Vodafone is a leading international mobile communications company controlling one-fourth of the world’s mobile phone market, with more than 139 million customers worldwide (as in Oct 2004). The company’s entry into the new Zealand market in 1998 led to intense competition with Telecom New Zealand. Vodafone’s entry resulted in both companies battling constantly to woo (persuade) customers and retain them. The competition between the two brought innovation and higher levels of investment into New Zealand. The biggest beneficiary of this relentless price war and the desire to outdo each other is the New Zealand consumer. Wholesale mobile rates went down by 30 per cent over the five years to 2005. Mobile call rates have fallen as reflected in offers to consumers with ‘no lock- in contracts, per second billing and no hidden costs. The greater investment in the telecommunications sector by both rivals has resulted in price benefits to residential and business customers with land lines as well.

In 2003, Vodafone announced that they had 1.3 million mobile customers in New Zealand, which amounted to 51 per cent of the market, overtaking Telecom in the mobile sector. In the same year, Telecom introduced unlimited text messaging for NZ $ 10 per month with a view to capturing the youth market segment (the greatest users of text messages). Vodafone did not immediately retaliate but by April 2005 had announced free text messaging (Vodafone to Vodafone mobiles) during weekends (Friday evening to Sunday midnight) for all Vodafone customers. The rivalry thus benefited New Zealand customers once again.

Questions:

1. How you can relate the above case study to Porter’s five force model? Explain. (5 marks)

2. Comment on functional strategies you can observe in the case. (5 marks)

3. Do you think that any new mobile company can have entry in to the New Zealand market? Why? (5 marks)

4. Comment on mobile phone market in Fiji using the similar issues discussed in the case. (5 marks)