E.T. PHONE HOME, Inc.E.T. PHONE HOME, Inc.Forecasting Business DemandForecasting Business Demand

Group 6Group 6Vinay Iyengar 04BM8002 Vinay Iyengar 04BM8002 Vikram Narayanaswamy 04BM8090 Vikram Narayanaswamy 04BM8090 C R Ramesh 04BM8089 C R Ramesh 04BM8089 Srikiran Kundeti 04BM8085 Srikiran Kundeti 04BM8085 Ganapathy Subramanian N 04BM8086 Ganapathy Subramanian N 04BM8086 Jaiguru M 04BM8088 Jaiguru M 04BM8088

Praveen Vasudevan 04BM8087Praveen Vasudevan 04BM8087

OBJECTIVEOBJECTIVE

Critical analysis of the basic assumptions Critical analysis of the basic assumptions in the Business Modelin the Business Model

CRITICAL ANALYSISCRITICAL ANALYSIS

Forecasting and Initial SurveyForecasting and Initial Survey

Market ShareMarket Share

PricingPricing

CostingCosting

TechnologyTechnology

FORECASTING AND INITIAL FORECASTING AND INITIAL SURVEYSURVEY

Number of businesses in ClevelandNumber of businesses in ClevelandGrowth rate 0.9% or higher ?Growth rate 0.9% or higher ?$427m investment in construction – was it $427m investment in construction – was it considered?considered?

Penetration Levels Penetration Levels Similar to that of consumer durables ?Similar to that of consumer durables ?15 – 90 % in shorter time?15 – 90 % in shorter time?Advertising and Equipment costsAdvertising and Equipment costs

MARKET SHAREMARKET SHARE

Majority Users – Business Sector Majority Users – Business Sector Chicago Waiting Lists Chicago Waiting Lists Business user survey in ClevelandBusiness user survey in ClevelandPast experience with Mobile Phones & PagersPast experience with Mobile Phones & PagersOther professionals and domestic users not in sample Other professionals and domestic users not in sample populationpopulation

Market Share for ETPH – 50%Market Share for ETPH – 50%Depends on many factors such as early start of service, tariff Depends on many factors such as early start of service, tariff rates, quality of service, functionality etcrates, quality of service, functionality etc

PRICINGPRICING

Most popular Price Range - $110Most popular Price Range - $110Includes monthly charge of $25 plus talk-time charges – Includes monthly charge of $25 plus talk-time charges – likely to vary with competitionlikely to vary with competitionFall in price with introduction to retail markets is not Fall in price with introduction to retail markets is not accounted foraccounted for

Same Price Demand RelationshipSame Price Demand RelationshipWill 21.2% & steady increase of 0.2% hold good for all 10 Will 21.2% & steady increase of 0.2% hold good for all 10 years?years?Demands may vary with region and timeDemands may vary with region and time

COSTINGCOSTING

Maximum limit on customersMaximum limit on customersSupport for 10,000 users max – may increase Support for 10,000 users max – may increase

Salaries and Overhead ExpensesSalaries and Overhead ExpensesFixed at $250,000 – may increase with timeFixed at $250,000 – may increase with time

Cost Estimates Cost Estimates No rationale for average of AT&T and Low EstimatesNo rationale for average of AT&T and Low Estimates

TECHNOLOGYTECHNOLOGY

No challenges by newer technologiesNo challenges by newer technologiesWill newer technology replace Cellular Telephony as it is Will newer technology replace Cellular Telephony as it is intended to replace Mobiles & pagers ?intended to replace Mobiles & pagers ?

Co-existence with mobile phones and Co-existence with mobile phones and pagerspagersIs the assumption that Cellular will replace Mobiles & Is the assumption that Cellular will replace Mobiles & Pagers valid – will they co-exist?Pagers valid – will they co-exist?

APPENDIXAPPENDIX

Financial FeasibilityFinancial Feasibility

Realistic Growth RateRealistic Growth Rate

State Map of OhioState Map of Ohio

FINANCIAL FEASIBILITYFINANCIAL FEASIBILITYRevenue Model for Realistic Growth RateYear 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994Monthly charge 110 108 106 104 102 100 98 96 94 92 90Annual charge 1320 1296 1272 1248 1224 1200 1176 1152 1128 1104 1080Unit sales 2215 3094 4529 6284 7896 9217 10631 11760 12686 13362 13964

Total Revenue 2923800 4009824 5760888 7842432 9664704 11060400 12502056 13547520 14309808 14751648 15081120

Fixed Cost 2630000 2630000 2630000 2630000 2630000 2630000 2630000 2630000 2630000 2630000 2630000Variable Cost 1581510 2209116 3233706 4486776 5637744 2525458 2912894 3222240 3475964 3661188 3826136Total Cost 4211510 4839116 5863706 7116776 8267744 5155458 5542894 5852240 6105964 6291188 6456136

Profit / Loss -1287710 -829292 -102818 725656 1396960 5904942 6959162 7695280 8203844 8460460 8624984

Cummulative Returns -1287710 -2117002 -2219820 -1494164 -97204 5807738 12766900 20462180 28666024 37126484 45751468

Assumptions Fixed costs in terms of Salaries are not changing

Revenue model for pessimistic growth rateYear 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994Monthly charge 110 108 106 104 102 100 98 96 94 92 90Annual charge 1320 1296 1272 1248 1224 1200 1176 1152 1128 1104 1080Unit sales 1880 2548 3237 4737 6686 8153 9708 10990 12076 12850 13405

Total Revenue 2481600 3302208 4117464 5911776 8183664 9783600 11416608 12660480 13621728 14186400 14477400

Fixed Cost 2630000 2630000 2630000 2630000 2630000 2630000 2630000 2630000 2630000 2630000 2630000Variable Cost 1342320 1819272 2311218 3382218 4773804 2233922 2659992 3011260 3308824 3520900 3672970Total Cost 3972320 4449272 4941218 6012218 7403804 4863922 5289992 5641260 5938824 6150900 6302970

Profit / Loss -1490720 -1147064 -823754 -100442 779860 4919678 6126616 7019220 7682904 8035500 8174430

Cummulative Returns -1490720 -2637784 -3461538 -3561980 -2782120 2137558 8264174 15283394 22966298 31001798 39176228

REALISTIC GROWTH RATEREALISTIC GROWTH RATERevenue Chart

-$10,000,000

$0

$10,000,000

$20,000,000

$30,000,000

$40,000,000

$50,000,000

1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994

Year

Cum

ulat

ive

retu

rns

STATE MAP OF OHIOSTATE MAP OF OHIO