TA-Orange entered the Thai mobile phone market as a result of a combined business enterprise between Thai companies Charoen Pokphand (CP) Group, Telecom Asia, and France's Orange SA. The company decided to make an initial impact that would unknowingly set forth a new phone market for Thai mobile consumers. The leap was to cut the taxes on all outgoing calls, offer preliminary prices on prepaid mobiles at half of the competition, and finance the price of handsets. This started out as a low risk for TA-Orange because their profits increased but ended with a consequence that was high risk.
The lowering of the handset prices had the least favorable result to the Thai mobile phone market. Although a low risk for TA-Orange, it turned the profit profiles downward for the local competitors. Advanced Information Services (AIS) reportedly lost 15% to 17% of its earnings for 2002. Their share price fell more than 20%, making shareholders at risk of getting trapped in the grill of waning prosperity.
The lowering of the handset prices did not stop Total Access Communications (TAC) from leaving the market. In fact, it challenged the company to change their mobile phones. The article, "Thai Mobile-Phone Market Is Locked in Price War," mentioned that the company changed a chip inside their mobile phones. Assumedly, making the company phones better and at lower cost to the consumer.
The offer to cut preliminary prices on prepaid mobiles was extremely beneficial to TA-Oranges' profit; however, analysts warn that competitors will begin offering similar values at better rates prompting the Thai consumers to "promotion-hop." Changing services from one group to another soon after an advertising cycle runs out is not uncommon among consumers. And analysts continue to warn that this will lead to severe rebates and a rise in promotion, ultimately...