NORDPLUS JUNIOR PROJECT

| Danish Market for Mobile Telephone Operators|

Profile of Debitel, Telia Denmark and CBB
by Anita Friis Jensen, Tina Hitz and Trine Bank

Debitel Danmark A/S:
In 1991 the Debitel concern started up in Germany and in the following years it has also become an important operator in France, Slovenia, Denmark and Holland. By now Debitel AG is sixth largest mobile company and the largest network-independent operator in Europe.
Debitel entered the Danish market for the first time on 25th of August 1997 and now Debitel Denmark A/S is the fifth largest operator in Denmark with a 6-% share of the total operator-market in the country.
Debitel is a telecommunications operator and today Swisscom holds a controlling stake in the Debitel concern. In Denmark Debitel is owned by Debitel AG, Fleggaard A/S and DLG.

Debitel offers national coverage. They are network-independent and pay to use external communication networks. Thereby they have no overheads related to the daily operations of the company witch makes it possible for them to focus on offering competitive prices and flexible service to their customers.
Debitel’s products, both mobile phones and pay as you talk-cards, are distributed through domestic chains - both supermarkets and specialty stores.

At first Debitel’s profile on the market was related to cheap Mobile phones, but then, in March 2002, they placed their marketing budget in the new company: Living Brands, whose founders had all been working with marketing of telecommunication in their earlier jobs. The idea was to relate more values to the public’s image of the company and thereby show them that Debitel is an operator which puts customers and service into focus. They wanted to change their image. This they achieved by making Debitel more personal. They made a campaign where they used the same man (Jan, who is one of the founders of Living Brands) in every commercial and every ad. Putting a face on the company made them more credible and thereby they gained customers.

Today you can say that it is standard for mobile operators to offer a subscription which automatically puts the customer at the most favourable price level. Of course Debitel also has such a subscription called Debitel automatic. Furthermore Debitel tried to steal Telmore’s customers with their new product: Smarttalk, which opened 1st January 2003. They offered free calling credit when the customers decide to become users of Smarttalk instead of Telmore. This has caused anger at Telmore which now threatens to file a lawsuit.

Debitel’s target group is hard to define seeing that they are offering so many different subscriptions. Thereby they reach a lot of different people. For instance Smarttalk mostly addresses young people aged from approximately 17 to 21.

Strengths	Weaknesses
• Network-independent (coverage in all of Denmark) • Low overheads • Wide distribution network • Know-how about market telecommunication (Living Brands) • Smart talk	• They fight with Telmore • Comparatively high price level
Opportunities	Threats
• Increasing number of mobile phone users • New communications technology – MMS	• Increasing number of competitors • Relying on other operators’ network • Technological development (people may use e-mail instead of mobile phone) • National IT and Telecom Agency may interfere in terms of regulation

As you can see Debitel has an overweight of strengths that makes it seem as a strong company. But on the other hand there are more threats than opportunities which means that in the future they might get a hard time on the operator market. But then again these threats are not only a danger for Debitel but also other companies. All in all they look as a pretty strong company.

Telia:
The Swedish company Telia is a part of the international TeliaSonera concern. TeliaSonera is a company which (in their own words) mainly tries to accommodate their customers and create a profit for their stockholders.
Telia mobil was founded in Denmark in 1998 but later merged with Sonera on December 9, 2002, and the company changed its name to TeliaSonera. The reason why the two companies made this merger was that they both were active in some of the most advanced telecom markets in the world. Also both companies have an interest in leading mobile companies in the Baltic and Russian markets. TeliaSonera hopes that this merger will lead to an enhanced growth potential based on current market positions and the strategic fit of the two companies.

Services and subscriptions
Telia has a very wide assortment of services. This is due to the fact that they have a lot of different subscriptions. Telia Classic, Telia Conto, Telia Choice and Telia Cash are among these. These subscriptions are very different. Telia Classic is, as implied in the name, a classic mobil subscription service where you pay a monthly rate and instead get a cheap minute rate. Telia Choice is a lot different. Here you don’t pay any rate, but only pay for the time you spend. You can choose between four different Telia Choice subscriptions. Conto 50, 100, 200 and 300. If you choose Conto 50 you pay 50 DKK. And for that you get 20 minutes’ calling. This also goes for 100, 200 and 300. The more you pay- the more minutes you get.

