1 Introduction

Mobile telecommunication industry is one of the fastest growing industries around the world. It advances in tandem with other sectors of information technology industry. Some countries are running ahead of others in the competition.

This paper aims at analysing the competitiveness situation of the mobile telecommunication industry of Finland and Germany. The comparison of industries in two different countries makes it necessary to use an appropriate framework to be sure to cover all factors and the recommended framework is "Porter’s diamond".
 

Country-specific demographic issues, degree of mobile penetration and acceptance of new technologies are described in detail in the factor conditions. In demand conditions the focus is on the factors, which influence the buying decision. Market opportunities, described in the model as chance, is discussed in the demand conditions as well. In strategy, infrastructure and rivalry, attention is paid to the infrastructure of the mobile networks. The manufacturing side is closely analysed in related, supporting industries, but is not covered in this paper. The regulatory situation in both market areas is discussed in government.
 

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2 Implementation of Porter’s diamond

2.1 Factor conditions

Finland

Characteristics to the mobile networks in Finland is the fact that the country is geographically fairly large but has a low population density of about 16 persons per sq. km. The majority of population is concentrated into major cities but nevertheless the network has to cover the whole country in order to be competitive.

Finland has the highest penetration of mobile phones in the world. In June 1999 60% of the Finns had a mobile phone subscription. Finland is also the first country in the world where number of mobile subscriptions has exceeded the number of fixed line subscribers.

Germany

Today, in Germany live some 80 Million people on area of 356,910 sq. km. This corresponds to a average density of 235 people per sq. km. The terrain can be best described as lowlands in north, uplands in centre, and Bavarian Alps in south. That means, there are not any main obstacles to overcome.

Even though that every month more then 200 million SMSs are sent in German mobile networks the penetration is fairly low at around 20 percent of all inhabitants. The mentality of German people tends to be conservative, and therefore they are not as fast in adapting to new technologies and in utilizing them, mainly due to the age structure and the culture.
 

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2.2 Mobile operators

Finland

The history of mobile telecommunications in Finland started with analogue ARP (1980) and NMT (1982) networks operated by Sonera. Operation of ARP network will be terminated by the end of year 1999 and NMT900 network by the end of year 2000. Operation of NMT450 network will continue (Sonera Interim Report 1-6/99).

National digital GSM900 networks are operated by Radiolinja, and Sonera. A licence for building a national GSM1800 network has been given to Radiolinja, Sonera and Telia. Sonera and Radiolinja have started to use GSM1800 networks together with their existing network in major cities. Telia´s GSM1800 network covers the area of Helsinki, Tampere, and Turku. Also several local phone operators have their own local GSM1800 networks.

By the end of 1998 Sonera had a share of 61% of subscribers in digital mobile networks. Radiolinja's share was 38%. Telia and local Finnet operators shared the remaining 1%.

Intermediate steps towards UMTS technology are HSCSD (high speed circuit switched data) and GPRS (general packet radio service) which will enable the data transfer speed to reach about 100 kbit/s. Not all the Finnish operators will immediately adopt HSCSD technology to upgrade their GSM data service. All the operators will adopt GPRS, which will offer greater opportunities to their services.
 
 

Germany

Deutsche Telekom established in 1985 their first mobile network, the analogue C-Net. At the moment 330.000 subscriber are using this network that will be closed down beginning of the year 2000.

Nowadays, four mobile phone operators offer a digital network at the moment.

The biggest one is Mannesmann Mobilfunk GmbH with their D2 network. This company has around 42,2 percent market share. DeTeMobil is a daughter of Deutsche Telekom AG and has around 41,2 % market share, including 300.000 subscriber from the analogue network. E-Plus is the third biggest operator and has roughly 15,4 percent market share. The smallest operator is VIAG Interkom GmbH & Co. with only 1,2 percent market share. This company owned by VIAG AG, British Telecommunications plc and Telenor AS started the beginning of this year.

Deutsche Telekom bought in June 1999 HSCSD as the first mobile operator in Europe. E+ already utilizes GPRS technologies in their network.
 

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2.3 Demand conditions and chances of the market

Finland

An important criteria influencing the attractiveness of mobile phones are the wide selection of features like SMS (short message service), intelligent routing and inquiry calls. The role of premium rate services, which offer the customers added value e.g. voice mail, call transfer, GSM hot billing, reporting services and different ringing tones, are winning more and more attention among subscribers.

