TABLE OF CONTENTS

INTRODUCTION..........................................................................................................1
COMPANY PROFILE.........................................................................................................1
ECONOMIC OVERVIEW IN SRI LANKA (related to telecommunication)............................1

REFERENCES

INTRODUCTION
COMPANY PROFILE

Dialog Telekom PLC operates Sri Lanka’s largest and fastest growing mobile
telecommunication network. The company is also the largest listed company on the
Colombo Stock Exchange in terms of market capitalization (USD 1.62 Bn. as of 31
December 2007), representing 20 per cent of the market capitalization of the Colombo Stock
Exchange.

Dialog Telekom PLC is a subsidiary of the Telekom Malaysia International SDN BHD. Dialog
has spear- headed the mobile industry in Sri Lanka since the late 90s, propelling it to a level
of technology on par with the developed world. The Company operates 2.5G, 3G and 3.5G
mobile services, supporting the very latest in multimedia and mobile internet services as well
as International Roaming in over 190 countries. Dialog Telekom accounts for approximately
57 per cent of mobile subscribers in Sri Lanka and for 45 per cent of the telecommunications
sector overall.

In addition to its core mobile telephony business, the Company operates a wide portfolio of
international telecommunications services, including but not limited to retail and wholesale

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international voice and data services, based on leading edge International Gateway
Infrastructure. The Company is also a provider of internet services through Dialog – a fully –
fledged Internet Service provider Dialog Telekom also operates Dialog SAT, a mobile
satellite service. (2007 Dialog Annual Report )

ECONOMIC OVERVIEW IN SRI LANKA (related to

telecommunication)

Sri Lanka is an island of twenty million people and it is administratively divided into 9
provinces and 25 districts. The commercial center of Sri Lanka is Colombo while nearby Sri
Jayewardenepura Kotte is the legislative capital. Growth in Sri Lanka has been broad-based
across three major sectors, which services are also one of them. The Services sector
recorded growth of 7.1 percent in 2007, with telecommunication, banking, real estate etc.

The Telecommunication sector continued to grow at a high pace, expanding by 19.7 percent
in 2007. Value-addition in telecommunication grew at lower rate due to price competition.
During 2007, the subscriber base of cellular phones & fixed access phones expanded by 57
percent and 90 percent, respectively, as per the Telecommunication Regulatory
Commission. (2007 Dialog Annual Report, pg148 )

ECONOMIC CHARACTERERISTICS OF DIALOG

TELEKOM AND THE MARKET IT OPERATES
INDUSTRY GROWTH & BRAND IDENTITY

As per the table below, we can conclude that Dialog Mobile has achieved unprecedented
growth during the past few years and it is serving a mobile subscriber base of 4.25 Million,
which is 53% of the Market Share and its revenue share is approx 68 % (Estimated). This
has lead Dialog Telekom to be the market leader in mobile telecommunication

Figure 1 –Dialog Telekom Annual Report, 2007, pg 25

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This was primarily due to affordable pricing, strong distribution & network coverage achieved
through aggressive investments on network infrastructure. These facts mainly increase the
switching cost, which makes the company a strong market leader.

Dialog Telekom was first to Launch the 3G

technology, WIMAX, M-Commerce(Ez Pay) in South
Asia and it has the lowest monthly Fee package for
USD 1. Also it has widest coverage in Sri Lanka.
(2007 Dialog Annual Report, pg 25 )

Dialog Telekom Brand has achieved various awards

not only in locally, but internationally too. It received
a Commendation at the GSM World awards 2007,
for the “Best use of Mobile for Social & Economic
Development”. Also it was ranked No.2 in the 2007
line up of the “Most Respected” entities in Sri Lanka.
(2007 Dialog Telekom Annual Report, pg 04 ) Picture 1 – Dialog Telekom Annual
Report, 2007, pg 35
The exceptional Customer Service by Dialog
Telekom also assists in a great deal to improve
Brand image & attract customers.

PRODUCT DIFFERENTIATION

By improving features, implementing innovations in the product itself, Dialog gains the
customers attention at regular intervals, reminding that it is the number one service provider
in Sri Lanka.

Dialog Telekom has over 75 packages for mobile subscribers under Post Paid, Prepaid and
Corporate and Dialog GSM has highly engaged in Price discrimination by charging
different prices for according to the package even though it is the same service offered.
Example – Post Paid : Super 500 (50x), Post Paid Blaster, Lite 103, Club Vision Gold etc.
Pre Paid : KIT Double, KIT normal, Kidz Phone, KIT per second Billing etc.
Corporate: Gold 400, Lexus 20, CO50X, Platinum etc. (Dialog Affinity)
It also consists of over 100 Value-Added-Services.
Example – Breaking News, Call Conference, Call forwarding, Roaming, GPRS, MMS etc.

