, 017 and 0142. In 2002, Maxis purchased TimeCell, a rival mobile service provider, from Time dotcom Berhad. anterior to the purchase, Maxis offered phone phone numbers beginning with 012, and TimeCell 017. no, subscribers substructure choose betwixt the two. Maxis provide a variety of mobile communication harvest-feasts and services. They offer prepaid handle casts, monthly subscription plans, global roaming, MMS, WAP (oer both GSM and GPRS), Residential Fixed Line services, broadband Internet plans, and as of early 2005, 3G services to both prepaid and postpaid subscription customers. Maxis Broadband make consumer can enjoy internet access in outdoor or indoor. It can go online at speed over 15 times faster than traditional dial up and do more, much more over the internet.ProfileMaxis Berhad, with its consolidated subsidiaries (together, Maxis), is the leading mobile communications service prov ider in Malaysia.Maxis were granted licences to operate a nationwide GSM900 mobile network, a domestic fixed network and an planetary gateway in 1993. It commenced its mobile operations in August 1995 and launched its fixed line and international gateway operations in early 1996.Since its establishment, Maxis has been providing a full suite of services on multiple platforms to fulfil the telecommunications necessitate of individual consumers, SMEs and striking corporations in Malaysia.Maxis mobile service is offered on a postpaid basis under the Maxis brand and via a prepaid stage under the Hotlink brand. The use of these two distinct brands, underpinned by synergistic values, has enabled Maxis to set its prepaid transaction success amply succession maintaining growth in its postpaid segment.Maxis has also pioneered and led the Malaysian market in delivering innovative mobile fruits and services. It was the first to launch 3G services in Malaysia known as Maxis3G in Jul y 2005, and in September 2006, it became among the worlds first to use HSDPA, a high-speed upgrade of its 3G network, to provide wireless broadband services. It was the first manipulator to toy the BlackBerry and Apple iPhone smart phones to Malaysia. The company in April 2009 expose the first commercial NFC-powered service in Malaysia.Maxis provide enhanced post-paid packages to corporate and SME customers, based on its highly successful consumer post-paid plans. These plans ar custom-made to meet the needs of enterprises, especially improved communications deep down and beyond their compound. Maxis international gateway services include termination of work into Malaysia from international telecommunications companies, supporting Maxis own outbound international direct dial (IDD) traffic, collecting international transit traffic and bandwidth leasing services. Maxis presently maintain zygomorphousconnections with more than 95 carriers in 38 countries and shake great invest ments in a number of submarine cable systems to carry its international spokesperson and data traffic.Maxis significant growth and strong track record of bringing innovation, excellent customer experience and value to stakeholders has won the company numerous awards over the years. The latest awards includeMalaysias Top Ten Companies class-conscious 1 Asias 200 Most Admired Companies, The Wall course Journal Asia, 2006 Asian unsettled Operator of the Year Asian peregrine News Award, 2007 Fourth Most Valuable tick off in Malaysia Brand Finance, 2008 and 2009 good Provider of the Year (Malaysia) Frost & Sullivan, 2008 Mobile Data Service Provider of the Year (Malaysia) Frost & Sullivan, 2009 Recipient of the Asia Pacific Super splendiferous Brand Award Asia Pacific International Brands Summit Malaysia, 2009Maxis vision is to bring advanced communications services to enrich its customers lives and ancestryes, in a mood that is simple and personalised, by efficiently an d creatively harnessing leading edge technology, and delivering a brand of service experience that is reliable and enchanting.Analysis of trade structureMarket structure classifies some of the key traits of a market, includingNumber of firms alikeness of the merchandises soldEase of entry into and way out from the market.Comparison of Market StructuresMarket StructureNo. of SellersTypes of output founding ConditionsExamples holy controversy cock-a-hoopHomogeneousVery unprovokedSmall crops, International commodity markets noncompetitive competitionLargeDifferentiatedEasyBoutiques, Restaurants, motelsOligopoly hardly a(prenominal)Usually identify but sometimes homogeneousDifficultCar Making, Tobacco Products, embrocateMonopolyOneUniqueExtremely difficultPublic utilitiesMAXISTELECOMMUNICATION FIRM.Few Competitors like DIGI, CELCOM, TUNETALK and so on.Entry into Telecommunication is Difficult.It requires a wide measuring stick of capital.Perfect competitionPerfect Competi tion Market has very large number of small firms, which acts independently rather co-coordinating