KAILAS H INTERNET

Product launch High difficulty

Telecom Candidate-led case

This case considers the market entry strategy of a new telecoms start-up in the Nepalese market. The
case is candidate-led and requires a candidate to be highly effective at case leadership and numeracy to
reach a solution.

Problem definition

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Your client, Kailash Internet, is a small team looking to launch an Internet Service Provider start-up in
Nepal. Their goal is to make internet cheap and widely available in the country, as they believe the
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existing telecom companies underserve and over-charge their customers.
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The team have USD $550k in initial funding for the business from investors who have experience starting
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internet companies in other developing markets. The initial aim of the team and the investors is to grow
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their user base quickly, without burning capital too quickly, and then to raise money again for further
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expansion.
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There are two potential propositions for the client team to consider: landline broadband (i.e., DSL) and
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mobile broadband (i.e., 4G). The client team is open to either proposition in principle, so long as it can
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support their growth ambitions and their mission for cheap, widespread internet in Nepal.

The team would like to know what their proposition should be to succeed in Nepal, and how they
should take their offer to market.

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Relevant information
If asked at this stage or later, please share that:
• Landline broadband involves delivering internet through copper phone lines. It requires a wired
telephone service and a DSL modem with a WiFi access point
• Mobile broadband involves delivering internet through 4G networks. It only requires a sim card
• Nepal has a population of ~30M people. GDP per capita is $835 ($2600 ppp)
• Nepal is a mountainous country where communications are difficult but essential. At the time of this
case, internet penetration stands at just over 50%
• The incumbents have built and maintained telephone lines around Nepal for decades, in a market
which has been highly protected and regulated. These providers more recently began to offer mobile
phones and landline broadband. They are concerned about potential margin erosion from mobile
internet, as mobile data packages may over time begin to cannibalize calls and text messages,
which are very profitable products (with margins at ~35%)
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It’s not anticipated that the government will move to impose new regulations on the internet market

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anytime soon. Entering the market requires getting a telecoms license, which is relatively
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• New competition in the market is not expected immediately, but some of the larger Indian mobile
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operators have their eye on the Nepalese market

• Our client would not need to build its own infrastructure. It would get access to the mobile or landline
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infrastructure of the incumbents, as mandated by the local regulation

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 Structuring

Guidance for interviewer

A good structure will reference the client’s specific goals, e.g. its ambition for rapid growth

A typical approach is to proceed in ‘top-down’ fashion: starting from the overall product to target,
narrowing down to the specific proposition to pursue for that product, and proceeding to evaluate how
best to launch.

Possible answer

1. Which of the two product types is most attractive for the client to launch, given its mission and ambition
for rapid growth?

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a. Market growth rate

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b. Economics (gross margin and investment costs)
c. Competitive intensity
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d. Barriers to entry
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2. For the selected product type, what should the client’s target proposition be?
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a. Target customer segments (if any)

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b. Commercial positioning (e.g. packages to offer and pricing for them)

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c. Brand positioning
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3. What is the optimal route to market?

a. Marketing & sales approach
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b. Distribution channels:
• Direct channels (e.g. website, sales force)
• Indirect channels (e.g. in third-party stores)
c. Potential partnerships

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 Driver 1: Which of the two product types (landline or mobile broadband) is most attractive for the
client to launch, given its mission and ambition for rapid growth?

Relevant information
If asked, please share that:
• The unit economics on each of the products are comparable. This factor wouldn’t lead the client to
make a choice one way or another
• Barriers to entry are comparable for the two products from a regulatory perspective
• A home landline broadband offering typically requires a marginally more complex support operation,
since most providers co-ordinate up-front connection set-up and maintenance
• The two players in exhibit 2 are currently the only providers of landline broadband in Nepal. We do
not have data on the competitive landscape for mobile internet at this stage
• Each offering may require the firm to make use of existing infrastructure, although Nepal has
regulation in place to enable this without unfair competitor intervention or restrictions

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Guidance for interviewer
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When the candidate hits upon this topic, encourage them to explain what information they’d be keen to
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understand about the two product types to inform their decision. Once a candidate has begun asking for
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information on the topic, share Exhibits 1 and 2. These two exhibits provide the core information needed
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to solve this part of the case.

