Telstra Corporation Limited Political, Economic, Legal, Technological, and Socio-Cultural Environment - Example

BUSINESS REPORT. INTRODUCTION. Telstra Corporation Limited is an Australian based telecommunications company that was founded by the Aussie’s government in 1975. It is one of the first companies to be established by the Aussies government and its success is always emulated by other established organizations across the world. It has been, and it is still the dominant provider of telecommunications services in Australia. Some of the products offered by the Telstra brand include; voice services, mobile telephony, Internet services, pay TV, fixed line services which it has already established a foothold both locally and internationally. Telstra’s mobile telephony division which was the first mobile carrier in Australia, is Australia’s largest mobile service provider with a subscriber base exceeding twenty million, it has the most advanced network offering 3G technology to it’s subscribers and with the recent launch of the Next Generation network, it is in a position to offer value added services such as mobile television and other generic internet services. Telstra also provides the national internet backbone which it mainly trades to less smaller companies for re-sales, it also provides IP & data transport for the international clients. It also owns the largest cable internet backbone trading under the name “big pond” which has over two million subscribers and it also owns & manages a host of top of the range retail shops for its mainstream products. Despite it’s tradition products, Telstra has been very dominant in new markets such as the collocation services, internet access and hosting. 1However not everything has been going well for the telecommunication behemoth in recent times, on 26th November 2008 Telstra submitted a tender issued by the federal government to build a National broadband network which was envisaged to cover 80-90% of Australia’s major cities despite the requirements being 98 percent, as a result Telstra was removed from the national broadband Network which subsequently resulted to its shares making the largest decline on a single day in it’s history. With Telstra’s market share, history and reputation, most of its executives had a perception that if they can lose on such a major project such as the National Broadband Project, then the same could be replicated across its entire product portfolios and this could seriously harm the companies future profitability. Executives at the company argued it was time now to move ahead and forget the past, it is this living in the past that brought unnecessary pride that led to violations of rules and regulations in the tendering process. A series of meeting were held to brainstorm on the way forward and one of the suggestions was to expand beyond its borders. It was unanimously agreed that international expansion was one of the quick remedies for the telecommunication giant and now the main question was which particular region and country to begin with. There were quite a number of different suggestions such as Africa, Latin America, Europe, North America and Asia. But going with the recent developments Asia was the region that was experiencing the fastest economic growth and since the business climate there was very favorable the question there was which particular country. After some considerable thoughts Thailand was chosen to be the country of choice, a number of reasons were tabled and it was very convincing that it should be the country to look at. Despite it being a country of choice Thailand still has very pressing and difficult issues to deal with; the liberalization and regulation of the telecommunication industry as a whole, a process that should have been completed in 2006 but is still a long way to go, Also the there are complexities of the concessions that were granted to the initial private players, the country has neglected its information infrastructure due to vested interest both in and outside the government to further their own ends. 2Nevertheless the industry is recovering and according to DIGITAL MEDIA ACROSS ASIA, Thais mobile market today has reached a peak of over 53 million subscribers and with a growth rate of approximately 30% in 2008 and this trend is likely to be sustained for some significant period of time. 3Also Thailand has a population of well over sixty three million, this is according to their 2008 population estimate, Its Gross domestic product (PPP) is well over five hundred and fifty billion dollars ($550.000 billion) with a per capita income of approximately eight thousand US dollars ($8.000). Thailand has been experiencing a very rapid economic growth rate which I must say is very healthy for any business with their economy registering an impressive 9.4% economic growth rate between 1985-1996, this is very impressive with any standard and its main monetary currency the “Bhat” is also very stable. Thailand also exports goods worth approximately USD $105 billion and this is just an indication of the kind of operating environment we are going to operate in. 4In addition to the robust economy Thailand is also enjoying favorable rankings among reputable international