CHAPTER – I

INTRODUCTION AND DESIGN OF THE STUDY

1.1 INTRODUCTION

In the modern world, marked by hustle and bustle coupled with ceaseless

activities, people have come to depend increasingly on mobile phones to carry out

their day to day chores. Cell phone is a man-made communicator, the application of

which is confined to the area of roaming. It is applied in a wide variety of settings – at

work, at home, and for convenience and security. This equipment has become such an

integral part of life today that it enslaves man to a great extent.

Cell phones are available with an incredible range of functions. Depending on

the cell phone model, one can store information, make task or do lists, keep track of

appointments and set reminders, use the built-in calculator for simple mathematics,

send or receive e-mails, get information from the internet, play games and integrate

other devices such as Personal Digital Assistants (PDAs), MP3 players and GPS

receivers.

Cell phones provide up-to-date information about business and economy

through SMS and MMS. In addition, the greatest advantage derived in the use of cell

phone is that it saves a lot of time and energy of man. Hence, the absence of cell

phone renders man miserable and its very presence becomes all the more

indispensable to him.

1.1.1 ADVENT OF CELL PHONE

Digital, wireless and cellular roots were introduced in 1940s. The Bahrain

Telephone Company (Batelco External Link) began operating a commercial cellular

telephone system. It probably marks the first time in the world when individuals

started using mobile cellular radio. And the first mobile phones made their

appearance on June 17, 1946. They were installed by South Western Bell Telephone

Company, in the cars of two different customers one at St. Louis and another at

Missouri of the United States of America. Bell Laboratories introduced the idea of

cellular communication in 1947 with the police car technology under the guidance of

Joel Engel, Head of Research, Bell Laboratories. However, Motorola was the first to

incorporate the technology into a portable device. Martin Cooper, a former General

Manager for the systems division at Motorola, is considered the inventor of the first

modern portable handset.

1.1.2 CELL PHONE AND ITS WORKING

Cell phone is an electronic device, which connects people around the world. It

is similar to a Walkie – Talkie. The difference between a cell phone and a walkie-

talkie is that two people can communicate at the same time through cell phones and

only one person can talk at a time with a walkie-talkie, cell phone uses two

frequencies, which is why one can talk and listen at the same time. Cell phone can

travel from area to area or cell to cell (cell phone tower coverage area) as device out.

The only limit to where the cell phone can go is how many towers are there to carry

and transmit the frequencies. This is a remarkable improvement over radio telephones

which carry the signals from one control antenna with a range of less than 50 miles.

Basically, cellular radio provides mobile telephone service by employing a

network of cell sites, distributed over a wide area. A cell site consists of a radio

transistor and a base station controller which manages to send and receive traffic from

the mobiles in its geographical area to a cell phone switch. It also employs a tower

and antennas, and provides a link to the distant cellular switch called a Mobile

Telecommunication Switching Office (MTSO).

Advanced mobile phone service using a novel cellular approach operates in 25

to 45 MHZ Bands and 870 to 890 MHZ Bands and 1800 MHZ (Dual Bands).

Recently, the large number of channels available in the new bands has made cellular

approach more practical. It is the usage of frequency which enables a person to talk

and listen at the same time.

On a ‗complexity per cubic inch‘ scale, cell phones are some of the most

intricate devices people play with on a daily basis; modern digital cell phones can

process millions of calls per second in order to compress and decompress the voice

stream. Because of these facilities in cell phones, the demand for them increases

tremendously and so the companies providing services and channels of service also

increase much.

1.2 STATEMENT OF THE PROBLEM

At present, the demand for cell phone is increasing. There are many players in

the cell phone industry. To market their services, every company is adding many new

features. The subscribers are provided with various schemes of cell phone services.

And the market for cell phone has become very competitive. There is cut throat

competition between private players and public sector undertakings such as Bharat

Sanchar Nigam Ltd. (BSNL). Due to poor area coverage, many cell phone industries

lost their market. Non-existence of towers in rural areas resulted in a great loss for

many cell phone industries. Subscribers also face many problems such as battery

break down, abrupt call cuts, poor area coverage and over billing.

In this backdrop, an in-depth study on the cell phone services throws insight into

their strengths and weaknesses and in addition, may suggest enhancements in

appropriate areas for better functionality and/or serviceability. Such a study may also

manifest the opportunities and threats that system faces and puts forward possible

corrective and control measures to be taken in the future.

1.3 REVIEW OF LITERATURE

Extensive literature survey is an integral part of every research. Review of

literature is necessary for the exact understanding of the topic under study. As the

present topic is related to cell phone services, an attempt is made here to review a few

important studies conducted by various management researchers and professionals on

these services. There are only a limited number of studies because the cell phone is of

recent origin. A separate chapter is not allotted for the review due to this reason.