In addition, the great selection of different mobile subscriptions gives the customers a chance to match their telephone behaviour in an economical way. The new subscription type for dual band phones is likely to attract more cost-conscious businesses and end customers in future. Due to high rate of young mobile phone users the prepaid subscription type will win attention.

Germany

The services offered on the market are besides the traditional voice services, the short message service (SMS), and in addition email and internet gateways. Value-added services such as voice mailbox and call diverting are offered by all operators, and widely accepted. Premium rate services are hardly used.

The coverage of all provider differs between the GSM 900 and GSM 1800 operator. The latter have a very small coverage of the total are of Germany. However, still due to roaming agreements with international mobile operators, it is also for the subscriber of these networks possible to use their mobile phones everywhere in Germany.

    D1 and D2

    E+

    E2 (Viag Interkom)

There are several subscription types that are taking into account the different kinds of users and their usage behaviour. If you examine all these different models closer, you should mention in any case that Viag Interkom is the only one that offers a so-called "home-cell". In this cell the subscriber has to pay the same amount for the calls as he would you the fixed-line. The new tariff model increased immediately the popularity of this new service. Other customer services, such as pre-paid SIM cards are offered, but not very accepted by the market since there are several limitation such as limited international roaming agreements and the limited SMS usage.

Finland and Germany

The significant trends in Finnish as well as German telecommunications market are listed below, will affect mobile network operators perhaps to a greater extent than the fixed network operators, because of the rapid growth of mobile users:

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2.4 Regulatory Authority

Finland

The regulators in Finland are the Ministry of Traffic and Communications and the Telecommunications Administration Centre.


The obligations of Finnish telecom operators are set out in the Telecommunications Market Act.

Compared with other telecommunication activity in Finland, which is non-licence based, entry to the mobile operator market is based
on individual licences granted by the Ministry of Traffic and Communications. The licences are valid for 20 years. The licence is free of
charge, only an administration fee needs to be paid.

The following list describes the Finnish regulatory characteristics of the mobile market:

The Finnish Ministry of Traffic and Communications was the first in the world to give UMTS licences. The nationwide licences were
given to 4 operators; Radiolinja, Sonera, Suomen kolmegee and Telia.
 

Germany

To understand the German market you have to know that there is one administrative office that is in charge of all licenses related to telecommunication - the so-called Regulatory Authority.

With getting one of the licenses for mobile telecommunication the licensee has also to fulfill some duties. For example it is regulated how fast the network has to be build up, and how much of the area has to be provided with the area. In addition, the licenses running out after a while. They are valid for roughly 20 years.

The regulation of telecommunications and posts, frequency regulation and number management are sovereign tasks of the Federation. The aims of regulation are specified in the Telecommunications Act and the Postal Act. The purpose of these laws is to promote competition through regulation and to guarantee appropriate and adequate services (infrastructure obligations) throughout the country. Technical regulation serves to ensure the efficient, non-discriminating and interference-free use of resources and the control of obligations ensuing from laws, ordinances or licence terms and conditions.
 
Operator  
D1 Duty to cover 94 % of all inhabitants of the western part and 90 % of the eastern part until 31.12.1994.
Vaild until 31.12.2009
D2 Duty to cover 75 % of all inhabitants.
E1 Duty to cover 88 % of all inhabitants in the western part until 31.12.1995 and 98 % of all inhabitants until 31.12.1997.
Valid until 31.12.2012
E2 Duty to cover 75 % of all inhabitants until  31.12.2001 
Valid until 31.12.2016

The mobile operators have to pay for the licences. Very recently some new licences were sold through an auction and D1 and D2 paid each around 600 MFIM to obtain new frequencies to expand their service.

The UMTS frequency is going to be sold next year (auction).
 

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3 List of References


Ministry of Traffic and Communication, URL: http://www.mintc.fi [referred 7/11/99]

Sonera, URL: http://www.sonera.fi [referred 6/11/99]

TAC, URL http://www.thk.fi [referred 7/11/99]

GSM Organization, URL: http://www.gsm.org [referred 5/11/99]

Deutsche Telekom, URL: http://www.dtag.de [referred 5/11/99]
 

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