Instaphone has had quite a rocky year. After the fledgling teleco was unable to raise investment from previous negotiations, the drama concluded with PTA canceling Instaphone’s license for failure to make its payments against license fees. This seemed to have been a final nail in the coffin, because any investor would then have to pay off Instaphone’s debts and license fees before investing in anything else.
News of this investment now is a bit surprising then. But what would it be able to do with the funds now? Here’s a brief strategic analysis of Instaphone and its options.
The interesting thing about Instaphone is their very loyal set of core customer-base who have vehemently refused to switch operators even at the worst of times. This is quite an asset to have. The bad thing is that this core consumer-base is still pretty small to matter as significant market-share, and that these loyalists are mostly price-conscious consumers which made Instaphone appeal to them to begin with.
Part of this investment will have to be written off from the start to pay back debts. This is no small number and writing off such a large amount from investment can limit options quite a bit.
After that, very heavy investment is required in infrastructure expansion – Instaphone was trying to leapfrog GSM technology and upgrades its old AMPS based infrastructure to HSDPA / CDMA. Part of this network rollout is complete but more will be needed before the (re)launch.
After that, lets not forget the big branding efforts they will have to do to remind consumers that they still live – most likely it might be a a brand-name change like Zong to keep the company fresh and promising.
These are a lot of pressures on investment, and here’s what I think Instaphone might do to compete.
1- Services, services, services. Instaphone’s infrastructure would have one of the best chances of implementing finally compelling services. E.g. they are the only teleco right now with the equipment to introduce DVB-H – i.e. true mobile TV that doesn’t use GPRS or cell networks to distribute cable-tv…. this allows them to make mobile tv cost effective and could spurn adoption. Over time though – the value is that services can complement each other if they are driven by a larger product strategic roadmap… if only they would think that far though.
2- Community, community, community. Their core customers share strong common interests and excitement in the company. They can offer VAS that specifically target interaction between consumers (mobile social networks; community buy & sell apps; community voting apps etc), or they could figure out ways of bringing the community into a part of their operations, which can in turn trigger word-of-mouth promotion and marketing for them. These activities would save massive marketing expense, but If only they’d think that far though.
3- Time to Market efficiency. This isnt particularly something Instaphone will have to do more than an advantage they have – whenever the government aims to roll out 3G licenses (and if) Instaphone will have a head-start in infrastructure readiness.
4- Supply-chain efficiencies. Most operators use 3-4 vendors for their infrastructure to ensure there is enough competition and threat to the vendors that they behave and provide consistent quality services. The tradeoff of this is that there are even more cost efficiencies that a firm can realize by working with just 1-2 vendors and buying in bulk. More than the upfront costs, there will be savings in not having redundant software, integration costs, multiple SOPs for network rings and more.
5- True mobile broadband. This is a no-brainer – PCI cards to run DSL quality net on the go. Enough said.
Where do you think Instaphone could see the biggest opportunity for its business in the environment today? Whats there for a teleco beyond the usual suspects (3g etc.)?