EVOLUTION OF CELL PHONES

MOA Report (2004) says that the mobile phones are often regarded as a fairly

recent innovation; however, they have been freely available in the UK for over 20

years. The first type of mobile phone was large and cumbersome and similar in size to

a large briefcase. These phones were analogue based and in the early days not overtly

reliable, due to the two existing network operators needed to install an effective

infrastructure of network coverage quickly. With the launch of the second generation

(2G) cell phones, consumer popularity towards cell phones rose steadily. Mobile

phones became smaller and easier to handle. Network coverage improved greatly and

it became more reliable. During the period from December 1999 to December 2000,

a total of 46,000 new users a day joined the UK mobile phone network. In UK, during

the Christmas period in 2000, 5.1 million bought mobile phones.

According to Rastogi (2003), mobile phones and fixed line phones are good

substitutes for each other and therefore, the entry of mobile phones in 1995 started

competing with the fixed line phones. At the time of entry of mobile phones into the

market in 1996, the call rate was Rs. 12 per minute for STD calls, which came down

to Rs. 8 per minute in the year 2000. A substantial reduction in intracircle, intercircle,

and international call rates is observed on a regular basis during these ten years after

the entry of mobile phones into the market. The total number of fixed line users

started declining whereas the total number of mobile users showed an increase. In

metro cities, the mobile phones have outnumbered fixed lines. This trend has also

started penetrating into cities and big towns.

DEVELOPMENT OF CELL PHONE INDUSTRY

Bijli (2006) states that Tata Tele Services (TTSL), the second largest CDMA

operator in the country, chalked out a major expansion plan to enhance its retail

presence, investing somewhere between Rs. 800 million and 1 billion by March 2007.

TTSL looks forward to increase its retail count from present 2,700 outlets to 3,500

outlets. The operator currently enjoyed a customer base of 12 million and forecast an

increase by another 50 per cent at the end of the year 2007.

REASONS FOR THE GROWTH OF TELECOM SERVICES IN INDIA

Arumugasamy (2005) opines that there are two factors responsible for the

growth of telecom services in India. One of the reasons is availability of cheaper

handsets with lesser functionality which suits the Indian conditions with dust

resistance and battery capacity. The other reason is the significant dip in tariffs from a

level of around Rs.16 per call for an STD, to a low tariff regime of Re.1 a call

nationwide.

TURNOVER OF TELECOM INDUSTRY

Jharwal (2005) states that the annual turnover of telecom industry during the

year 2005 was more than Rs. 51,600 crores. The telecom operators contribute about

Rs. 6000 to 6,500 crores per annum to the central exchequer in the form of license

fee, USO levy, spectrum charges, and dividends etc. BSNL alone contributed about

Rs. 2500 crores to the central exchequer during the year 2005.

GROWTH OF GDP THROUGH CELL PHONE SERVICES

Business Line (2007) reports that according to a new study of three developing

markets - China, India and Philippines conducted by global consultancy giant Mc

Kinsey, the economic impact of all wireless activities on the economy of these

countries is upto four times of the combined value of the mobile operators. The

wireless activities in India contributed about 2 per cent of the country‘s GDP in 2005;

the study says that the rise goes ahead as the mobile penetration was a mere seven

percent in the year 2004. India, the world‘s largest growing telecom market, is

expected to grow with 500 million mobile users by 2010 and 250 million by 2007

from the current 150 million.

GROWTH OF CELL PHONES

Vivek Gupta (2003) observes that after shipping 20 million phones, Bharti has

become the largest manufacture of telephone instruments globally outside China. The

company is targeting the next 10 million phones by 2005.

Kuber (2005) asserts that the sales of camera phones from all makers topped

84 million units worldwide during the year 2003. It is also no secret that more and

more people now prefer to buy camera phones against ordinary ones. Reliance offers

camera phones at a low price of Rs. 4,500; the penetration is expected to rise further.

The first camera phone was introduced in Japan by a leading mobile operator

belonging to the Vodafone group and was manufactured by Sharp. Today, even the

entry level models from Nokia, Sony Ericsson, Motorola and others offer basic

imaging capabilities and some are also offering video capture and viewing capabilities

and image editing software.

Kuber (2005) opines that among the Asian markets mainly, India and China

are leading the overall mobile phone market. In US, camera phone penetration

reached 14 per cent of the total cell phone user base during the year 2004. In the same

year, the camera phone shipments around the world went up by 200 per cent.

Dhaliwal (2006) reports that India had set to record 3rd

largest mobile

population in world during 2007 as middle classes ‗went mobile‘. Mobile ownership

was expected to cross 100 million in 2007, as the largest middle class in the world

took up ownership.

Krishnaswamy (2006) says that during 2010, India is expected to be the second

largest market for Nokia in terms of volumes. The company claims, it was the first

vendor to manufacture both devices and network equipment. It is on track for the

$150 million project at the start of production. A comparatively late start in the

country, Nokia has gained great brand image.

Indian Minister for Telecommunications (2007) reports that according to 2001

census, the population of India was 109 crores and 80 lakhs. In India, 70 lakh cell

phones are manufactured annually and 20 crore people are cell phone users. Nokia

manufactured 400 lakhs (40 million) cell phones worldwide during 2007.

MODERN FEATURES AVAILABLE IN RECENT CELL PHONES

Kuber (2005) observes that the early camera phones were limited in their

effectiveness due to the limited number of colours produced on a phone screen. The

storage capacity was also limited, hampering their capabilities and price. These

storage problems have vanished with the integration of higher built-in memory and

most camera phones now support memory cards capable of storing gigabytes of data.

