ET Phones Inc' Forecasting Business Demand

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ET Phones Inc.Forecasting Business Demand

• The road ahead..

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Background

• ETPH studies report of a market survey concerning
  potential demand for proposed cellular radio
  service.
• ETPH submits to FCC bid for Cleveland, Ohio area,
  as a service circle.
• 1 wireline, 1 nonwireline licence to be granted
  in each of the 30 largest metropolitan markets.
• ETPH hires Digitron, a telecom research
  consultancy, to carry out market research survey.

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Technical Market Scenario

• Cellular radio is new, cleared for commercial use
  only in 1981 by the FCC.
• CR is a more efficient technology in terms of
  network efficiency.
• Till early 1982 communication functions to be
  performed by CR products and services still
  largely undefined.
• CR touted as the technology that would change
  the face of telecom industry .
• Most available frequencies grossly overloaded,
  resulting in 3-10 years long waiting list for
  mobile phone connections.

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• Currently mobile communications were provided
  through pagers and mobile phones, by small
  businesses known as RCCS (Around 750 in 1982
  throughout US).
• 1977 study by Trade Association says that ROE of
  30 prevails in the industry.
• Frost and Sullivan estimates that sales for
  mobile radio equipment would rech more than 6
  billion in 1990, but also says that 67 of this
  would be from the business sector.

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FCC requirements for license grant

• Detailed demand forecast.
• Estimates of construction costs.
• First year operating expenses.
• Documented financial backing.
• Proposed service charge.

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Digitrons tasks

• Develop user profile.
• Forecast demand for cellular phones in Cleveland
  SMSA for 1984 through 1994.
• Identify market potential in each portion of
  Cleveland SMSA.
• Develop forecast model to aggregate demand for
  cellular radio and distribution of demand
  throughout Cleveland.

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Cleveland facts and figuresBleak past

• 3 major industries Automotive, Steel and Rubber.
  All 3 In a major slump.
• 1980 and 1981 saw unemployment at 9.7.
• Retail sales at 0 growth rate in early 1981,
  while construction was marginally up by 10 from
  1980s weak levels.
• Lost 34 of population during 1970s. However this
  also included people moving to suburbs.
• 10.5 million default in 1978. Reconstruction
  efforts by various institutions .

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Exciting Future

• 33 of Fortune 1000 industries have their HQs
  here.
• Downtown has major development projects coming
  up, Sohio announced the building of the
  corporations HQ here.Medical Mutual was also
  doing the same. Total cost of construction
  projects on the anvil - 427 million.
• Boom expected soon in construction and service
  industries, as well as distribution and transport

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Present Mobile Telephone Market Conditions

• Ohio Bell Company, Cleveland Mobile Telephone (an
  RCC) are major competitors. OBC has 57.4 share
  (483 units), CMT has 25.8 share (217 units).
• Total of just 842 mobile phones in Cleveland.
• 8 paging companies serving total of 10,733
  customers, OBC leads with 32.2, CMT has 18 and
  Digital Paging 16.4.

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Prevailing Billing System

• OBC charges 21.45 per month as service charge.
• CMT sells equipment for 2,400 plus monthly
  charge of 41.5
• Fitzgerald Communication just sells phones at
  3949 (including installation and sales tax).

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Forecast Model development

• Potential Users assumed to be primarily business
  executives.
• Heaviest demand is expected from Construction and
  Service industries.
• Wholesale trade industries show maximum interest
  in mobile phones
• Administrators/managers, Owners followed by
  Sales Personnel projected to be heaviest users.

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User Profile

• Random sample of the businesses in the region
  collected (400)
• Asked through telephone about interest in mobile
  telephones at reasonable rates.
• Interest was believed to be created due to
  Keeping in touch and Convenience rather than
  Prestige.
• 90 respondents were managerial staff.
• Questions about frequency of use also asked

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Digitrons Nine Factors

• Projected number of businesses The number of
  businesses expected to exist in Cleveland in the
  years 1984-1994.
• Percentage demand The projected demand among
  these businesses.
• Total potential business customers Number of
  businesses Percentage demand.
• Number of units per customer Number of cellular
  radio units that each business would utilize.
• Total potential units Business customers No.
  of units per customer.

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• Percentage penetration - Actual level of
  adoption among the potential business customers.
• Estimated market demand Total potential units
  Percentage penetration.
• Market share of ETPH Market share of ETPH
  assumed at 50.
• Estimated number of ETPH units Estimated market
  demand Market share of ETPH.