Target group
Because Telia offers so many subscriptions they aren’t just in contact with one target group. They both have subscriptions which address younger people and business people. This is a very big advantage. But also a very expensive advantage because isn’t cheap to make so many offers. Because when you have all those kind of offers you make the customer base very wide. That can be very unhealthy for a business because in that way you have difficulties earning on the offer.
Telia itself hasn’t got a direct target group. In their marketing they try to attract almost everybody – and in that way try to fulfil their wishes.

Market share
In the last year Telia has spent a lot of money gaining customers on the mobile market. This has resulted in 178,000 new Danish customers having joined Telia. So now Telia has 460,000 mobile customers in Denmark. That is quite a lot and it corresponds to a market share of 10,4 %.
In recent years there has been a war going where all mobile companies have been fighting. The big companies ( Sonofon and TDC) have been the main leaders – and then the small companies have followed. This has resulted in prices on the mobile market having become very low (because of the competition). Especially concerning the youth segment there has been a big fight because youngsters these days have a great deal of money. Telia has also been a part of this fight where it has challenged discount companies (like TELMORE and CBB). The whole war started because Debitel came up with a new subscription where you could send text messages for only DKK 0.15. Then the other companies followed – and the prices kept falling. This was good for the customers but for the companies it was an expensive war.

Internal factors
Strengths	Weaknesses
• Offers a lot of different subscriptions (e.g.. Telia Choice and Telia Classic). • They cover 93% of Denmark. And in the rest 7 % they have an arrangement with Sonoco. • Has 460,000 mobile customers in Denmark (that would say 10.4 % of the sharemarket).	• Has an estimated negative value of 3.7b Dkk (2003, Source: Morgan Stanley) • In 2001 they had problems with their invoicing system – they still suffer from this. • Has a deficit of 38 billion( 2003). • Has received a lot of complaints from customers ( e.g. Sending bills to dead people). Their reputation is in danger.
External Factors
Opportunities	Threats
• Has a partnership with TDC • The number of mobile users is increasing • Has a partnership both with Sonofon and TDC about MMS-messages.	• Competition on the market • National IT and telecom Agency may interfere in terms of regulation. • They can have problems by surviving because of their deficit and estimated negative value.

According to this SWOT- analysis you can see that Telia has a lot of strengths and opportunities. They have a lot of customers, big market share and good partnerships. Unfortunately Telia also have some dangers threats which can lead to an economic disaster.

CBB:
CBB is a company which was started up by Henrik Friis on 1st of October 2000. Henrik Friis’ idea was to sell cheap mobile communication on the consumer market. They wanted to address/target young people between 15 and 25 years. It turned out not to be a good idea in the beginning. The first annual report on 31st December 2001 showed a loss of about DDK 11 million. After the large deficit the situation has now improved and CBB gets an increasing amount of customers. The number in October was around 44,000 customers. Now CBB has also replaced the managing director. Now it is Teddy S. Pedersen who has a career in telecommunications.
It is a Danish company and it only sells their “product” in Denmark.

CBB does not have a very big share of the market. A survey from the 2nd quarter of 2002 shows that CBB’s share of the market is below 5 per cent. This is not very much - but the director of CBB is convinced that the number will change. He thinks that CBB has possibilities to grow because of their low prices and technology. (Berlingske Tidende, 12 November 2002)

In the beginning, when the company was called Club Bla Bla, the target group was young people between 15 and 25. Using the Mini-risk model for analysis, their target group would be the grey segment which comprises a lot of young people. In October 2002 they changed their name to CBB to try to reach other target groups. Today they also have CCB Erhverv (CBB Business).

As mentioned above CBB both has customers on the consumer market and on the business market. They have been nominated the most cheap telecommunications company in a lot of ways by the National IT and Telecom Agency.