With blue tooth gaining popularity amongst these phones, exchanging photos is no

longer a painful process.

REASONS FOR THE DEMAND OF CELL PHONES

Chandiran (2005) points out that yesterday‘s luxuries are today‘s necessities.

Today, there are a number of cell phone service providers in the market and they differ

in network capacities used, reputation, tariff on calls made, etc. In the present world,

even middle class people are using cell phones and they replace the postal, telephone

and telegram services. By considering this situation, cell phone service providers have

come up with different names. But users prefer to avail services from favourite

service providers due to various reasons. It is obvious that coverage area, billing

system, plans offered and low service charges lead to the high use of cell phone

services by the customers.

Sukumar (2006) observes India was the fourth largest market for Nokia after

China, US and UK, in the beginning of the year 2006. At the end of the year, Nokia

was expected to gain the third or second largest market in India.

SUCCESS SECRET OF NOKIA

According to Vivek Gupta (2007), the Indian GSM handset market is growing

at a rapid pace witnessing a 100 per cent growth in volume. Nokia is considered to be

the market leader in India. Nokia‘s leadership is due to its ability to offer a wide

variety of products with style, technology and design that the customer prefers.

EMPLOYEES IN NOKIA

Sukumar (2006) opines that by the end of the year 2005, Nokia employed

around 58,900 personnel worldwide. Out of this, 40 per cent of the employees were

found in Finland. Less than 10 per cent of the work force was based in China, its

number one market.

MARKET SHARE OF CELL PHONES

Gupta (2005) opines that during the year June 2005, dominated largely by

Nokia with a total market share of 59 per cent, and followed by Samsung (13 per cent)

and Motorola (7 per cent) respectively, the Indian mobile handset market catered to 45

million GSM subscribers. According to Gartner, the total number of mobile phones

sold was around 21 million in India in 2004, which is estimated to be 34 million in

2005. To tap the market potential, many large Electronic Manufacturing Services

(EMS) companies are seriously considering setting up their handset facilities in India.

Singh (2006) furnishes the fact that Nokia, Samsung, Sony Ericson and LG

have established their manufacturing base in India to embrace cost effectiveness and

fight the market share battle more effectively. Nokia‘s market share was a staggering

78.8 per cent in February 2006.

Vivek Gupta (2007) asserts that although Nokia is considered to be the leader

in sales, the market share fell down from 80 per cent in December 2005 to 70 per cent

in December 2006. At the same time, Motorola and Sony Ericson gained 10 per cent

and 8 per cent market share respectively. With five to six million subscribers added

every month, handset companies captured a huge market in India during 2007.

Nokia‘s fall in the market share may not affect its volume of sales and profitability.

Industry analysts opine that Nokia‘s market share may stabilize around 70 to 72 per

cent by offering products that are relevant and customized to local needs.

AMOUNT SPENT ON PURCHASE OF CELL PHONES

Parthasarathy (2006) says that the average amount spent on the purchase of

handset, which is around Rs. 5000, represents nearly half a month‘s salary for most of

the customers in India, while for British people, it amounts to just five per cent of their

salary.

FAVOURITE CEL PHONE BRANDS

According to Parthasarathy (2006), Nokia and Samsung are the favourite

brands for Indians and this is same as the global preference. Internationally, Motorola

is in the third place followed by Sony Ericsson and LG.

MARKETING THROUGH CELL PHONES

Bauer (2005) states that the leading industry brands and marketers commit

from five to 25 per cent of their advertising and promotional marketing budgets to

interactive digital media including the mobile phones.

Hanley (2006) briefs mobile marketing as the practice of leveraging mobile

channel for marketing. It is the practice of brands and marketers interacting with their

audience through the mobile channels which include messaging (SMS, MMS, and E-

mail), voice message, alternative alerts, bluetooth, mobile internet, wireless

advertising and data services like mobile TV, picture recognition, mobile portals etc.

The Direct Marketing Association (2006) notes that marketers are employing mobile

marketing for response fulfilment, sales promotion support, direct sales (through

downloadable content), 'interactivity' (such as voting and competitions), customer

service support, research and data collection, couponing and ticketing, Customer

Relationship Management (CRM), advertising and branding .

PROBLEMS FACED BY CUSTOMERS

Sawa (2004) reveals that the cell phone weighing about 100 grams is made

of electronic components. Popularization of cell phones, no doubt, benefits

manufacturers of those components, but has few ripple effects on other industries.

Cell phones consume little power, but cell phone bills are a burden to family

heads, college students, many middle school and high school students. Cell-phone

bills tend to dampen house hold spending.

Gigi Vijayakumar (2005) points out that the users find the current mobile

devices to be ineffective, particularly with respect to restricted keyboards, and pocket

size screens, limiting the usability of mobile commerce. In addition, because of the

limited storage capacity and information access speed of most smart phones and PDAs

(Personal Digital Assistant), it is often difficult or impossible to download large files

to these devices.