organizations such as the world economic forum which in it’s annual survey of global competitiveness ranked her at 34 out of 125, the A.T Kearney/foreign policy magazine with its global services location index 2009 ranked Thailand at No.4 out of 50 and the heritage foundation which also publishes the indices of economic freedom survey ranked her at 50 out of 157. Apart from the strong economic growth and the strong economy, the superior rankings from internationally reputable organizations, the conducive business climate there is also the Royal Thai armed forces and the Royal Thai police which ensure there is proper security in the kingdom. There is an educational system which is well organized with numerous vocational institutes and universities, which will ensure steady flow of manpower to organizations. However there still exist a need for Thailand’s investment environment to be closely scrutinized since money that belongs to shareholders will be risked by investing in the country and it would be only fair if we would closely some of the basic factors required in a conducive business environment, environment that can sustain and grow considerably a business with worthwhile shareholders return. Political Environment. 5Thailand’s government is a unitary government and it has been a constitutional monarchy since 1932 under a parliamentary democratic system. In 1932 there was a revolution that brought to an end an absolute monarchy and brought a constitutional monarchy. From then democracy in Thailand has been very weak and the country has mainly been ruled by successive military leaders after coup d’états and with the most recent one being in 2006. It has a constitution that was drafted by a military appointed council in 2007 even though approved by a referendum, it led to the present structure of the government that consists of the executive, the legislative and the judiciary. The executive who is usually the head of government is the prime minister and there are usually two deputies assisting him. The prime minister is also the leader of the cabinet. There is the cabinet that is mostly composed of 35 ministers with their deputies. There is also the legislative; this is the national assembly which has 630 members, the senate a legislative branch which traditionally has been the military and elites stronghold. There is finally the house of representatives which is the primary legislative house for the Thailand’s government. It comprises of 480 members in which 400 are elected nationally through competitive ballot system and the remaining 80 are nominated by the political parties. There is also Thailand’s Judiciary which comprises of the court of justice, the administrative courts and the constitutional courts Political Environment Analysis Thailand’s political environment is relatively unstable, however it may not be very risky for business since whenever the government has been overthrown there is no single instance when business are drastically affected since most of the time it has been happening peacefully. Also with the new constitution in place we expect a very stable government in the future since it passed through a referendum that was unanimously voted in by citizens of the country. Legal Environment. 6Thailand’s Judiciary has three elaborate structures namely; The court of justice that consist of court of first instance, the Supreme Court and the court of appeal. The administrative courts which is made up of administrative courts of first instance and the supreme admistrative courts. The constitutional court which is mandated with the responsibilities of settling matters pertaining to the constitution. The constitutional court has at least managed to win praise as it has managed to settle social unrest and some political stalemates. 7Despite all this there exist a telecommunication law that provides a regulatory framework for the industry to be liberalized and regulated. The enacted law contains provision for the privatization of state regulators, which means the government can only retain a maximum of 49.9% of shareholding. A regulatory body was also established, the national telecommunication Commission and finally the new law only allowed a maximum of 49 % shareholding in foreign telecoms companies. Legal Environment Analysis. With the establishment of the telecommunication act, it is clear that this is a sector that is well repected and fully recognized by the government. Also there are clear rules pertaining to ownership. This is likely to reduce conflicts between stakeholders. Economic Environment. Thailand has been experiencing a very robust economic growth in the past and it is envisage that this will continue for sometime. Today Thailand is the largest exporter of rice in the world and this is just an indication that the environment is very suitable for any business to thrive in. Thailand’s telecommunication environment is showing very positive signs, at the end of 81999 the mobile penetration was only 4%, today it is slightly above 50% and it is projected that by 2012 it is expected to exceed the 85% mark. Even though this is impressive it still lagging behind the Asian tigers. Economic Environment Annalysis. With Thailand’s ever expanding G.D.P of approximately 5% per annum, the demand for mobile devices is set to remain very strong, since the prices are also set to come down more people are expected to own them and hence subscribe with telecommunications companies, This will create more money for the existing players and also it will offer a perfect opportunity for aany newcomer who comes to the playing field, This is a very perfect timing for any new entrant since it will be very easy to break even provided he is offering competitive products and services particular in mobile and internet services. . 