1.

Introduction to Dialog

With the increased use of mobile phones in Sri Lanka, there is a vast growth potential for the
mobile telecommunication industry. In Sri Lanka, the mobile telecommunication industry is
concentrated on a few players namely Dialog, Mobitel, Etisalat, Hutch and Airtel, competing
in an Oligopoly market. (Oligopoly is a small group of businesses, two or more, that control
the market for a certain product or service. This gives these businesses huge influence over
price and other aspects of the market.)

Dialog is a diverse company with several services to benefit the consumers, such as
telecommunications, fixed lines, broadband connections and TV connections. The Company
delivers advanced mobile telephone and high speed mobile broadband services to a subscriber
base of 10.9 million Sri Lankans, via 2.5G and 3G/3.5G and 4G networks. The company
consists of 4000+ staff members with several outlets island wide in the major cities to provide
the customer service and sales for the customer. They have the largest network coverage in the
island and is the market leader.

MARKET SHARE
Airtel, 9%
Hutch, 5%

Dialog, 38%

Etisalat, 23%

Mobitel,
25%

Dialog is considered the best technological innovator in mobile communication in Sri Lanka,
being the first in South Asia to introduce Short Message Services (SMS), Automatic
International Roaming (AIR), Wireless Application Protocol (WAP), General Packet Radio
Service (GPRS), introduced Missed Call Alert, Multimedia Messaging Services (MMS), 3G
and EDGE service. It also became the first telecom service provider to initiate a pilot 4G LTE
(long Term Evolution) in Western Province of Sri Lanka in year 2011.

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 2. The Product and Product Differentiation

2.1 The Dialog product ranges are as follows:

Dialog Mobile
Dialog Fixed wireless telecommunication (CDMA)
Dialog Broadband and internet
Dialog Television services
Dialog Global ( Roaming services of over 200 destinations)

2.2 Dialog Product Differentiation

Image/Brand- Dialog has a strong brand name in the market being the market leader and
has a large base of loyal customers.
Advertising & Promotion- They carry out aggressive sales promotion with several
packages that can be ordered by any customer, based on their necessity. They also have
promotions on and off for prizes to encourage customers to either switch to dialog or to
take part in promotions. It keeps the customers and the company in good relations.
Customer Service- This is one of the main areas that has been a success factor for Dialog
in the market. Dialog Telekom Enterprise Contact Management is a fully integrated multi-
channel 24/7 Contact centre handling customer interactions via Web Chat, E-mail, Fax,
SMS, Voice, 3G video and IVR. They have gone further and now adopted the customer
conveniences as their main focus.
Expanded product features- Dialog offers a full range of diversified products extending
its services up to easy cash (EzCash). They also have different options that the customer
can choose from, such as weather forecasts and news updates.
Easy access- Dialog has numerous services outlets and distribution channels, covering the
entire country with a good coverage throughout the country, being the first to extend its
coverage to Jaffna in 2011. Dialogs distribution network now comprises of over 42,000
retail outlets, 22 company managed state-of-the-art service centers and over 100 franchised
customer service points.
Loyalty Programs - The Star Points network consists of over 400 partner merchants with
more than 20,000 partner outlets island wide. They cover a variety of multiple retail sectors
expanding to household-items, electronics, grocery, clothing chains, food and beverage,
cosmetics, healthcare and domestic and international travel.

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 3. Existing barriers to entry and exit in the relevant market

3.1 Barriers to Entry

Capital Investment required- Building and development of telecommunication

infrastructure is very costly and time consuming. Obtaining regulatory clearances to enter
to telecommunication industry in Sri Lanka is difficult.
Rapidly changing technology- Unlike other industries in the telecommunication industry,
companies should be in par with the newest technology that is ever so growing dynamically.
Economies of scale- Dialog also use cost leadership mainly with the mobile connections
and broadband connections, they attempt to reduce the price slightly but not by a lot, they
depend on the brand name. For a new entrant it would take quite a long time to start earning
profits from the huge monies that has to be invested.
Strong Business Alliances- Dialog group has formed alliances with suppliers and
distributors to gain competitive edge over competitors. They have networked with
supermarket chains like Cargills and have partnered with software vendors and equipment
suppliers like Huawei and Sony. They have formed international alliances to expand the
service to other countries.
Customer Loyalty- Unlike other industries, in the telecommunication industry it is hard to
attract new customers, because they would hesitate to change their unique mobile number
assigned to them, unless a very attractive benefit or package is given to the customers.

3.2 Barriers to Exit

Barriers to exit is the companys ability to withdraw from the business. In the mobile
telecommunication industry barriers to exit are:

Investment in specialized assets The company has invested in Plant, equipment, and
other telecommunication specific assets, that are very costly to transform into another
application and therefore have little salvage value
Fixed costs- Dialog has already entered into many agreements such as alliance agreements,
leases, and the need to maintain parts for existing plant and equipment. Cancellation of
these agreements would involve high cost.
Relationship to other business units- The telecommunication industry is a wide network
and many other companies will be affected from shared facilities, distribution channels, or
sales force, if Dialog exits from the market.

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 Government- It is a very tedious process to exit from the telecommunication industry
where the government closely monitors through the Telecommunications Regulatory
Commission.

4. Degree of control over price that the suppliers of the product enjoys

Unfortunately for the suppliers and fortunately for the consumers the mobile
telecommunication industry suppliers in the Oligopoly market have a very low degree of
control over the price.

If one company tries to lower the price, the other few players in the market also will follow suit
in lowering their prices to match the price reduction. But however, if a company increases its
price the other companies will not follow and the company will lose its sales.

Usually price wars do not exist in the oligopoly market structure.

The five companies in the mobile telecommunications industry spend heavily on market
capturing strategies to capitalize on non-price wars. Every firm tries to capitalize on the
following aspects:

Advertising
Promotion
Quality and technology
Value added services
Customer and community service