Mobile war in Trinidad - an analysis

An analysis
by Ian Alleyne

Port-of-Spain, Trinidad, July 7, 2006 - A tidal wave has swept away the bridge since the start of the fierce battle between the two main mobile operators in Trinidad and Tobago. The market has been liberalized. Digicel has launched. TSTT has re-branded. These two operators have locked horns and Laqtel is waiting in the wings to launch.

Failure to Launch
The original target date for full interconnection by Digicel was November 30, 2005. This interconnection deadline was set by The Telecommunication Authority of Trinidad and Tobago (TATT). TSTT, the party responsible for installation of the interconnection equipment, objected to the deadline.

The parties had dissimilar interests. An early market entry was in Digicel’s best commercial interest. A November 30 launch meant that two great promotional opportunities, Christmas and Carnival, lay just ahead – back-to-back. TATT’s regulatory interest lay in the introduction of competition to the local telephony market in the shortest time possible.

However, TSTT’s commercial interest was best served by a delayed start to competition. Not that the incumbent was opposed to competition, but the longer the delay, the greater the time for preparation. That is, preparation to improve their service and implement a new competitive strategy.

Between the arch-rivals Digicel had more at stake. TSTT, the incumbent operator, was already reaping a return on its mobile investment. On the other hand, Digicel with over TT$1.0 billion (US$1 = TT$6) invested had no income from the local market and was painstakingly awaiting interconnection to launch its operations.

Hence, the onus was on Digicel to drive the issues of interconnection and the new mobile concessions. Digicel kept the issues alive and made them the focal point of the government and TATT. In December 2005 their mobile concession was granted. However, interconnection was not as forthcoming.

Digicel declared itself the new kid on the block by launching an advertising campaign that directly attacked TSTT. For days, which seemed without end, Digicel had full page advertisements in all the daily newspaper that degraded TSTT and its workers. TSTT was depicted as despicable, lazy and a drunkard. The campaign sought to capitalize on the public’s deep-rooted dissatisfaction with the monopolistic old leopard.

At first, the advertisements had an appeal and provided amusement. But they soon become overbearing. From the continuous bombardment, ad nauseum, many perceived that Digicel had a wider target than TSTT and its workers.

The object of Digicel’s campaign was the attitude of TSTT and its employees. However, this attitude is not unique to TSTT. It is an undesirable quality of our fractured character as a people. A few persons, via letters to the daily newspapers, spoke out against this ignominious campaign. However, Digicel remained cocky and insensitive.

This was bad strategy and contrary to international practice. In International Business 101, companies are advised against being insensitive to different cultures or adopting offensive postures in foreign countries. In practice, multinational companies stay away from attack modes as displayed by Digicel.

Without a doubt TSTT, a foreign entity, cannot take out full page advertisements in any Irish newspaper depicting the Irish as drunken dirty pigs. (I am not saying that they are). If TSTT planned to operate in the Irish market and did this it would have been the end of that. TSTT, and rightly so, flatly refused to respond to Digicel’s blatant insults.

So after openly and in cocksure fashion insulting the incumbent it was arguably unreasonable to expect TSTT to push any interconnection agenda.

Digicel’s trump card lay in the expectation of a directive from the government to TSTT to interconnect by November 30. However, the government flatly refused to get directly involved in the matter.

As we all know Digicel did not interconnect on November 30, 2005. TSTT announced March 31, 2006 as the new date for interconnection. Digicel with egg on its face was made to ‘suck salt’ over the 4 month delay period. What happened after could only be described in local parlance as ‘is now de mass start’.

Santa Carried a bMobile Bag
In what some call poetic justice TSTT launched its competitive marketing strategy on November 30, 2005, the same day Digicel had planned to launch. The strategy included rebranding, competitive rates and a dazzling array of new mobile handsets. All of this was wrapped within a hitherto unbeatable two-for-one mobile phone offer. Santa had arrived earlier than expected.

The launch was successful. There were long queues at the new bMobile stores and stock-outs from unanticipated demand. TSTT benefited from higher penetration by saturating the marketing with middle-to-high end phones at hitherto unbelievable prices. This effectively raised the barrier to entry into the mobile market for Digicel.

Digicel faded into the background over the Christmas season in the wake of TSTT’s powerful marketing blitz.

Next was the Carnival season and Digicel had to re-assert itself in the market place to the prominence it enjoyed prior to November 30, 2005. This was important since Carnival holds the attention of most Trinidadians, especially an important target market for Digicel. Secondly, Carnival would have provided a springboard lift to its new launch date, dictated by TSTT, of March 30, 2006.

Digicel Played Mass
The Carnival season was turned into a sponsorship dogfight. Digicel asserted its position during the Carnival season after being successfully shut out by TSTT for Christmas. All the prominent Carnival events received big sponsorship from either TSTT or Digicel and ‘big money’ was spent. Many long-standing sponsors like Angostura had to take a backseat. This was not their war.

Digicel’s Carnival campaign was no doubt successful. They re-emerged prominently in the nation’s psyche. This lift was sufficient to re-ignite people’s expectation of Digicel and refocus on their anticipated launch.

Market Mistakes
On March 30, 2006 interconnect was achieved and days later Digicel launched. However, after waiting so long they failed to fully capitalize on the opportunity.