9Fig 1.0 A table showing Thailand’s Telecom sector. Socio-Cultural Environment. According to Thailand’s last population census, almost 1095% of the total population are Buddhists and with the remaining 4.5% being Muslims. Christians are estimated to represent a paltry 0.5% only. Since 2001 the Muslims whom are known to adhere to the strict sharia laws of zero tolerance to corruption have demonstrated against the central government on the alleged corruption and ethnic bis. Thailand has respect towards ancestors and this has created a strong sense of generosity, hospitality and social hierarchy. With seniority also being a prevalent concept in Thais culture, elders have ruled on important matters and ceremonies and the young have the duty to respect the older. Thailand is a sport loving nation and they are good followers of the English premier league, they have a world recognized cuisine, and their staple food is rice which they are also the leading exporter in the world. With the advent of multilingual press the society has been influenced; there are numerous English and Chinese newspapers available in circulation, this has made it the largest newspaper circulation country in south east Asia with an estimated 13 million copies being sold daily and in addition it has well over 116 different newspaper publications excluding T.V, radio, and internet. Socio-cultural Analysis. It is very clear going by the above conclusion that we can comfortably note that Thailand has press freedom which means it is very likely to be democratic, transparent and has respect for private property, its seniority culture which siblings have to respect elders is also a healthy sign that justice is always there, presence of Christian population even though minor shows that foreign culture is also accepted. The fact that they are adamant followers of English premier league shows that foreign culture is respected. However with a strong Islamic population consisting of very strict sharia laws, technologies such as internet which are known to bring negative attitudes such as pornography, gambling, selling of banned alcohol, is likely to receive slow uptake therefore the companies Return On Investment in this particular market segment is likely to be very low. Technological Environment Thailand’s infrastructure is very poor and expensive to maintain, the infrastructure has been a victim of neglect and most of the telecommunication companies are spending huge and crazy amounts of money in the upgrade and modernization of the current dilapidate infrastructure. With the cost of doing business going up due to these dilapidated infrastructure the government of Thailand has taken necessary steps to ensure that the infrastructure conditions are at par with the worlds best and in particular it’s neighbors in Asia. 11The government has awarded 3G licenses to boos t mobile operators, the same government has also set aside USD$200 million to boost smaller companies providing 3G services. Technological Environment Analysis Since the government itself is providing intensive and educating its people on the importance of telephony and internet technology then it will be easier to penetrate since most of the marketing material will be well understood going by the fact that there is also explosive growth in the industry there is likely to be a general feeling of appreciation from the word go. Also by the dilapidated infrastructure we may come in with our modern infrastructure and take advantage of the situation so as to lure more clients and even become a dominant player within a short span of time. SWOT ANNALYSIS. THAILAND STRENGTHS 1. There are multiple players in the telecommunication industry 2. Formation of National Telecommunication commission has brought regulation to the market. 3. There are Strategic investors in the Telecoms Market. WEAKNESSES 1. Fixed line growth is static with very little signs of recovery since broadband is gaining a firm grip. 2. The countries leading operator ownership is in limbo. OPPORTTUNITIES 1. Broadband Market present is absolutely dynamic Showing signs of huge growth as more people are Turning to it and shunning the fixed line segment. 2. There is also integration of services from mainst- ream operators, and this might eventually lead to Content application synergies with some of the Content providers. 3. 3G networks has the potential of revitalizing the Wireless industry enabling operators to increase Revenue from non-voice products. 4. The introduction of interconnection fees will offer regulators relief on the current price wars. THREATS 1. Fixed line sector has been stagnant and is still stagnant. 