Selvaraj (2005) opines that the customers face the problems of cell coverage,

connectivity and billing patterns. Customers also feel that a long time is taken by the

cell phone service providers to rectify the complaints made by them. Women often

find it difficult to carry the handsets with them, while men carry them through their

shirt/pant packets. Customers also fear about the risk from exposure to Radio

Frequency (RF) emission from wireless phones.

Banumathy (2006) opines that the customers face problems like poor coverage

of area, voice clarity, difficulty in getting connections etc.

INDIAN NETWORK CAPACITY IN THE GLOBAL SCENARIO

Jharwal (2005) says that telecom sector is one of the fastest growing sectors of

the Indian economy. During 2005, India had more than 100 million telephone

networks considered to be one of the largest networks in the world. In the year 2005,

India was the fifth largest network in the world after china, USA, Japan and Germany.

GROWTH OF CELL PHONE SERVICES

Krishnan (2004) says that Bharti had 31.9 million mobile users at the end of

2006 compared to 16 million at the end of 2005. Its broadband and telephone

subscriber‘s base grew from 1.2 million to 1.7 million over the one year period. The

revenues and net profit for the nine months was Rs. 13,126 crores and Rs. 2,904

crores; a growth of 59 per cent and 84 per cent respectively compared to the year

2004.

According to Economic Times (2004), 4.06 crore people in India used cell

phone facilities during the year 2004. The subscribers with GSM technology touched

3.20 crores in the year 2004 and the rest of the 86 lakhs subscribers used CDMA

technology in India. BSNL started its service in the year 2002. During August 2004

alone, BSNL added 6.30 lakh subscribers. The overall subscribers‘ base of BSNL till

August 2004 was 69 lakhs, Reliance had 78 lakh subscribers, Bharti Airtel 83 lakh

subscribers, and Hutch had 62 lakh subscribers.

Kumarakaushalam (2005)

reports that according to P.H. Rao, Managing

Director, Bharti Mobinet, the mobile market of Airtel had touched two lakh subscriber

mark, while the Chennai cell phone market had crossed the four lakh figures in

December 2002. The total of

62 million cell phone subscribers in the Indian

Telephone Market is divided between GSM and CDMA and its proportion was 3.8: 1,

and 750 million numbers of cell phones sales was expected worldwide in the year

2005.

According to Business Today (2005), India added 19.6 million mobile

telephone connections in 2004 and 1.44 million increase during the year 2005. During

the next 5 years, above 90 per cent of connections added were expected to be mobile.

In the year 2005, around 80 per cent of India‘s 54 million mobile telephone customers

were those who used pre-paid cards. The remaining 20 per cent customers accounted

for postpaid connections.

Makkar (2005) reveals that there were 34.6 million mobile phone subscribers

in the country as on April 2004 (Cellular Operators Association of India and

Association of Basic Telecom Operators). With approximately seven million

subscribers, Airtel commanded nearly 20 per cent share of the market – making it the

number one brand in the country. Airtel‘s world class service and innovative products

enabled it to establish this position of leadership.

There was a drastic rise in the number of subscribers for Airtel from 1.14

million in 1999 to 3.27 million at the end of January 2001. It had almost doubled to

6.4 million subscribers in the year 2002. As on March 2002, out of the total of 6

million subscribers, 2.4 million subscribers were postpaid subscribers, prepaid

subscribers were about 3.5 million. (Selvaraj 2005)

Bansal (2005) reports that India is the fastest growing mobile communication

market in the world. It was one of the early adopters of Global System for Mobile

Communication (GSM) technology and during 2005 there were over 30 million GSM

subscribers in the country, an increase of 100 per cent over the year 2004. In addition,

there were over 10 million Code-Division Multiple Access (CDMA) subscribers. In

order to keep pace with the world, India should widely adopt third generation (3G)

technology.

Gupta (2005) says that from a slow start in 1995, the Indian mobile phone

industry has shown a growth of more than 100 per cent annually and there is an

increasing demand for better services and lower prices. India has emerged as the

second largest mobile handset market in the world, poised for explosive growth by

2007.

According to Jayaram (2005), the global 3G experience has been far from

good. Almost a year after, full-blown 3G services were launched, there are only 45

million 3G users world-wide across 25 telecom networks. That is just 2.36 per cent of

the 1.9 billion mobile subscribers worldwide during the year 2005. Vodafone, which

has 154.8 million subscribers globally, has just 2.4 million 3G subscribers. The most

optimistic industry forecasts suggest one percent of the mobile subscriber base in India

is shifting to 3G in two years of starting operations. During the year 2005, 60 million

mobile subscribers were available in India. The mobile operators worked towards

meeting the target of 200 million mobile subscribers by the end of 2007.

Bauer (2005) states that in 1997, there were 297 million mobile

subscribers worldwide and in just 10 years, the subscriber rate has ballooned to an

incredible 1.8 billion. Europe is the most mature market with 96 per cent

penetration rates, followed by Japan (79 per cent), the United States (64 per cent),

and the rest of the world is following suit with increased rates of mobile services

adoption.

Agarwal (2006) opines that the mobile subscribers‘ base in India crossed the

100 million mark, from 55 million in May 2005 to 101 million in May 2006.