decisions centrally. Perfect Competition is toll takers over referable to commodious Competition. Perfect Competition mainly deals with homogenous Products.Homogenous intend Goods from one firm cannot be severalize from other. analyse Maxis with Perfect CompetitionPerfect CompetitionMaxis1. It has very large Number of firms.2. Entry emergency is very easy.3. Very less standard of Capital is enough.1. It has hardly a(prenominal) Competitors in the Market likeDIGI, CELCOM, OKTEL etc..2. Entry Requirement is Difficult.3. It requires large amount of Capital.On comparison Maxis with Perfect Competition market structure. Maxis do not start out under Perfect Competition.Monopolistic CompetitionMonopolistic Competition securely has many Small Sellers.They involves in several(predicate)iated Product.It is free from Price Competition.It has Easy Entry as well as Exit.Comparing Maxis w ith Monopolistic CompetitionMonopolistic CompetitionMaxis1. It has many small sellers.2. Entry destiny is easy.3. Its free from Price Competition.1. It has a few Competitors in the Market.2. Entry requirement is difficult.3. It has competition in price with their competitor.On examine Maxis with Monopolistic Competition market structure. Maxis do not come under Monopolistic Competition. MonopolyMonopoly is a Single Seller in the market.It deals with unique product.Entry Barriers is very difficult.Comparing Maxis with MonopolyMonopolyMaxis1. It has Single Seller in the market (free from Competitors). 1. Ithas its Competitors in the market.On comparing Maxis with Monopoly market structure. Maxis do not come under Monopoly.OligopolyIt has very few seller (which is dominated by a few large firms).. It deals with Homogenous as well as Differentiated Product.Entry Barrier is difficult.Comparing Maxis with OligopolyOligopolyMaxis1. It has few Sellers in the market.2. Entry Barrier is dif ficult.3. It requires a large amount of Capital.1. Maxis have few Competitors in the Market.2. Entry barrier is difficult.3. It requires the large amount of Capital.On Comparing Maxis with Oligopoly market structure. We came to know that Maxis is an Oligopoly.Behaviour of MaxisThe deportment of Maxis can be identified by considering the number and size distribution of firms (market helping in terms of subscribers and revenue) in the market the extent to which products atomic number 18 differentiated how easy it is for other firms to enter the market and the extent to which firms atomic number 18 co-ordinated or diversified. However, as there argon only 3 large cellular communication firms (Maxis, Digi and Celcom), individual market component parts are used to taproom market power.The basic conditions faced by the cellular communication firms areDemand conditionsPrice is relatively elastic as seen by gigantic swings in net additionsleadership quarters to quarters as different cellular communication firms took on price-leadership.Source MALAYSIA TELECOMMUNICATIONS REPORT Q3 2011Where the actions and the outcomes of these actions are mutually beneficial among several agents and this interdependence is mutually recognized. Neoclassical economics assume perfectly rational agents, perfect information and zero transaction cost under perfect competition. However, due to limited cognitive capability and/or blemished information, bounded rational agents experience limits in formulating and solving complex problems and in processing (receiving, storing, retrieving, transmitting) information. Routine standard procedures or heuristic approaches to decision-making are apply by bounded rational agents. The sum of the market shares of the n-largest firms.Maxis subscriber net addition dropped to a dismal 120,000 users in 3Q10 before regaining to 274,000 users in 4Q10. The relevant substitutes are provided by fixed-line Telcos for local city calls (fixed-line rate of RM0.04/minute versus cellular rate of RM0.15/minute) and Voice-over-Internet-Protocol (VoIP) providers for IDD calls. However, these are not of study concerns soon as the mobile services are cannibalizing/substituting fixed-line services slice the VoIP providers are competing in a value-conscious segment with an inferior product (i.e. poorer voice quality).Supply conditionsThe cellular technology adopted is the European GSM standards. However, due to constant technology changes, both Maxis and Celcom have launched 3G services earlier while Digi had its 2.75G (EDGE) services previously and recently added 3G services in auberge to be able to compete with both Maxis and Celcom. The market structure analysis drum vanguard of Maxis is as followsData Observations and/or MeasurementAnalysis/CommentNo. of Firms3Regulated OligopolyMarket ShareCellular persistence subscriber market share (overall)Cellular industry revenue market share (overall)Subscriber/Revenue market shareCelcom 3 3% & 36.0%Digi 25% & 25.3%Maxis 41% & 42.1%There is no single dominating firm.However, Maxis