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Catering different market segments & satisfying customer needs and wants by differentiation
such as above makes the product & service unique and this gains the advantage against the
rivals.

BARRIERS TO ENTRY/THREAT OF ENTRY

It is not only the incumbent rivals that pose a threat to firms in an industry. There is a
possibility that new firms may enter the industry and affect competition. In theory, any firm
should be able to enter and exit a market and the profits should always be nominal. In
reality, however, industries possess characteristics that protect the high profit levels of firms
in the market and inhibit additional rivals from entering the market.

In the telecommunication, industry firms are reluctant to enter the market because of the
expensive start-up costs such as license, infrastructure, planning and government policies
etc. Since the existing service, providers are doing well especially Dialog Telekom there is a
threat for a new firm to enter the market. For an example the Hutch, which was the last
service provider, entered the mobile telecommunication market in Sri Lanka did not succeed
in the industry even though they charge the lowest tariffs rate. (Quick MBA)

Almost everything such as the uniqueness of the product, tariff plan, marketing strategies,
customer satisfaction strategies, distribution strategies and the technology should be perfect
in order to a firm to enter the Sri Lankan mobile telecommunication industry, since Dialog
has the most advanced technology in South Asia.

THREAT OF COMPETITORS

Dialog GSM operates in an oligopoly market, which consists of only four service providers,
who are Dialog, Mobitel, Tigo and Hutch. The fifth competitor Airtel who is the largest service
provider in India, will also join the market and we expect that it will be a greater threat to all
service providers.

Customer Care and Customer Satisfaction is one of the main areas that Dialog Telekom has
been a success in the market. Dialog Telekom Enterprise Contact Management is a fully
integrated multi-channel 24/7 Contact centre handling customer interactions via Web Chat,
E-mail, Fax, SMS, Voice, 3G video and IVR. Also thinking about the customer conveniences,
it operates a large number of Outlets Island wide comparing to all the competitors.

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 Table 1 - Dialog Telekom Annual Report, 2007, pg 37

A threat of competitors exists when a product’s demand is affected by the price change of a
competitor’s product. Even though Dialog Telekom charges a reasonable price for the
service they provide, it is still higher than the competitor’s price. Since most of the people in
Sri Lanka consider only about the basic features on a mobile, they would easily switch to a
competitor only because of the price. So as more competitors become available, the
demand becomes more elastic since customers have more alternatives. (Quick MBA)

Dialog has the widest coverage within the island comparing to all
other service providers in Sri Lanka. In addition, it has agreements
with more than 400 operators around the world, so that any
subscriber can take the same number across the world. This is a one
of the main reasons that customers would not switch operators. In
other words, this benefit increases the switching cost.

SCALES OF PRODUCTION

When we consider the Scales of Production in Dialog Telekom, it is recognized that it is

categorized under Economies of Scale.

Dilaog GSM is in a situation which the long run average Launching a new product or
cost declines as the firm increases the output. It has a value added service for
great opportunity of increasing the output of a product, Dialog GSM is much more
because it has a customer base of 5 million which is more cost effective comparing to
than 50% of the market share and it is still growing. the competitors

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 Picture 2 - International
Econ

CORPORATE RESPONSIBILITY

Dialog Telekom PLC further strengthened its business case within the nascent field of
Corporate Responsibility in 2007, backed by ‘Integral’ initiatives that strengthened CR
competencies across all levels of the organization, as well as through sustainable ‘Outreach’
programmes that supported National and Millennium Development goals aimed at enriching
Sri Lankan lives.

Dialog has introduced “eZ Insurance” which is a beachhead M-Commerce innovation that
harnesses the potential of GSM connectivity to break the nexus between poverty and risk.
(Dialog 2007 Annual Report)

Dialog Telekom has offered more

than 5,000 employment
opportunities only within the
Company which doesn’t include
Franchise & other retailers. Also the
Dialog Viyapara Diriya workshops
empower retailers to improve their
business and lives through a
paradigm shift.
Picture 2 - Dialog Telekom Annual Report,
2007, pg 49

BUSINESS ANALYSIS

Dialog GSM has been consistently aggressive in applying its innovation strengths towards
enhancing the affordability and applicability of its service to meet the extended connectivity

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requirements of consumers across multiple segments and demographies. Its inclusive
approach to pluralizing access to connectivity technologies has transformed mobile
telephony from its exclusive positioning in 1995 to a broad based commodity affordable and
available to citizens from all walks of life. (2007 Dialog Telekom Annual Report )

SUBSCRIBER BASE

Dialog Telekom with its affordable service offering has played a significant role in the Sri
Lankan mobile telecommunication industry & this is clearly defined in the following “Growth
of Subscriber base” graph.

