Cell Phone Industry Analysis Persuasive Essay Example

and without it we would be stranded.

2. SWOT Four Strategic Factor Analysis Tables are listed below; one for each of the our major domestic cellular service providers. AT&T, Sprint Nextel, T-Mobile, and Verizon are all faced with internal and external factors that affect their business. They do have one thing in common, the threat of economic downturn. In order to be prepared to face this best, they should use their strengths and maintain minimum capital for economic downturn contingencies.

Other strategies these carriers can create by combining their strengths, weaknesses, opportunities, and threats include T-Mobile introducing new products and services such as the Linux Razor to promote innovations and the use of more advanced technology.AT&T can invest in different ways to improve their customer service rating through more intensive problem solving training for their service representatives. Sprint Nextel could use a short term strategy to gain customers and market share by cutting the price of their unlimited calling plan below their competitors but they would have to find a way to maintain what is gained from this strategy.

Verizon can target those customers that want to prepay for their talk time but also want the same benefits offered to contracted customers by offering new prepaid services.The previously listed strategies are just some of the many ways these carriers can combine the forces that work with and against them to obtain success.

The result is an industry with four distinct firms competing for the majority of US subscribers. The following chart represents the breakdown of the domestic wireless market share as of the fourth quarter of 2007. Source: Data compiled from Chetan Sharma Consulting The industry is not only

experiencing consolidation through mergers but it is a time of growth in the industry as well. The industry growth can be seen in the graph of US household mobile phone use below.

Source: Data compiled from Forrester ResearchSince 2003, US households with mobile phone use have grown from 67. 2 million to 94. 5 million, a total growth rate of 40% in five years. Year over year growth has averaged 8. 9% per year for the same time period. Industry growth is expected to continue according to Forrester research. US households with mobile phones are expected to grow another 11. 4 million homes or 12% by 2012.

Another measure of industry growth is individual mobile subscribers. Today multiple users have cell phone even among individual families. Therefore, each firm reports subscriber growth or decline in their respective annual report.All four of the large firms in the industry have experienced growth in their subscriber base from 2005 to 2007. According to the FCC’s report on US subscribers, total subscribers have grown 17% to 238. 2 million subscribers. The breakdown by firm is represented in the following graph. Source: Total from FCC 2007 data tables, firm share from annual reports The US cellular service industry is in a period of growth, as noted in the previous household and individual subscriber analysis. However, the growth is most notable in the wireless data market.

As noted in the graphs below, omparing voice Average Revenues Per Unit (ARPU) sold to data services ARPU, the growth is in data services such as text, email compatibility, music, and wireless entertainment. Price competition and similarity in networks has leveled the field in voice services. The innovations

are primarily in data services. The US wireless data market grew 55% in 2007 ending the year with $24. 5 billion in data services revenues with 4Q yielding $6. 9B (Chetan Sharma 2007).

The US nearly equaled Japan, one of the largest data services markets, in mobile data service revenues for the year.With several significant launches coming up in 2008, the US remains one of the most attractive wireless data markets (Chetan Sharma 2007). Source: Chetan Sharma Consulting The four largest firms all experienced the highest growth in the industry over the past three years. Several attributes specific to each firm contribute to this growth in the industry. The following overview of network coverage, innovation, mergers, and services contribute to their growth within the domestic wireless industry.

They provide wireless, business networks, IP and broadband, and directory services. The wireless segment makes up the largest percentage of AT&T revenues at 34%. AT&T completed a strategic acquisition of Bellsouth Corporation which allowed them to combine their wireless service with Cingular wireless in 2004/2005. This positioned AT&T as the largest of the big four firms. The variety of their business segments allows them unique economies of scope, a potential advantage over their competitors. AT&T has also made significant innovation in their network and in their consumer wireless products.

In late 2007, AT&T completed an upgrade to their network moving to GSM technology. GSM allows better international network compatibility. The current network covers 190 countries and over 165 US cities, in 73 of the top 100 markets (AT&T Annual Report, 2007). The biggest innovation from AT&T was in their strategic alliance with Apple. They have exclusive rights to offer the Apple

IPhone.