Connections have grown to 84 per cent, forcing handset vendors to put more thought

into low cost phones aimed at first time buyers.

Sachithanand (2006) points out that during the year 2005, the mobile telephone

base was expected to grow by 38 percent in the metros, 120.6 per cent in ‗C‘ circles,

and 67 percent in ‗B‘ circles. The handset manufacturers tried to make a market out of

small cities, big towns, small towns and even rural India in an effort that spans

everything from Rs. 200 prepaid recharge coupons and Rs.999 life time connections

for mobile phones.

Lath (2006) reveals that India had 5.9 million mobile subscribers in August

2006, the highest in the world (China had 5.19 million). At the end of August 2006,

India had 116.5 million mobile subscribers. This is the first time since the onset of

cell phones in India in 2004, the country is adding more subscribers than China.

Paul (2006) asserts that in January 2006 India added 4.7 million mobile

telephone connections, an average of 105 a minute. That took the total number of

mobile telephone subscribers in India to 81 million. At the time of the official

opening of Nokia‘s Chennai factory, the number had risen to over 85 million.

‗Research and Markets Estimates‘ show that by 2007, India is expected to become the

third largest mobile telephone market in the world after China and the US; another

estimate by Portio Research foretold that India would add 358 million mobile

connections between 2006 and 2011 as compared to China‘s 354 million, the same

study extrapolates that by 2011, China and India together will boast of over a billion

mobile connection to their credit.

Taneja (2007) reveals that the number of telecom subscribers in India was

expected to reach a staggering 250 million by the end of 2007, as competition in

the segment intensified with aggressive expansion plans of regional and global

players. The country‘s total mobile subscriber base stood at about 13 crores, with

an addition of 66 lakh subscribers in the month of October 2007. While GSM

based cell phone subscriber base touched 9.6 crores in October 2007, the CDMA

based mobile user base had swelled to 3.3 crores during the month, according to

the data released by Trade Associations COAI and AUSPI respectively.

Kumar (2007) opines that in India BSNL introduced its service during 2002

October. In India nearly 3 crore BSNL mobile connections were available during the

year 2007. Among the 3 crores, 2 crore connections were in Tamil Nadu. Only 2000

cell phone towers were available in Tamil Nadu in the year 2007. In Kanyakumari

District, one lakh people used BSNL mobile service during 2007. Tamil Nadu had the

majority of BSNL customers in the year 2007.

Pandya (2007) enumerates the facts that at least 110 million new mobile phone

subscribers will be added during the next three years. According to US based

investment bank Morgan Stanley, India‘s mobile market was expected to add a

compound average rate of 40 per cent until 2007. India has also emerged as the

second largest market after china for cell phone handset makers such as Nokia,

Siemens, Sony Ericson, and Korea‘s LG. They have models in the market to keep

pace with the demands from people.

Arumugasamy (2007) brings to light that the mobile services were launched in

1994 in India. The major boost to the sector however began in 2000 after the

announcement of NTP 1999 (New Telecom Policy), which led to a drop in code tariff.

This was followed by the miraculous growth in the years 2003 to 2005, when

telephone connections almost doubled from 54.62 millions in March 2003 to 95

millions in January 2005, i.e., 41 million connections were added in less than two

years.

Sify (2007) reveals that mobile phone users have outstripped traditional

landline connections in the industry, marking a major lifestyle and communications

milestone for the country. A survey conducted by Voice and Data, India‘s leading

telecom magazine, found that 45 million possess mobile phones in India compared to

44 million who have landlines. It took landline phone subscriptions 50 years to get to

the 40 millions mark while mobile phone touched it in nine years and four months.

Among the world‘s countries with billion-plus subscribers, India and China provide

rich pick ups for an industry looking outside the mobile-saturated Europe.

LEADING SERVICE PROVIDERS IN INDIA

Thiagarajan (2004) opines that both Bharti and Hutch continue to pose a

challenge to BSNL. Bharti has maintained its lead in GSM market share over BSNL

at 25.8 per cent during the year 2004. The recent acquisition of Aircel has given

Hutch a higher market share of 23.6 per cent compared to BSNL‘s 21.5 per cent.

EXTRA FACILITIES PROVIDED BY CELL PHONE SERVICES

Sahu (2005) says that the cell phone services were used in their own

transactions such as sending the mobile service charges, bill payment and account

reviews, change in tariffs, new plans and other offers through SMS, MMS etc.

Companies providing information services have initialized to deliver financial, sports

news and traffic updates through M-Commerce applications. Service providers

provide ball-to-ball score up-dates live when a cricket match is being played. By

implementing LBS (Location Based Service), mobile holders‘ location at the top of

the mobile phone can be displayed. In future using the LBS, the mobile holder can

know about the traffic density, travel routes, preferred hotel locations, emergency

services available in the vicinity. Downloading of music, logo, and picture is also

possible through the extra facilities provided by service providers.

FACTORS INFLUENCING CELL PHONE SERVICES

Revathy (2005) found the various factors like poor service from Department of

Telecommunications (DOT), lower service charges offered by DOT than by other

private players, convenience of contact, accessibility, improvement of own

business/profession, prestige and status symbol as the influencing factors for the

possession of cell phone connections.