REVENUE & PROFITABILITY

The total operating Revenue growth was driven by robust growth in the cellular subscriber
base, which translated to the generation of enhanced call revenues. The Revenue in Dialog
GSM mainly consists of Pre-paid, Post Paid, International Termination, and Inbound
Roaming. Other factors driving revenue growth include the growth in coverage and
increases in the volume of international traffic and associated revenues.

Table 2 – Calculations from Dialog Telekom Annual Report, 2007,

pg 68

Table 1 – Revenue Composition, Dialog Telekom Annual

Report, 2007, pg 72

Significient components of Direct costs are Network cost, Telecom equipment depreciation,
International Telecommunication Levy, International Orgination cost, Roaming costs and
Lease circuit rental costs.

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Table 3 – Calculations from Dialog Telekom Annual Report,

Taxation : Dialog has been granted Flagship Investor status by the Board of Investment
(BoI) of Sri Lanka by virtue of the quantum of inward infrastructure investments made by
Telekom Malaysia. The terms of the Flagship Investor agreement bestow a 15-year tax
exemption period on the Company which terminates in the year 2012. (2007 Dialog Annual
Report, pg 74)

CONCLUSION

Dialog Telekom is a leading mobile telecommunication service provider in Sri Lanka, which
operates in an Oligopoly market. It has a over 50% of the market share which makes it the
market leader.

Considering the economical characteristics of the telecommunication industry such as Brand

Identity, Barriers to entry, Price elasticity, Threat of competitors and scales of production etc,
we can conclude that Dialog Telekom has successfully faced the challenges up to now.
Price discrimination is highly put into practice by Dialog GSM and this helps it to be a strong
competitor in the market.

Dialog Telekom has the latest technologies in their grasp and when it comes to exceptional
customer service Dialog Telekom has secured its name on it.

RECOMMENDATIONS

Although Dialog Telekom is a strong player in the market, it still has to improve and be
prepared for future threats and defend its position as market leaders.

Considering the above graph, we can identify that even though Dialog still has more than
50% percent of the market share, they will have to defend it because after 2005 there has
been continues decline.

1. CONNECTIVITY
Dialog Subscribers in some areas are experiencing call drops & connectivity issues
since the customer base is too larger for the existing base stations. In order to

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Table 4 – Calculations from Dialog Telekom Annual Report, 2005,
2006 & 2007
 prevent such situations Dialog should invest on increasing the number of base
stations and create customer satisfaction.

2. ADVERTISING
Since Dialog GSM operates in an Oligopoly Market, advertising is very essential to
compete in the market. The advertisements should be more creative and it should
target not only the youth, but every segment in the market.

3. PRICING
Dialog should come up with tariff reductions, since most customers are concern
about basic features of a mobile for the cheapest rate. It doesn’t have to be the
cheapest service provider, but some reductions with the economical changes in the
country.

4. PROMOTIONS
Promotions at certain periods will attract the customers to use the facilities more. The
promotions must be mainly targeted on the price, since it is the first fact that grabs
the customer’s attention. Dialog can also introduce special offers and benefits not
only for the high-end users, but for other market segments too.

5. IMPROVE THE STANDARDS OF CUSTOMER SERVICE

The employees should be well trained to offer an exceptional customer service.
“If a customer leaves without a purchase you have not failed. If customer leaves
without a smile you have” – Ronan Kaufman
In order to keep the employee moral high, rewards & benefit schemes should be
introduced and implemented quarterly or annually.

REFERENCES

Dialog Telekom PLC, Annual Report, 2005

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Dialog Telekom PLC, Annual Report, 2006

Dialog Telekom PLC, Annual Report, 2007

Emerson, L., (Eds.). (2005). Writing Guidelines for Business Students. (3rd ed.). South
Melbourne, Australia.

International Econ. Retrieved January 12, 2009 from

http://internationalecon.com/Trade/Tch80/80img.gif

Layton, A., Robinson, T., Tucker, I., (Eds.) (2005). Economics for today. (2nd ed.). South
Melbourne, Australia.

Porter’s Five Forces Analysis. Retrieved November 22, 2008 from http://www.university-
essays.tripod.com/porters_5_forces_analysis.html

Quick MBA, Porter’s Five Forces, A model for Industry Analysis, Retrieved November 21,
2008 from http://www.quickmba.com/strategy/porter.shtml

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