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A strong candidate will quickly notice that the relevant growth rates of the two products favour mobile.
The interviewer should encourage them to think creatively about why this might be, in order to better
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understand potential dynamics in the market.

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Candidates should also discern from the combination of Exhibit 2 and Exhibit 1 that the mobile market
must be more fragmented and therefore easier to enter.

Possible answer

When it comes to unit economics, there doesn’t appear to be much to separate the two products. Therefore,
we should make our decision based primarily on the growth prospects of each segment and our client’s
potential to succeed in them.

Exhibit 1 shows that internet use is rising very fast in general, with a CAGR of 26% over the last several
years. Of the two segments, mobile is clearly growing the fastest. Over the period, it’s grown from a small
proportion of the market to around 50% of it – and there isn’t yet evidence of this growth flattening out.

It is likely that landline broadband market is restricted to users who have access to cover phone lines, who
tend to be more urban, affluent and early adopters of new technologies. Most of these potential customers

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are likely to be already equipped. Landline broadband therefore is likely arriving at saturation because it only
covers the more urban and affluent segment of the population that has copper phone lines. Given that Nepal
is a mountainous and impoverished country, many users can only access mobile broadband.

On the other hand, mobile broadband opens us access to rural, working class users, who are likely to come
to this technology later on. Together with decreasing prices, this is likely to explain why the mobile
broadband market in growing faster. Therefore, we need to focus our approach on this segment of the
market.

We can see in Exhibit 2 that the two main incumbents are predominantly focused on providing landline
broadband today, with market shares of around 50% each. However, neither are dominant in the mobile
internet market. Because this market is growing, it must be more fragmented and contain some smaller,
newer players. This too makes it more attractive to us: there is still possibility for new entrants to enter and
make inroads, without the risk of dominant incumbents seen in the landline broadband market.

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Overall, this data suggests that the client should focus their efforts on providing mobile internet to the market.

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From a growth perspective it’s more attractive, and it is likely an easier market to penetrate too.
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Next, we need to look into what types of mobile internet packages are demanded by the market, and what
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proposition the client should target to succeed.

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 Driver 2: For the selected product type, what should the client’s target proposition be?

Relevant information
When sharing Exhibit 3, state that the client has considered six different mobile packages, four of which
are currently available in the market: the daily 500MB, weekly 2GB, and the two monthly packages.
Each package’s pricing reflects its timeframe, so in other words: daily package pricing reflects a per day
price, weekly package pricing reflects a per week price, and so on.

Share the below information if asked for:

• It costs the client $2.5 per gigabyte in network infrastructure costs
• We can assume that customers buying daily or weekly packages follow the below general
purchasing patterns:
− Daily purchasers buy a package once every ten days, on average

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Weekly users purchase a package once every two weeks, on average

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There will be additional costs to acquire customers, and overheads to manage and maintain the
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business centrally, but these need not be considered for this initial comparison
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Guidance for interviewer

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Expect the candidate to request data on different mobile packages or to start brainstorming options
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themselves, such as monthly subscriptions or a one-off data bolt-on. Once the candidate begins to ask
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for specific information, Share Exhibit 3. Candidates should recognise that more information than this is
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needed to understand unit economics: share the information on this above when asked.
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The candidate should proceed to calculate the profit per customer and total market size of each
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package, and compare them on a like-by-like basis. To do this, candidates should be encouraged to
calculate the packages on a monthly basis.

The numbers alone won’t determine what share of each products’ total sales the client can capture, but
candidates should provide informed judgement on this. Candidates should prioritise the two options
which seem favourable, but aren’t yet offered by existing players: the daily 250MB and weekly 1GB
packages. Candidates should also intuit that an offering of multiple package durations will be key to
attract a variety of customers (e.g. including daily, weekly, and monthly options).

Possible answer

The best starting point for reviewing packages is Exhibit 3, which provides a range of data points on potential
package options. Let’s use this to calculate the potential market size of each product type as well as their
profitability.