CUSTOMER ATTITUDE TOWARDS CELL PHONE SERVICES

Selvaraj (2005) states that the existing customers are satisfied with the current

services and the cell phone companies have good prospective customers. By creating

more awareness, better coverage, connectivity and new schemes, the prospects for cell

phone service can be generated. The researcher concluded that ―a bird without wings

cannot fly; likewise a man without cell can not dwell in future‖.

According to Banumathy (2006), the customers feel the cost of the handset is

high, so the manufacturers should reduce the cost to enable more people to buy and

use the cell phones. The subscriber should be well informed about the availability of

services and the methods of using the cell phones. The outgoing charges for cell

phones are felt to be very high. Similarly, incoming charges especially while roaming

are also considered to be high by the customers.

FACTORS INFLUENCING THE SATISFACTION OF CELL PHONE

SUBSCRIBERS

Vijayakumar (2006) observes that the satisfaction derived by the subscribers of

Airtel Network has been influenced by the clarity of signals, availability of plan

options, low call charges and activation formalities.

FACTORS INFLUENCING THE MIGRATION OF CUSTOMERS FROM

PREPAID TO POSTPAID CONNECTIONS

Sudhakar (2005) asserts that there are various reasons for the factors

influencing the migration of cell phone customers from prepaid to postpaid services.

They are the schemes and tariff plans, increased usage of mobile connections, need for

additional services, low air time rates of postpaid in comparison to the prepaid at the

time of purchase, reference group influence, prepaid proving economical and

availability of corporate connections.

FACTORS INFLUENCING THE MIGRATION OF CUSTOMERS FROM

POSTPAID TO PREPAID CONNECTIONS

Sudhakar (2005) reveals the reasons for the customers migrating from postpaid

to prepaid connections. The customers feel that the monthly bill is higher than what

they can afford, high rental charges, service dissatisfaction and decrease in usage of

postpaid services are the various reasons which make the customers migrate from

postpaid to prepaid.

POSITION OF SERVICE PROVIDERS AMONG THE PUBLIC

Banumathy (2006) reveals the position of various service providers. The

customers of Tuticorin district gave first priority to Aircel, second to BSNL, third to

BPL, fourth to Reliance and fifth to Airtel in the year 2006. The service providers are

expected to bridge the gap between the services promised and services offered. BSNL

must improve the quality of services to compete with the private service providers.

PROMOTIONAL STRATEGIES FOLLOWED BY SERVICE PROVIDERS

Thiagarajan (2004) reveals that when Reliance launched its ‗Independence Day

Special Plan‘ during 2004 for its prepaid subscribers at Ps. 0.99 per minute, BSNL set

its prepaid tariff 10 per cent lower than Reliance, but also opened another front by

slashing its postpaid tariff.

Chandiran (2005) brings to light the various promotion strategies followed by

the cell phone services during the growth stage. Brand building, emotional bondage

and mass media are the effective advertising strategies followed as promotional tools.

As sales promotion strategies, the schemes, tariff plans, event sponsoring, special

package for the corporate world, and co-promotion should be given importance during

the growth stage of the cell phone services. In the personal selling process, the

suitable strategies to be followed are focused personal selling and corporate accounts

strategy. In the distribution process, in-depth retailing and high-reach strategies can

be entertained to make the services successful in the near future.

Makkar (2005) asserts that the new brand strategy is focused on meeting the

evolving needs of mobile service customers. It is designed to create a stronger

relevance for a large segment of potential young customers. The strategic framework

will bring new, exciting and innovative world class services through world class

technology with a new look that takes forward the core strength of Airtel.

FINANCIAL REQUIREMENT TO MEET CUSTOMER EXPECTATIONS

Srivastava (2006) points to the financial requirement of the cell phone

companies to meet the customer expectations. The GSM operators already fear that

they would have to invest Rs.3, 000 crores more on base stations if the CDMA

operators bag additional spectrum. Obviously, it is cheaper to get spectrum. But this

would also require the government to convince the Defence Ministry to provide some

spectrum for the development of cell phone industry.

SERVICE QUALITY OF MOBILE OPERATORS

Panandikar (2005) points out that the degree of consumer satisfaction bears a

direct impact on the quality of service where good quality of services gives better

customer satisfaction and bad quality of services leads to dissatisfaction of the

consumer. In a monopoly situation, a customer has no choice but to accept the quality

of services of whatever level of standard that the monopoly operator provides.

However, by bringing in competition and giving free choice to select an operator, the

market share of an operator would largely depend on the quality of services and the

price. More discerning customers might even opt to pay a higher price for a better

quality of services. Consumer complaints represent the negative perception of quality

of services. Quality of service as perceived by a customer largely depends on Service

Support Performance: ability of an operator to provide services and maintain them;

Service Operability Performance: service user–friendliness, simplicity and ease of use;

Service Integrity Performance: transmission performance to the pre-established

performance criteria; Service Ability Performance: accessibility, retainability and

reliability signifying, making available the services to a customer on request and

ability to provide them without interruption.