is the leading firm in both revenue & subscriber market share, followed by Celcom and Digi. ProductDifferen-tiationProduct preeminence based on calling plans and set structure to charm to different customer segments. Value-added services (ring-tones, etc.) are quite homogenously provided by tertiary party provider. Minimal product differentiation as airtime is airtime and VAS confine are widely available across all 3 firms.Entry barriersLicensing and regulationsHeavy capital investments & minimum efficient of scale required First-mover advantages electronic network & Lock-in effectsHigh entry barriers mainly due to government regulations due to frequent technology changes, incumbents do incur substantial ongoing capital expenditures and face the dangers of being leapfrogged by potential entrants Numbers portability not enforced yet to counter the lock-in effects of personalized phone numbers. Exit barriersHuge sunk costsBulk of capital investments are asset fitting(postnominal) to Telco operations. Source MALAYSIA TELECOMMUNICATIONS REPORT Q3 2011Price competitionUsing venture theoretic model, Telcos are assumed to provide a homogenous product and have sufficient capacity to serve the market demand. It is a non-cooperative game as there werent any enforceable agreements between them as they compete in the marketplace. It is a repeated one-shot concurrent game as they were driven by quarterly performance accountable to shareholders. As such, they would decide on their pricing strategies independently and aware of rivals prices in the market while forming certain expectations about rivals pricing strategies. Actions available are Maintain Price and Undercut Price.Payoffs are ranked in methodicalness of preference (higher number is preferred). The most preferred outcome by firms is where one undercuts price while its competitors maintains price, leading to market share gain at the expense of its rivals. When all firms maintain prices, there is no change in market-share and profitability. When all firms undercut prices, market-share remains with reduced profitability. The strategic-form representation in a simplified 2-player model is as follows Telco2Telco1Maintain PriceUndercut PriceMaintain Price3,31,4Undercut Price4,12,2Example of Game possiblenessSolving for Nash equilibrium, both players have Undercut Price as theirdominant strategy resulting in a Pareto-inefficient Dominant- Strategy-Equilibrium at (2,2). This is a repeated Prisoners plight game and these interactions are witnessed in the current market through an escalating price-war resulting in reduced Average-Revenue-Per- drug user (ARPU).Example of Starter pack price wars involving Maxis and DigiLaunch periodMaxis Hotlink 017Digi Beyond PrepaidSep 8, 2005RM20 to RM10Oct 27, 2005RM18 to RM9.90Nov 25, 2005RM10 to RM8.80Dec 10, 2005RM9.90 to RM8.50Average Revenue per UserSo urce Articles from 2009 to 2011, Press release 2009 to 2011, Maxis reports 2009 to 2011, Digi tarradiddles 2009 to 2011, Celcom bills 2009 to 2011. If this game is repeated infinitely, collusive doings through the use of Tit-For-Tat strategy may result in non-competitive/monopolistic-like pricing which reduces public welfare. Though Maxis had a higher ARPU previously according to the preceding(prenominal) data, Maxis always need to be proactive in monitoring firms behaviour to detect possible tacit collusion through price-signaling.Product differentiationThe preceding(prenominal) game theoretic analysis suggests that if the price-war continues,Maxis and the other two firms impart eventually be forced to price at their marginal costs similar to a perfectly competitive firm. Therefore, it is rational to expect Maxis or the similar firms to conk out the intensity of the price competition through product differentiation and customer segmentation. It is important to note that tr aditional microeconomic scheme treats all consumers as homogenous. In reality, this is not the case and these firms are therefore offering different calling plans, pricing structures (ON-Net/Off-Net), pre-bundled minutes and services, etc. collectable to bounded rationality and heterogeneous consumption, consumers find it difficult to make head-to head cost-benefits comparisons and thus make the products appear to be somewhat non-homogenous and not fully substitutable for one another.These firms are also competing and differentiating through demand rousing (shifting the demand curve) by organizing SMS contests, sponsoring shows like Malaysian Idol which elevate SMS voting, etc. where the SMS charges are priced much higher than normal SMS charges in order to drive higher non-voice revenue and profitability as illustrated by Maxis, Celcom and Digis 2010 announcements below.Source DiGi AGM 2011 IRwebsiteOne has to take note that the marginal costs are almost negligible relative to the huge fixed-cost investments required. ON-Net refers to calls within the