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This is the first of a five-case series (306-138-1 to 306-142-1). In 1991, a small task force of government officials in Peru began laying the groundwork for the sale of a controlling 35% stake in the country's telecommunications duopoly: Compania Peruana de Telefonos (CPT) and Empresa Nacional de Telecomunicaciones (ENTEL). The telecom privatization was part of a larger program launched by President Alberto Fujimori, which aimed to turn Peru's many state-owned enterprises over to the private sector by the end of the decade. Although the telecommunications industry was not the first to be privatized under the Fujimori initiative, it would be by far the biggest to date. Eight international telecommunications consortia qualified to take part in the bidding process. The winning consortium would face the challenge of being the major economic player in the country, would obtain high visibility and would have to form a partnership with the government in order to continue the economic reforms. Case (A) provides background on Peru's economy and the telecom industry, describes its privatization program, including the privatization plan developed for the telecommunications industry, and the key players in the process, including regulatory agency OSIPTEL, government committee CEPRI-Telecom, and the three consortia bidders Telefonica (Spain), Southwestern Bell (USA) and GTE (USA).

Case (B) provides background on the three consortia of bidders in Peru's telecom privatization, including business group data for each of the three.

Case (C) describes the day of the bid (28 February 1994), on which each of the three bidders submitted their offers for a 35% controlling stake in both CPT and ENTEL. Telefonica Group's winning bid of US$2,002 million was more than double the other two bids, to the surprise of all players involved.

Case (D) looks at Telefonica del Peru's financial performance, and the appreciation of Spanish Telefonica's investment. By late 2003, Telefonica Group of Spain had significantly outperformed its competing bidders (Verizon and SBC) for seven consecutive years. Its performance was due to its strong domestic operations but more to its successful international growth strategy, focused on Latin America.

Case (E) describes Telefonica's position in 2004, as the largest telecom operator in the Spanish and Portugese-speaking world, and provides supporting data. A background note 'The Global Telecommunications Industry (2002)' (306-143-5) is available to accompany this case series.

In late March 1999, French car company Renault announced that it had bought a 36.6 percent stake in Japanese Nissan for US$5.4 billion to form an alliance between the two companies. With no experience of running a global operation, and still recovering from a failed attempt to merge with Volvo in 1995, Renault seemed an unlikely candidate to take on Nissan, which with US$20 billion of debt, was verging on bankruptcy. The press and industry analysts were nearly unanimous in their disapproval of the alliance, which one observer referred to as 'a marriage of desperation for both parties.' By March 2004, Renault's investment was worth US$18.4 billion, and was regarded as a successful model by competitors, practitioners and business schools. How did Renault and Nissan achieve this remarkable turnaround? Through a unique approach, beginning with a six-month social initiation phase, which established common ground and concrete opportunities for collaboration between the two companies. Carlos Ghosn (a Renault executive who became Chief Operations Officer of Nissan in 1999, and later Chief Executive Officer) was central to this process, through his introduction of the Nissan Revival Plan. This was a company-wide business initiative with clear targets, which aimed to radically strengthen the company's 'common glue' around the mission of revival. In parallel, the social amalgamation between Renault and Nissan continued through cross-company teams, and nurtured collaboration. In this way, the companies created an environment of genuine trust, loyalty and reciprocity, which in turn enabled them to develop the integration mechanisms needed to forge a top performing global partnership in less than five years.

This is the first of a two-case series. The case series explores Smart Telecommunication Inc's innovative approach to serving low-income customers in the Philippines. The case introduces a framework for developing strategies to serve low-income customers in developing countries - the 4A's. This framework is an adaptation of the classic 4P's of marketing that are likely to have been covered early in any marketing course. Case (A) provides an overview of the mobile phone market in the Philippines as of early 2003, as well as demographic and socioeconomic information. According to analysts, the mobile phone market in the country is heading towards saturation due to the fact that the majority of the population is unable to afford mobile services. It is estimated that in a best-case scenario, 35% of the population will be using a mobile phone by 2008. The CEO of Smart, Napoleon L Nazareno asks if it might be profitable to serve the massive but still untapped pool of low-income consumers, or whether his company should focus on pursuing market development opportunities to increase revenues from existing customers.

The (B) case demonstrates how Smart was able to implement a highly innovative marketing strategy to serve low-income customers. At the heart of this marketing approach was Smart Load, a mobile proposition involving sachet-based pricing (similar to that seen in the fast moving consumer goods (FMCG) world), a revolutionary over-the-air (OTA) mobile reloading technology, and a decentralized distribution approach. Through the implementation of this strategy analysts revised their estimates of market penetration from a maximum 35% of the population, to upwards of 70% by 2008.

This background note is to accompany the case series 'Privatization of Telecommunications in Peru (A) to (E)' (ESMT-305-0041-1, ESMT-305-0042-1, ESMT-305-0043-1, ESMT-305-0044-1, and ESMT-305-0045-1). The global telecommunications industry was worth US$1 trillion by 2000. Its growth in the 20th century was due to its shift from data (telegraph), to voice (telephone), back to data (Internet). In parallel, the explosive growth of wireless, mobile and data transmission products, services and technologies throughout the 1990s had completely changed the industry dynamics. This note looks at the historical background of the industry, the reforms in the 1990s aimed at increased private sector participation and competition, as well as greater regulation. It describes the trends that changed the industry, including: (1) the rise of new, private and multinational mobile telephone operators throughout the 1990s; (2) the evolution of cellular networks; and (3) the establishment of the 3G standard and its increasingly global nature.

By early 2004 one of the fastest growing mobile virtual network operators (MVNO) in the world was Telmore, a Danish service provider. Since its inception in November 2000, it had captured 9% of the total mobile telephony market in Denmark through a simple, transparent and low cost Internet-based model that had proved a big hit with customers. It had led a massive price decline in mobile prices, with charges for voice calls dropping 54% in 2003 alone. The rapid growth of Telmore had not been unnoticed by the Chairman of easyGroup, Stelios Haji-Ioannou. An evangelist of the power of the Internet to transform long-established business models, Stelios was best known for creating the European discount airline easyJet and founding one of the world's fastest growing car-rental companies, easyRentacar. On observing developments in Denmark, Stelios was sure that a no-frills business model - like the one used to undercut the traditional airlines that did away with large numbers of staff and infrastructure - could radically transform the UK and continental European mobile industry. Could Stelios succeed in taking this model beyond Denmark, and what were the implications for established mobile phone companies in the markets he was aiming to target. This case addresses the themes of value innovation, value chain evolution and industry disruption. It can be taught as a marketing, strategy or operations case, depending on the target audience and industry.