Group Members Hadia Tasawar Humma Safdar M.

Usman Anwar Qasim Gondal

To switch to our network, the customers will have to pay a fee of 2500E
They will get 190 minutes free for the 1st month after switching to our network After 190 free minutes, the customers will be charged 8E/minute.

The customers will have to use at least 4 minutes per month

They will be charged 30 E every month apart from the per minute charges

Our costs for one customer 1. Sales cost 2000E 2. Per month cost50E 3. Per minute cost2E

So for 190 minutes, the total cost is 2000+50+(190 x 2) = 2430 E

For the first month when we will give 190 free minutes our profit will be: Cost price = 2430 E Selling price= 2500 E
Profit 2500- 2430 = 70E per every new customer in the first month

 Cost price for 4 minutes 1. Per month cost - 50 E 2. Per minute cost - (2E x 4min) 3. Total cost price = 58E
1. 2. 3. 4.

Selling price for 4 minutes Per month fixed price- 30E Per minute cost - (8E x 4min) Total selling price= 62E Profit 62-58= 4E

No. of min at least used 5 4 3 50 50 50

Fixed cost per month

Per minute cost 2 2 2

Total cost price (CP) 60 58 56

No. of min at least used 5 4 3

Fixed price that customer will pay 30 30 30

Per minute cost 8 8 8

Total selling price (SP) 70 62 54

Profit SP- CP 10 4 -2

Our target market is a mass market which include big and small businesses as well as the local people According to the consultants report on OLD, we will also target the 50,000 (20%) of OLDs customers that account for 80% (960 minutes)of the sales
So each customer out of the 50,000 use 960 minutes So our main focus will be on these big companies and bring them to our network

Enough of old! Try NEW with improved technology and low rates!

No of minutes= (no. of large customers x 240min)+(no. of rest of customers x 15min) -( the no. of new customers x 190 free minutes) (The number of minutes in the chart do not include the free minutes) [960 minutes yearly for large companies so this means 960/12= 80 min on average per month. So for one quarter 80min x 3 months= 240minutes] [60 minutes yearly for other customers so this means 60/12= 5 minutes on average used by other customers per month] For 1 quarter 5 x 3 = 15 minutes

1.

Revenue = (no. of minutes x price i.e. 8E) + (2500 x new customers)+(30E x no of customers) 2500E is the fee that every customer will pay to switch to our network Operating cost=(no. of minutes x 2)+ (50 x 3x customers) +( 380 x no of customers) 190min x 2E = 380 E is the variable cost of 190 FREE minutes that we give to each customer

Sales cost= (2000 x no of customers approached)

G&A= (10% of Revenues) Net profit= Revenues- Total cost

We have also assumed that the large customers use 960 minutes and the rest use 60 minutes yearly according to the 80/20 ratio
These values are calculated with the help of data in the OLD annual report We have also assumed that 6% of our sales costs are not transformed into our customers. For example we approached 954 people in Q1 in year 1 but could get only 900 customers. So sales costs are for 954 customers in Q1 year 1 whereas other calculations are for the 900 customers we got in that quarter

Year 1 Q1 New customers Total customers Minutes Revenues Operating cost Sales cost 900 900 64,125 2,790,000 605,250 1,908,000 2300 3200 45 372,000 8,795,000 1,963,000 4,876,000 Q2 2500 5700 60 855,000 13,165,000 3,035,000 5,300,000 Q3 3000 8700 70 1,500,750 19,631,000 4,591,500 6,360,000 Q4

%large customers 25

G&A Total cost

Net profit

270,900 2,784,150
5850

879,500 7,718,500
1,076,500

1,316,500 9,651,500
3,513,500

1,963,100 12,914,600
6,716,400

Year 2 Q1 New customers Total customers %large customers Minutes Revenues Operating costs Sales costs 3000 11,700 60 1,755,000 21,630,000 5,040,000 6,360,000 2900 14,600 65 2,354,250 26,171,000 6,227,500 6,148,000 Q2 2700 17,300 68 2,906,400 30,082,200 6,298,800 5,724,000 Q3 3000 20,300 68 3,319,456 34,145,648 7,178,912 6,360,000 Q4

G&A Total cost

Net Profit

2,163,000 13,563,000
8,067,000

2,617,100 14,992,600
11,178,400

3,008,220 15,031,020
15,051,180

3,414,565 16,953,477
17,192,171

NEW can lower its prices from 8E/min to 6E/min if MAD allows new entrants to enter the business This will ensure that the NEWs current customers dont leave the network NEW will still be able to generate considerable profits as seen in the next slide For year 3 the selling price has been kept to 6E/min

Year 3 Q1 New customers Total customers %large customers Minutes Revenues Operating costs Sales costs 3000 23,300 70 4,019,250 31,765,500 9,628,500 6,360,000 3000 26,300 68 4,418,402 34,100,412 10,426,804 6,360,000 Q2 2900 29,200 71 5,102,700 38,206,200 11,742,400 6,148,000 Q3 3000 32,200 70 5,554,500 40,917,000 12,699,000 6,360,000 Q4

G&A Total costs

Net profit

3,176,550 19,165,050
12,600,450

3,410,041 20,196,845
13,903,567

3,820,620 20,711,020
17,495,180

4,091,700 23,150,700
17,766,300

Our estimated revenue from the first year will be 44,381,000 E Our costs are very less as compared to our revenue because we have kept the general and administrative expenses to a minimum and havent let them exceed 10% of the revenue

The total costs from the first year are estimated to be 33,068,750 E So thus our net profit will be 11,312,250 E

Sufficient profits can be generated as shown in the financial forecasts if we focus more on the large customers. These obviously link back to our pricing policy of charging 8E/ minute. As the sales department had predicted that 20%discount from the OLD price will lead to maximum sales
Our net profit from the 1st year of operations will be 11,312,250 E

The main competitor of NEW for the 1st year will only be OLD because MAD will not grant any additional licenses in the 1st year
OLDs prices are high i.e. 10 E/min as compared to NEWs low price of 8E/min as well as 190 free minutes that NEW offers for the first month

OLD may change its marketing strategy when NEW comes in the market OLD will probably now market its wireless on the basis of trust factor that has been established between the company and the customers
It will also make strategies to convince people not to trust the NEW network

If MAD gives license to new entrants, NEW will not be affected as such because NEW can easily lower its prices to compete with the new entrants
New entrants will not be able to give such low prices because the cost of building a network and taking customers from NEW will be very hard

When NEW will break OLDs monopoly two reactions are expected 1. OLD will introduce new packages to compete with NEW 2. OLD will lower its prices

If OLD decrease prices of their products and services on the contemporary old technology which is not able to give reliable services to customers So no ground left for OLD to call back their customer because NEW offer very effective services to customer with new packages So customers prefer NEW products instead of OLD.

If MAD license new entrants they have to charge less than the pricing strategy of NEW which will be a difficult task for them because the networking will cost them more as it costs NEW and OLD

NEW will ask for deregulation for all wireless companies In this way the competition will increase and then to put new entrants out of business NEW can collaborate with OLD and together they can charge a price that is even less than break even and they can put other new entrants out of business and can earn profits.