PROBLEMS AND ISSUES IN TELECOM SECTOR

Srivastava (2006) asserts that increasing competition, emerging markets,

retaining customers, government regulations and maintaining cost are the basic

problems faced by telecom sector. Increase of rivalry between various service

providers leads to price war. In the growing market, the subscribers have a vast range

of choices from various service providers. The challenge for the companies is to give

the customers a good low cost plan. Due to growing competition, the existing

customers might switch over to other connections which are highly beneficial

compared with the existing ones. Telecom Regularity Authority of India (TRAI)

norms are stringent and the service providers find it difficult to meet the norms as per

government regulations. The service providers feel that the maintaining cost for

hotline centres and the staff is high.

SUGGESTIONS TO SERVICE PROVIDERS

Rigin (1993) points out that like manufacturing organizations, service

organizations also face problems of marketing. Hence, service organizations

including cell phone companies have to use promotional strategies such as advertising,

sales promotion, public relations and personal selling. The use of single promotional

tool or combination of tools is normally determined by various factors such as market

conditions, market forces, behavioural pattern of consumers etc. Updated knowledge

and applying appropriate promotional tools in a comprehensive and potential way

which suits the market strategies will have significant influence over the success.

Srivastava (2006) opines that for the survival of telecom companies, they

continuously need to provide customers extra value added features, high quality

services at competitive price, so that the customers do not switch to other service

providers.

Taneja (2007) reveals that price plays an important role in the growing or

emerging market like telecom sector. For telecom companies to survive, be

competitive or even grow, they continuously need to provide customers extra

value added features, high quality services at competitive price, so that customers

do not switch to other operators. Although the other companies are in a growth

phase, they cannot afford to be complacent and need to continuously innovate

through aggressive pricing, attractive schemes and superior service to retain and

add more customers.

So, the need is felt to study the cell phone services on various aspects such as

their importance, growth, marketing, customer attitudes, satisfaction levels and other

problems faced by the customers, dealers and retailers on cell phones and their

services. Based on the mentioned aspects, the following objectives have been framed.

1.4 OBJECTIVES OF THE STUDY

The present study has the following objectives:

1. To study the origin, growth and development of cell phone industry.

2. To identify the customers‘ perceptions regarding the services rendered by

cell phone industry.

3. To analyse the intermediaries involved in the cell phone industry.

4. To find the various types of services provided by the various players and

their marketing strategies in the cell phone industry.

5. To perceive the problems of the customers, the intermediaries and the

service providers encountered in recent years.

6. To offer suggestions to solve the problems and to improve the services.

1.5 HYPOTHESES OF THE STUDY

1. Personal factors do not have influence over the customers towards cell phones.

2. Economic factors do not have influence over the attitude of the customers

towards cell phones.

3. No significant difference exists between different sim card dealers and their

satisfaction levels.

4. Correlation exists between media of advertisement and gender.

5. No significant difference exists in satisfaction levels of sim card dealers in the

different taluks of Kanyakumari District of Tamil Nadu, India.

1.6 SCOPE OF THE STUDY

1. The present study is an attempt to throw light on the preference of cell

phone users with postpaid and prepaid mobile services in Kanyakumari

District, Tamil Nadu, India.

2. This study is an attempt to analyse

(i) the awareness among cell phone users about the various facilities

provided by cell companies and service providers.

(ii) problems faced by the users and dealers.

(iii) the factors influencing the choice for cell phones and cell connections.

3. The study would further highlight the strategies followed by intermediaries in

the mobile services and also the problems faced by them.

1.7 SPECIAL CONCEPTS

Special concepts help to know the technical words involved in the study and

their meanings.

GSM ARCHITECTURE

GSM stands for Global System for Mobile Communication. Another mobile

form CDMA means Code Division Multiple Access. The difference between GSM

and CDMA is any GSM subscriber can easily change the services of an operator in a

single mobile and this is not possible in CDMA. In other words, CDMA is

preformatted with particular service provider‘s choice.

POSTPAID SERVICES

Pay after use is called postpaid service. The cell phone users pay the rentals

and other charges after using the mobile services for a fixed period, usually one

month. It is similar to used landline payment.

PREPAID SERVICES

Pay before use facility is known as prepaid. The cell phone users pay a fixed

sum and get talk time. When the user dials to another, his talk time decreases. This is

similar to ITC (India Telecommunication Card). To avail prepaid service, the cell

phone users buy a starter pack and are given a SIM card and to continue the usage,

recharge coupons are available.

EASY CHARGE

Easy charge is a facility provided by most of the dealers and retailers to the

customers to facilitate immediate recharge. The customers can recharge their mobile

wherever and whenever they like. When they make a call or send a message to the

dealer or retailer, the requested amount will be added to their mobile account

immediately.

LAPU SERVER

LAPU means Load As a Per cent of Use. LAPU server plays a main role in

the easy charge process. In the easy charge process, the requested amount of the

customer is accounted immediately with the help of this server. As soon as the

message is received from the customer by the dealer, he accesses his account using

LAPU server. The LAPU server increases the requested amount as the balance of the

customer immediately.