Their initial marketing campaign lacked ‘oomph’. Compared to TSTT their rates were higher and mobile handsets more expensive. In addition, their range of phones was unexciting and advertisements lackluster. Both red and green had multiple full page ads in each of the daily newspapers (and they still do). But the green ads were far superior in appeal and design. The red ads appeared unimaginative and dreary. It was as if red meant stop and green, go.

Digicel failed to manage market expectations. In many of their regional markets Digicel had given away free phones upon entry. To what extent this was done is debatable. However, Trinbagonians expected free handsets from Digicel and many were disappointed with the lack thereof. This disappointment led persons to then critically examine and compare Digicel’s rate structure. Their urge to switch was further dampened by what they found – more expensive tariffs.

Digicel sensing the public’s mood took a hard line. According to the head of Digicel, he did not believe in free phones giveaways and it was high time the operator began to recoup its investment. In other words it was confident that the market would flock to Digicel regardless.

Free handsets are not giveaways but market insurance. TSTT had saturated the market with bmobile handsets so subscribers basically had the latest bling. Carnival has just finished and as usual Trinbagonians had spent all their money on Carnival costumes and tickets to the many Carnival events sponsored by TSTT and Digicel. So it was unrealistic to expect Trinbagonians to invest in new mobile phones before Easter. Unless it was free!

The four month delay would have adversely impacted Digicel’s budget. Delays mean unplanned costs and unplanned costs mean cost overruns. By definition a budget is not infinite so cost overruns must be dealt with by either additional funding or cut-backs. The latter may have affected Digicel’s initial market launch plan.

If not, then the plan was ineffective from the start. This is apparent from changes that were soon to follow the launch. Digicel was the first to offer disposable phones on a wide scale in the local market. They sold at TT$49 (US$1 = TT$6). Also, it offered free phones to post-paid customers. It had finally aligned itself with market expectations.

The cheap phones served to gain market penetration. However, it was unlikely that a $49 phone made money for the dealers. TSTT, not to be outdone, quickly offered phones at $99 and later at $59.

Maybe Digicel underestimated TSTT’s marketing prowess. Despite its monopolistic upbringing it had matured into a market savvy enterprise. Despite its poor service it has conducted an effective marketing campaign. When it comes to marketing it is no doubt the local gorilla, King Kong.

Different Strategies
The two strategies were different. TSTT’s strategy was based on price. Digicel was based on service. However, due to a poor entry strategy Digicel was forced to play the price game. First by offering cheap cell phones and then by promotional rates as low as 1 cent per minutes. In the melee its rate structure became confused and its whole marketing campaign appeared reactionary. In the meantime TSTT’s smooth marketing machinery rolled on.

Digicel cannot compete with TSTT on price. It only did so to recover from a blundered market launch. What is can compete on is service because this is where the incumbent fails miserably.

In Trinidad and Tobago many people have switched to Digicel. For the first time many people in low populated and rural areas were able to receive reliable mobile service coverage. For these people there is no choice – it is Digicel or nothing. They are non-existent as far as TSTT is concerned. With all the claims of being the bigger better network these people received no service from TSTT.

Others are slowly switching because of better reception quality. No more “Hello, hello …. I can’t hear you!”, intermittent coverage and dropped calls. Finally, Digicel has started to focus on its strengths. Its advertising is changing from alien, sci-fi models to everyday people enjoying the benefits of first time service and better reception. This is how they can best identify with people’s needs and successfully compete in the long-run.

It does mean, however, that the market will be segmented into price and quality. Price is TSTT’s market and quality Digicel’s. However, Digicel must develop price competitiveness. If TSTT improves the quality of its service it can distinguish itself on price.

Digicel must know by now that despite the bad treatment by TSTT many people still will not switch easily. There are several reasons for this. Firstly, Digicel is not blameless. Its aggressive tactics and stance on key regional issues have rubbed many people the wrong way. Secondly, the switching cost is too high for many people to simply throw away their TSTT phones. There are too many contacts to be notified of any change in number. Thirdly, the unsettled interconnection fee (TSTT/Digicel) will result in higher call cost, across operators.

While Digicel and TSTT are still haggling over an interconnection fee, subscribers have already resolved the issue. They will simply have a mobile phone per operator or limit inter-operator calls. Laqtel and TSTT have already finalized an interconnection fee of 45 cents per minute. Based on market signals this may be below the economical rate for Digicel.

Interestingly, Pyramid Research, expects TSTT to lose about 40% market share. Pyramid Research, an international research and consulting firm, has over 20 years of experience in the communication and technology industries, worldwide.

According to TSTT’s CEO its subscriber base was about 900,000 in February 2006. If this is the market size then TSTT’s market base is expected to fall to about 540,000 subscribers. Based on market observations it is unlikely that TSTT has lost a significant number of subscribers.

Laqtel’s Opportunity
Digicel’s foray into the market has not broken the incumbent’s back. This has left a wide open opportunity for Laqtel. If Laqtel can put its house in order and launch in a timely fashion it can become a formidable threat to both Digicel and TSTT. That is, once its service is equal to that of Digicel and its prices comparable to TSTT. One good thing about Laqtel it has no baggage apart from a light political complexion.