Challenger Strategies: Case DNA Finland Ltd. Mathias Tallberg Networking Laboratory, HUT

Content The Market Challenger and Challenger Strategies The Mobile Operator Business Case: DNA Finland Ltd. Conclusions Questions?

The Market Challenger and Challenger Strategies The market challenger company challenge and fight other companies for a stronger market position To improve its market standings, a challenger company needs a strategy aimed at building a competitive advantage of its own Can rarely improve its competitive position just by trying harder or by imitating what a leading company in the industry is doing If large market share companies have a significant cost advantage, small market share companies have only two viable options: move to increase the market share or withdraw from the business Attack the market leaders strengths rather than its weaknesses (e.g. if the market leader is not serving the market well enough) Indirect attack by attacking weaknesses or gaps in the market coverage (new geographic markets or poorly served segments)

The Mobile Operator Business About big investments and fierce competition Many issues to consider (regulation, investment, technology, marketing, disrtibution channel, organizational, purchasing etc.) Most important: pricing? Pricing offers a rich field of opportunities, but require deep understanding of the business as a whole Falling ARPU nowadays a real problem Traditional mobile network providers vs. mobile service providers

CASE: DNA Finland Ltd. The Finnish Mobile Operator Market DNA Finland Ltd.  Suomen 2G  Pricing for Voice  GPRS Pricing  The Acquisition of Telia Mobile Finland  The Distribution Channel

CASE: DNA Finland Ltd. The Finnish Mobile Operator Market  Deregulation  At the end of 2002 there was 87 mobile subscriptions per 100 inhabitants  TeliaSonera, Radiolinja, and Suomen 2G holds licenses for GSM  TeliaSonera, Radiolinja, Suomen 2G, and Suomen 3G holds licenses for UMTS  Market leaders: TeliaSonera and Radiolinja  Market challengers: DNA, Saunalahti Group, Cubio etc.

CASE: DNA Finland Ltd. The third largest mobile operator utilizing GSM/GPRS Owned by Finnet Ltd. Turnover in 2002 was 111 million € A mobile service provider and its services work in Suomen 2G’s GSM/GPRS network Subscriber base reaches over DNA’s services mainly targeted for corporate customers and other innovative customers, who are not afraid to try something new…

CASE: DNA Finland Ltd. DNA funtions as the mobile service operator, Suomen 2G as the mobile network operator DNA:  builds the products which are visible to the end-user  is responsible for customer service, distribution, pricing, marketing, and billing  develops customer relations  etc. Suomen 2G:  builds and operates a nation-wide GSM/GPRS network and service  is responsible for connecting traffic with other networks, roaming agreements, and co-operation, both nationally and internationally  mobile service provider customers: DNA, Wireless Maingate, Fujitsu Invia, and PG Free

CASE: DNA Finland Ltd. Voice Pricing  DNA wants its pricing model to be as simple as possible…  and of course competitively priced.  Operators such as Saunalahti Group and Cubio puts pressure on lowering prices  DNA Maraton, a typical challenger pricing policy: Fixed monthly price for calls and SMS’s between DNA subscribers DNA the first operator in the world providing such a service User friendly and clear pricing

CASE: DNA Finland Ltd. GPRS Pricing  Based on a fixed monthly charge (DNA GPRS for consumer customers an exception)  Differs from the pricing policies of other mobile operators providing GPRS service in Finland  Most affordable GPRS provider in the Finnish market  Two types of GPRS service: DNA GPRS DNA WAP-GPRS  DNA offered GPRS for a 11 month trial period without limitations to find out if there is customer demand for such a service => there was…  Is this the best alternative? not fair congestion

CASE: DNA Finland Ltd. Acquisition of Telia Mobile Finland  May 12, 2003 reached an agreement with TeliaSonera about about the acquisition of Telia Mobile Finland’s operations  Now over mobile subscriber customers  The acquisition combined the resources of two challenger mobile operators  Over 100 employees lost their jobs  Suomen 3G sold, Suomen 2G got the UMTS license from Telia Mobile Finland The Distribution Channel  Both traditional and totally new types of distribution channels (e.g. Filmtown, Helios, and R-Kioski)  Do not want to wait passively in stores, but wnats to find distributors who customers visit anyway and on a regular basis  The network of DNA shops: > 550 today

Conclusions Mobile communications is here to stay Decisions on strategies critical DNA has been able to build a strong and wellknown brand fast DNA’s mobile subscriptions have reached the planned 15% The year 2004 will tell if DNA will be able to make positive cash flows as well…

Questions?