CBB offers their customers on the consumer market mobile phone communication. You get the possibility of using “talk”, text messages and multimedia messages. There is no subscription. The charge is DDK 0.99 if you top up at www.cbb.dk, which is their homepage. You have to buy for a minimum of DDK 199- otherwise the prices are the same as if you buy a “pay as you talk card”. To send text messages costs DDK 0.24 for each message. If you are not a user of the Internet you can buy pay-as-you-talk cards with selected dealers. With pay-as-you-talk cards the charge is DDK 2.25 but text messages still cost DDK 0.24.
On the business market they offer companies mobile phone communication at the same low taxes as on the consumer market. It is also with “pay-as-you-talk cards”. The company can choose how much the employees can spend on their mobile phone. Every phone number can be followed online.

CBB has a very good profitability because they do not have many overheads. When they “do their business” online they neither need many employees, nor pay rent. Consequently, CBB could be seen as a dot-com.
To sell the “pay-as-you-talk card” CCB uses Bilka, Blockbuster, fötex, Kvickly and telekäden as their dealers.

Maybe in the future CBB will have a bigger share of the market. People follow the technological development and they get more and more busy. Therefore they do not have time to pay the bill and then it would be easier for them when they can just fill up whenever they want. Below a swot analysis outlines some of the internal and external factors. They make a more detailed description of the company CBB.

Internal Factors
Strengths	Weaknesses
• CBB has a very cheap product (the cheapest in Denmark). It is also very functional. • Very low prices where you only pay for calling time and text messages • There is no subscription • They do not have many overheads. • The Chief Executive Officer (Teddy S. Pedersen) has a career in telecommunications. • They have started up “CBB Erhverv”. • They do not have to clear their customers’ credit because they have to fill up the mobile before it is operative. • You can use it in other countries • They have a very good coverage. • They use Sonofon’s network which covers 97% of Denmark • The customers can top up around the clock all days incl. Sundays and holidays..	• You can only fill up the mobile phone on the Internet and with pay-as-you-talk card. • They do not have more than one “subscription” to offer. • They have a very small share of the market (under 5%) • They do not have many dealers for their start packages and pay-as-you-talk cards. They only have Bilka, Blockbuster, fötex, Kvickly and telekäden. • They do not have much to offer. Therefore a lot of the consumers would choose another company because they have more to offer.
External Factors
Opportunities	Threats
• They follow the technological development • Not everyone has the possibility to access the Internet. Therefore they also have pay-as-you-talk cards. That is where you buy a card in a shop. • There is an increasing number of mobile users. • CBB also offers multimedia messages which is a new form of technology. • It is possible to communicate from the mobile phone with the computer. -Maybe that would be more normal in the future.	• An increasing number of competitors. • People get more and more used to the computer. This may result in people using e-mails instead of the mobile. • The general technological development offers customers a lot of new possibilities.

All in all you can see that CCB both has a lot of strengths and weaknesses. The opportunities look very good and there do not seem to be many threats. CBB has great opportunities because they follow the technological development.

Comparison of Telia, Debitel and CBB:
After a general overview of the telecommunication operators, we can now conclude that these three companies are very different. Telia and Debitel are a lot a like, but still there are differences between these two companies. Debitel has the biggest distribution net, because you both can buy Debitel at supermarkets and in special stores. Because of this, it is much easier to know and buy Debitel. It is just the opposite with CBB where the customers themselves have to lock on the Internet to get a CBB subscription.
A thing that Debitel and Telia have in common is that they both target many different types of people. This is because of their many subscriptions. They don’t have a direct group of people they want to target. When they try to address so many people they are also very known among the public, because they have such a wide marketing.
CBB is a new and small company therefore it is not well known. But still CBB can be a threat to Telia and Debitel. The reason is that more and more people use the Internet to fill up their mobile phone, and this is exactly the product that CBB offers.
When you try to look at how big those three companies’ market share is, you can see that Telia has a much higher share than the others. Because CBB is such a new company, they only have a market share under five percent. Debitel has a little bit more (about six percent). The one with the biggest market share is Telia who proudly can say that it has 10,4 percent of the market.
After summarising we can now see that these three companies are different from each other. Both in distribution, target groups and market share.