1.8 SAMPLING TECHNIQUES

The study is an empirical study based on survey method. Primary and

secondary data were collected by the researcher herself.

Stratified random sampling technique was adopted to collect details on

customers‘ perceptions regarding the cell phones. A sample of 660 respondents has

been selected on the basis of random sampling method. The respondents are drawn

from four groups of people connected with the cell phone industry. Altogether, 300

cell phone users were contacted and interviewed with the help of the questionnaire

specially designed for the purpose.

To detain information regarding marketing strategies followed by

intermediaries, 360 intermediaries such as 120 cell phone dealers, 120 cell phone

service distributors/dealers, 120 retailers of various service providers were contacted

and interviewed.

1.9 AREA PROFILE

Kanyakumari District is a fertile land with an area of 1672 sq.kms. It occupies

1.29 per cent of the total extent of Tamil Nadu. It ranks first in literacy among other

districts in Tamil Nadu. According to the census of India 2001, the population of the

district is 16, 76,034, of which 8, 32,269 are males and 8, 43,765 are females. There

are 13, 08,322 literates in the district, out of which 6, 68,667 are males and the rest are

females.

1.10 STUDY AREA

The present study, Cell Phone Services in KanyaKumari District, is an

attempt to analyse the market structure of cell phone industry and customers‘

perceptions towards cell phones with special reference to Kanyakumari District. The

taluks of Vilavancode, Kalkulam, Agasteeswaram and Thovalai of the district have

been taken as the representative regions of Kanyakumari District.

1.11 PILOT STUDY

A pilot study was conducted covering 100 cell phone users for assessing the

customer‘s perceptions regarding cell phones and cell connections.

Again to gain information regarding marketing strategies followed by

intermediaries, additional 150 intermediaries such as 50 cell phone dealers, 50 cell

phone service distributors/dealers, 50 retailers of various service providers were

contacted and interviewed. Based on the requirements of the research study, the

questionnaire was suitably restructured and used for collecting requisite information to

meet the objectives of the study.

1.12 TOOLS USED FOR COLLECTION OF DATA

The study is based on both the primary and secondary data. To collect general

information regarding cell phone services, secondary data were collected from various

journals, published reports, books and the like. The questionnaire on customers‘

attitudes towards cell phones was prepared and administered to collect information

concerning the customers‘ perceptions about cell phone industry. To collect

information regarding the marketing of cell phones, a questionnaire ‗Survey of

Intermediaries involved in Cell Phone Industry‘ was prepared and administered.

1.13 TOOLS USED FOR ANALYSIS AND INTERPRETATION

Simple statistical tools such as averages, percentages, Chi-square, Rank

Correlation, Weighted Average and ANOVA have been used for analysis and

interpretation of the data collected.

1.14 LIMITATIONS OF THE STUDY

1. The study is mainly based on random sampling method instead of census

method. Hence the findings of the study cannot be generalized.

2. It was also very difficult to obtain necessary information from the

customers, dealers and retailers because they are reluctant to disclose all the

information available with them.

3. Since the findings are arrived at from the study of Kanyakumari district

only, the findings cannot be generalized.

4. Due to the explosive growth of the cell phone industry, generalizations of

the facts deduced within the duration of two years could not fully be realized or relied

on. However, the analysis made is as scientific as possible giving attention to all these

limitations.

1.15 SCHEME OF REPORTING

The present study has been reported through eight chapters:

The first chapter is devoted to ‘Introduction and Design of the Study’. This

chapter also includes importance of the study, advent of cell phone, working of cell

phone, statement of the problem, review of literature, objectives of the study,

hypotheses of the study, scope of the study, period of study, special concepts used,

sampling techniques, area profile, study area, pilot study, tools used for collection of

data, tools used for analysis and interpretation, limitations of the study and scheme of

reporting.

The second chapter discusses the ‗Origin and Growth of Cell Phone Services’,

in India as well as in Tamil Nadu. This chapter also discusses about the top 15 cell

phone subscribers, world-wide market share of mobile phones, and history of cell

phones in India, growth of subscribers in Tamil Nadu and BSNL‘s mobile subscriber

additions.

The third chapter, ‗Service Providers of Cell Phones in Kanyakumari

District’, deals with the different types of prepaid and postpaid services provided by

various service providers and the economics of cell phone industry in Kanyakumari

district of south Tamil Nadu.

The fourth chapter, ‘Intermediaries in the Cell Phone Services’, deals with

the market structure, channels involved and occupational details of the intermediaries

involved in cell phone services.

The fifth chapter, ‘Customer Attitude towards the Cell Phones’, describes

the social and occupational background of the cell phone users as well as the

customers‘ perceptions regarding various cell phones.

The sixth chapter, ‘Problems and Prospects of Cell Phone Services’, deals

with the specific problems faced in the marketing as well as using of cell phones. It

also suggests possible remedial measures to overcome difficulties and challenges in

the field of cell phone industry.

The seventh chapter, ‗Findings and Suggestions’, being the concluding

chapter, is devoted to summarise the major findings of the study. Suggestions have

been offered to solve the problems faced by the cell phone industry. In the final

chapter, certain areas have been identified and recommended for future study.