same providers network. OFF-Net refers to calls made from one provider to another providers network. Decision-making based on imperfect information (uncertainty about future, costly to feign perfect information) and/or limited cognitive capability.Through product differentiation, to each one differentiated product is addressing its relevant market instead of addressing a large homogenous market, thus accepting Telcos to raise price to a higher place marginal cost (and reduce consumers surplus) without losing its entire market share. Thus, product differentiation can soften price competition and crap a degree of marketpower. We find from the higher up data that Maxis currently have the highest market power and leading company with the highest revenue.However, these type of firms balance between the reductions in welfare caused by product differentiation pricing above marginal costs versus the increased in welfare by allowing different consumers preferences to be closely met. Each firm also check over proper ethical behaviour on the part of the Telcos to ensure that public welfare is protected in SMS contests, SMS voting, etc. to prevent unsuitable negative consumption externalities such as encouraging the habit of romp, excessive spending, etc.AdvertisingMaxis often use advertising to clear brand and/or product differentiation in order to soften the price competition. To the extent that persuasive advertising create customer consignment through perceived differentiation over essentially identical products, they create market power in the sense that consumers may be ordain to pay more for preferred brands, thus allowing these type of firms to raise prices above marginal costs.Following the previous assumptions with payoffs ranked in order of preference (higher number is preferred), the most preferred outcome by firms is where one advertises while its competitors dont, leadin g to market share and profitability gain at the expense of its rivals. When all firms dont advertise, there is no change in market-share and profitability. When all firms advertise, market-share remains with reduced profitability. Maxis uses similar strategy by advertising less gaining market share and more profit at expense of its rivals which we can see below Advertising Expense of 2005 by Malaysian cellular communications industryCommunications SectorMobile Line operateRM(million)Communications SectorMobile Interactive ServicesRM(million)TotalRM(million)Celcom52.3Celcom6.658.9DiGi37.7DiGi5.142.8Maxis47.8Maxis1.949.7Source www.mcmc.gov.my, Reports by Maxis, Celcom and Digi 2005 Customer SatisfactionSource SKMM Consumer stick with 2007 at www.mcmc.gov.myThe Customer-Satisfaction-Index (CSI) for the three firms are almost similar. We find that Maxis performance is satisfactory in the market and can be considered as a leading oligopoly firm among the three.ConclusionMaxis is one of the Malaysian oligopoly cellular communications industry with high entry barriers, mainly due to government licensing restrictions and high exit barriers due to huge capital investments (sunk costs). However, frequent technology changes could potentially allow leapfrogging by competitors or potential entrants. The market share is with intense price-competition as the market gets more saturated. Non-price competitionis also intense, mainly through advertising. However, as price-competition escalates, other cellular communication industries are pricing closer to marginal costs as evidenced by the steady drop in ARPU over the past few years. Consumer satisfaction is high for Maxis though consumers are seeking for even lower communications charges and greater geographic coverage.Maxis is currently doing a good job and should continue to push ahead with its plan to allow greater customer choice. Maxis should also monitor for deceptive advertising, SMS contests & voting, etc. and also possible tacit collusive behaviour through price-signaling. It is also recommended that Maxis conducts benchmarking against regional and international cellular communication industries on key areas like profitability and/or returns on equity to determine fair-returns, service quality, expert efficiency, etc. to determine the success of its policies in future._______Referenceswww.theedgedaily.comDigi gains market share, The butt against Daily, 5 Dec 2005www.osk188.comwww.digi.com.mywww.maxis.com.mywww.celcom.com.myMaxis Quarterly 2009 ReportMaxis Quarterly 2010 ReportDiGi 2009 ReportDiGi 2010 ReportCelcom Annual Report 2010Maxis Annual Report 2010DiGi Annual Report 2010www.mcmc.gov.mywww.mobileworld.com.my/ Profit_expense_2005www.boardroomlimited.comDixit, A and Skeath, S (2004) Games of Strategy (2nd Ed), W.W.Nortonwww.wikipedia.orgRosenberg, E.A. and Clements, M. Evolving market structure, conduct and policy in local telecommunications, The National Regulatory Research Institute . 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