In 2007, AT&T showed a gain in subscriptions over Verizon due to the IPhone introduction as seen in the graph below (Chetan Sharma, 2007). Source: Chetan Sharma Consulting 3. 2. Sprint NextelAccording to the Sprint Nextel financial reports, their strategy is to offer state-of-the-art technology to provide differentiated wireless service and applications (Sprint Nextel Annual Report, 2007). Sprint Nextel segments its business into wireless and wireline services.

The segments serve consumer, business and government customers. Sprint Nextel’s wireless segment accounts for 86% of their total revenue. Sprint was the first to merge its business with Nextel in 2005. Merging the companies hoped to create a more robust network and unique innovation advantages over their competition.

Sprint Nextel utilized innovations in walkie-talkie applications and push-to-talk service. Nextel had a better digital network that was better suited to the push-to-talk service. Push-to-talk service gave Sprint Nextel a benefit advantage that was unique to other wireless competitors. Sprint Nextel has suffered dismal financial performance in 2007 due primarily to poor customer service.

Customer service has been blamed for the lowest churn rate in the industry at 2. 4% and rising as of year end 2006 (LeClaire, 2006).The merger between the two companies has been blamed as well for causing a strain on the financial performance as well as service performance. Sprint Nextel does have other significant innovative consumer products in the pipeline.

A recent alliance with Samsung to promote a touch screen phone with similar capabilities as the Apple IPhone created buzz at the wireless trade show in April 2008 (Carew, 2008). In 2008, Sprint hopes to tap into similar success from the launch of Iphone by AT&T, and improve customer service

to gain on their competition. 3. 3. T-MobileT-Mobile is the US division of the global enterprise, Deutsche Telekom. Their strategy is to “drive strong year-over-year growth by pioneering innovation that matters to consumers” (T-Mobile USA Annual Report, 2007).

T-Mobile USA, the smallest of the four big firms, is 100% wireless services unlike its competitors. However, the US wireless segment is only 22. 5% of Deutsche Telekom’s total annual revenue. Deutsche Telekom segments also include European wireless, broadband fixed network, and business customers.

T-Mobile like its competitors has made a smaller but still significant acquisition of SunCom in 2007.The SunCom acquisition gave T-Mobile an expanded network in the Carolinas and Puerto Rico. T-Mobile has committed to constant consumer product innovation as well with the 2007 release of the T-Mobile Shadow, the T-Mobile Sidekick iDTM, LXTM, and Slide, T-Mobile Wing, and the BlackBerry Curve – the first converged device enabled for the new HotSpot @Home service (T-Mobile Annual Report, 2007). T-Mobile prides itself on delivering excellent customer care, winning J. D. Power’s award for customer care seven straight quarters. This customer care has helped with overall customer retention.T-Mobile has shown significant improvement in churn rates, improving to 1. 8% in 2007 from 2. 1% in 2006 (T-Mobile USA Annual Report, 2007).

They claim one of the largest networks and the fewest dropped calls of all carriers. Similar to their competitors, Verizon’s business is segmented into wireless, business services, consumer retail, and telecom wholesale. The wireless segment of their business makes up 47% of their total revenue (Verizon Annual Report 2007).Verizon claims to be the largest domestic wireless carrier in terms of revenue (Alleven, 2007).

Much like AT&T, Verizon completed a significant

acquisition in 2006 of MCI. MCI gave Verizon strategic access to major markets, as well as a global network to develop their international integration. Domestically the Verizon network is similar to AT&T covering most major metropolitan areas, and developing shared network capacity with other carriers to fill out their coverage area. Verizon uses a different technology, utilizing CDMA technology in its network. The CDMA network covers close to 340 of 349 major US metropolitan areas.

It is compatible with GSM networks as well. The CDMA network uses Verizon towers, as well as contracted use with local providers and competitors such as Sprint. Verizon has invested heavily in their VCast mobile music and TV capabilities. Innovation in the wireless data segment has given Verizon tremendous growth in revenues, doubling data revenues from 2005 to 2006 (Alleven, 2007). Verizon showed tremendous growth for a second year, tying AT&T with 64% data revenue growth in 2007 (Chetan Sharma, 2007). Additionally, Verizon prides themselves on customer centered benefits.

The customer centered culture has given Verizon the lowest churn rate in the industry, as low as 1. 1% (Alleven, 2007). Verizon’s commitment to innovation and customer service allow the company to continue to grow in the competitive environment of the domestic wireless industry.