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 Expected Potential Profit
Effective Implied Monthly Monthly
market size monthly Margin (%)
Package Price ($) Price per gigabytes revenue cost per
(‘000 market size
gigabyte ($) per month per user ($) user
customers) ($m)

Daily
2.75 11,000 11 0.75 8.3 1.9 91 77
250 MB

Daily
3.75 7,000 7.5 1.5 11.3 3.8 79 66
500 MB

Weekly
7 6,300 7 2 14 5 88 64
1GB

Weekly
11 4,000 5.5 4 22 10 88 55
2GB

Monthly
15.5 3,500 5.2 3 15.5 7.5 54 52
3GB

Monthly
21 2,000 4.2 5 21 12.5 42 40
5GB

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The unit economics are comparable across packages, with monthly options being the least profitable.

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However, the potential market size favors weekly and daily options over monthly ones.
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As the client is most interested in gaining quick traction in the market and growing their customer base
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quickly, focusing on options that appear high-potential from a revenue standpoint should be a priority. The
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client should also focus options that are under-served at present, and therefore a gap in the market to
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exploit.
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The daily 250MB option should be clearly prioritized in this regard, since it is has the highest potential market
size and is not offered at present. The weekly 1GB option should be prioritized too – while 2GB is of
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equivalent size, 1GB is a gap in the market that the client could make use of.
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The client should also pursue a monthly option, to complete the proposition. Of these, 3GB has the highest
potential from a revenue and profit margin standpoint.

The client could position itself as offering cheaper, lower-data package options – each of the above
packages would fit with this proposition. Since it is offering packages that don’t yet exist, it could position
itself as a disrupter in the market by providing very low-cost options.

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 Driver 3: What is the optimal route to market?

Guidance for interviewer

This part of the case will likely be explored last, if time permits. It should not be positioned as a problem
to fully ‘crack’, and the interviewer should not give significant information or guidance. Rather, it should
be positioned as an opportunity to think creatively about what go-to-market options might be attractive
for the client to consider.

Possible answer

We should take into account several go-to-market considerations here. I would recommend the client look at
the following areas, based on the premise that the client is targeting low-income users leaving mostly in rural
areas, with a low cost offering

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1. Marketing & sales approach:

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a. Brand proposition: Low cost, no commitment
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b. Marketing channels: Radio adverts are probably the most able to reach are target users and be
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within our budget
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2. Distribution channels:
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a. Retail. Given many customers will be first-time mobile adopters, in-person transactions will be
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critical. However, there might be limited retail options in the areas we’re targeting. We should have a
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flexible approach and enlist a variety of local retailers, such as gas stations, small grocers, and post
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offices in rural areas

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b. Community. We should take advantage of the informal economy in these remote areas and allow our
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customers to become our distributors

c. Direct. Some customers may be existing internet users looking for new deals. We should therefore
provide an option to buy directly online

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 Conclusion

What’s your overall recommendation to the client?

We were asked to determine the best offering and market entry strategy for a telecoms start-up looking to
make internet cheaper and more widely available in Nepal.

Taking market trends, competitor positioning and profitability into account, I recommend the client enters the
mobile internet market and offers low-cost, low-usage options: a daily 250MB package, weekly 1GB
package, and monthly 3GB package.

Mobile is clearly the most attractive market to enter, and the low-cost options represent a major growth
opportunity with untapped potential from some of the competition. We can assume the main target market
will be customers in rural, less affluent areas. The client can target this market with a clear brand proposition

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aimed at those seeking low-cost options.

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We should consider a range of distribution channels and potential partnership options to maximize growth
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potential as we pursue this option. To succeed with fast growth, the client should also consider heavy
promotion and discounting – this will affect profitability, but grow its presence.
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As a next step, I recommend the client look into review its go-to-market approach in more detail, and review
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branding, distribution, and partnership options that can maximize its growth in the market.
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 Exhibits

Exhibit 1: Internet use in Nepal in millions of users over the last seven years

Number of users (millions)

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Overall CAGR Year 0 to 6: 26%

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Exhibit 2: Current market share of existing Nepalese Internet providers ($’000)

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* Everest Communication and Nepal Telecom are the only providers of landline broadband in Nepal
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Exhibit 3: Packages and pricing among Nepalese consumers

Expected market
Package Price ($)
size (# users)

Daily 250MB 2.75 11,000,000

Daily 500 MB 3.75 7,000,000

Weekly 1GB 7 6,300,000

Weekly 2GB 11 4,000,000

Monthly 3GB 15.5 3,500,000

Monthly 5GB 21 2,000,000

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