2. There is significant political risk and confusion on the government’s amendment of foreign business Act. RECCOMENDATION & CONCLUSION. 12Thailand’s law concerning operation of business by foreigners is quite liberal, the law regulates the establishment of companies, taxation of the firm together with its employees, foreign exchange, work permits and other foreign considerations. The government also grants priviledges operating from its special economic zones. Thailand is today is a newly industrialized country, despite the hurdles it has faced in the past such as political unrest, corruption, incompetent judiciary, coup d’états, it has managed to achieve a very robust economic growth rate over the last two decades managing to increase its Gross Domestic Product to over USD$ 550 billion with a per capita 13income of over USD$8000 thousand, this shows that there is the purchasing power and with a population of over 1464 million people there is the likelihood that it has a very strong middle class whom are the drivers of the businesses and economies in general. There have been a lot of confusion in foreign business ownership and in particular the telecommunication industry, but of late that has been worked on courtesy of the formation of the National Telecommunication Commission. There are very many players in Thailand’s telecommunication industry, this has brought about increased competition with significant amount of innovations. This has led to increased price wars among telecommunication players thereby squeezing the profit margins and eventually reducing the Return on Investments, however despite this scenario, notable players have continued registering impressive subscriber growth and explosive profits all being attributed to new products such as the internet and 3G network technology. The presence of world class players such as SingTel, Telenor and Hutchinson just suggests how ripe the telecommunication environment is. There exist a lot of opportunities in Thai’s telecommunication industry, to begin with the broadband market is very dynamic and it is showing a very huge growth opportunity, more and more people are now getting connected to broadband services since the demand for bandwidth coupled by bandwidth intensive applications is on the rise, academic institutions, businesses and individuals have just realized the importance of broadband and now everyone is shifting, there is also integration of services which will definitely lead to application synergies and due to the envisaged increase in non-voice services there is a very likely trend that there will be contract opportunities for vendors. The advent of 3rd generation network is going to revitalize the wireless market and revenue streams are likely to come from non-voice market segments. Finally the interconnection fees will offer operators relief to the aggressive price wars, this is definitely going to increase profit margins and subsequent return on investment. With Telstra’s track record, mission and vision in comparison with Thailand’s conducive telecommunication environment it is very appropriate for Telstra to ignore all the political risk associated with Thailand, since there are quite a number of foreign owned similar companies that are thriving in the same environment and are making very handsome profits. Also since the telecommunications industry and in particular the mobile segment is in it’s infancy and nowhere near the saturation market it would be wise for Telstra to move swiftly and expeditiously to tap into the growing market since most opportunities are existing in our traditional dominant areas such as the 3G networks, internet services, value added services and the broadband market which is very huge and always showing signs of future profitability. It is only by venturing into the industry at its infancy that we are likely to have a portion of the national pie and the soonest the better. Secondly since there exists quite a number of companies, the processes and procedures of acquiring a telecommunication license seems to be well organized, this will reduce the time taken to establish Telstra’s Thailand’s division since acquiring corporate headquarters, laying out the required infrastructures such as the mast, laying cables, acquisition of office supplies & equipments and hiring of personnel will be dealt with expeditiously. According to Thai’s telecommunication act since 15foreign ownership is only limited to 49% shareholding I would recommend Telstra to shop for a Thailand registered strategic investor, after finding a strategic investor they should now by apply for a license to the Thai’s government and keep on pushing for it so that they may be approved the soonest and start reaping the rewards of the explosive telecommunication industry in Thailand. REFERRENCES. 1. http://en.wikipedia.org/wiki/Telstra 2. http://comm215.wetpaint.com/page/Thailand:+Mobile+Media+Landscape 3. http://en.wikipedia.org/wiki/Thailand 4. http://en.wikipedia.org/wiki/Government_of_Thailand 5. http://www.euromoneyplc.com/product.asp?PositionID=3102&ProductID=11502&123=abc&PageID=334&Letter=T 6. http://comm215.wetpaint.com/page/Thailand:+Mobile+Media+Landscape 7. http://www.thailand.com/exports/html/law_intro.htm Read More