What Segment(s) Should Be Targeted?
Right from the beginning CBB has tried to target/address young people between 15 and 25 years old. Later on they tried to address companies on the business market to try to get more customers because of the fact that their share of the market is under 5 per cent. Now we will try to find a new possible target group for CBB. For that we will to use the mini-risc model which divides people into five groups. You could say that is divided people into five life-style segments- a blue, a green, a rosa, a violet and a grey.
Using the mini-risc model they could try to address the blue segment. People from the blue segment are very focused on the fact that tings are modern and materialistic. They follow the technology and want things to look and be smart.
The green segment could also be a possibility to CBB. They also want things to be modern. Therefore they want to follow the technology and be smart. But not as much as the blue segment. The green segment is more idealistic.
The rosa and the violet segment would not be possible to reach. Persons from the rosa segment like traditions. That is almost the same for people in the violet segment. They also like traditions and they are being sceptical to new things/products. Therefore they would not like to use CBB.
All in the entire blue segment would be the best for CBB in the Minerva model if they should choose another segment. Maybe it is not a very good target group for CBB and it would cost a lot recourses to address to two different target groups when they also address to the young people from the grey segment. So maybe they should focus on the young people and maybe try to get more customers there. Young people want things to be easy and cheap. They also grew up with the technology so they are very confident with the Internet.

Level of Competition:
Today CBB is following a niche-strategy as their level of competition. This means that they are focusing on a small part of the market, Internet service and pay-as-you-talk-cards, and thereby they have a great knowledge on these particular areas. Even though CBB’s market share is very small it can still be an advantage because the competition in these very small segments is not near as hard as in the bigger segments. There are only a few operators who offers exactly the same product as CBB and therefore it is much easier to gain customers.
In the future it would be a good idea for CBB to keep following the niche-strategy because they work well as a small company and they have all the knowledge they need. Besides, it can be very risky trying to move into the rest of the market. Of course they may succeed but then again, they maybe don’t. Then they risk losing customers. Therefore, we think it is a good idea for CBB to keep on following the niche-strategy.

Generic Strategy:
When you talk about generic strategies CBB is now following focus (on low costs). They are interested in having as low costs as possible and thereby they choose to target a very little group of people. The reason why it is possible for CBB to keep these low costs is that they use comparatively low charges on marketing their products. Thereby they abstain from high costs on TV-commercials and campaigns. But on the other hand this means that they are unknown by a lot of people and thereby they automatically get a very little share of the market.
We estimate CBB’s choice of generic strategy as being the right one. It is very functional when they focus on a narrow target group and therefore they should continue following this strategy. CBB has the image of being a cheap telecommunication operator and their products are easy for the customers to use and understand. We think focus on low cost is the right strategy for CBB.

Parameters:
Right now CBB has an undefined marketing where they only offer one product to one kind of people. At this moment their main target group is younger people who are familiar with the Internet and mobile phones. They don’t target any one else. That may be a problem for them, because they in that way can’t get many new customers. One thing they could do to provide this is maybe to try and get in touch with another segment – by making defined marketing. A defined marketing is where a company offers sevel products to sevel target groups. Many mobile companies use this kind of marketing when they are offering a lot of different subscriptions. Here they make a subscription on the basic of their customers. For example they think about what kind of need those kinds of people have and what kind of price they would like to pay. These information companies can use to make a suitable subscription for their customers.
If CBB would like to change their Parameter-mix to defined marketing maybe they could try to target an older audience. If this should become a success the company would have to examinee the segment they are going to target. So if they want older people to use CBB they have to give them another subscription which fit them better. In this case it maybe a good idea that CBB made it possible to use the telephone to fill their mobile account. In that way they give their customers more options and becoming more attractive to their other target groups.
But even though a defined marketing would be a good idea, it maybe wouldn’t work for CBB. The reason is that CBB are following the niche strategy and therefore only are interested in doing business in this sort of area (and not a competitor).
CBB are doing just fine with the undefined marketing. They have managed to keep their costs low because they only target one group of the population. So if they changed their parameter-mix the whole idea about CBB would fall to the ground.