International Management Review

Vol. 7 No. 1 2011

Choice Criteria for Mobile Telecom Operator: Empirical Investigation among Malaysian Customers
Sabbir Rahman, Ahasanul Haque, Mohd Ismail Sayyed Ahmad
International Islamic University, Kuala Lumpur, Malaysia
[Abstract] The purpose of this paper is to investigate the choice criteria for a mobile phone operator in

the Malaysian Mobile Telecom market by the customers. Structural equation models were applied to test the propositions by means of a survey of a random sample of 400 mobile telecom customers from major cities in Malaysia. It was found that the price and service quality hypothesis are more important than the brand image hypothesis. From this research, mobile telecom managers can learn and plan to offer attractive offer in the market that meet Malaysian customers needs.
[Keywords] service quality; price; brand Image; customers perception

Introduction
Mobile telephone provides ubiquitous social interactions between and among individuals, groups, organizations, and the governments alike, and that, subsequently, makes and operates a broadly networked international environment tying nations, cultures, casts, creeds, national identities and businesses. Deutsch (1953) states this trend as a web of nations. Todays development of communication technology ignores the global border and makes the world as global village (McLuhan, 1964). The telecommunication sector is experiencing phenomenal global change with the liberalization and privatization of the sector (Beard & Hartmann, 1999), which, in turn, widens a fierce competition. Worth noting is that the telecommunication industry in Malaysia has also been a fastgrowing sector keeping appropriate pace with global advancements, especially the mobile telecom market. This development has become a catalyst for the growth of the nations commercial and industrial sectors. This telecommunication sector contributed much to the nations economic growth and development, which is consistent with the national vision 2020. Scrutinizing the background of the Malaysian telecommunication sector, competition can be seen as main factor by the telecommunication service provider companies. Beside TM (Telecom Malaysia), three major companies have been operating in Malaysia, namely Celcom, Digi, and Maxis. These three service providers usually cover the following segments of the Malaysian telecommunication market: traditional telecommunications, IP services, wireless and mobile markets and technologies, broadband markets and technologies. They also provide most sophisticated mobile services with an expanding number of value added services, such as Short Message Service (SMS), Wireless Application Protocol (WAP), Subscription Services (SS), General Packet Radio Services, and Third Generation services. To modernize and to enhance telecommunications service growth rate, a competitive element was introduced in stages. In this study, we have tried to pin down the consumers perceptions and their rejuvenating ideologies about the mobile telecommunication service providers and their services. The outcome of the study will deliberately assist the future service providers to take passionate actions towards enriching customers service experience. This research focuses particularly on consumer in the cell phone industry in Malaysia. Moreover the proposed research also builds on existing consumer behavior literature by exploring the role of perception that ultimately influences the selection of an operators services. The overall objective in this research is to understand the customers the choice criteria for a mobile phone operator in the Malaysian mobile telecom market by the customers. Meanwhile, this research has some of the following specific objectives, as well: to determine the factors of customers perception towards an operators; to recommend some suggestion to make future strategy.

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Literature Review
Service Quality Consumers prefer service quality when the price and other cost elements are held constant (Boyer & Hult, 2005). According to Leisen and Vance (2001), service quality helped create the necessary competitive advantage by being an effective differentiating factor. Service quality is essential and important for a telecommunication service provider company to ensure the quality service for establishing and maintaining loyal and profitable customers (Leisen & Vance, 2001). Johnson and Sirikit (2002) stated service delivery systems have the ability to allow managers of a company to identify the real customer feedback and satisfaction on their telecommunication service. According to Wang and Lo (2002), marketing and economics quality often depend on the level of product attributes. They also stated that there are two primary dimensions for quality in operations management. Wal et al. (2002) indicated quality reflects the extent to which a product or service meets or exceeds consumers expectations. Wang and Lo (2002) studied on comprehensive integrated framework for service quality, customer value, and customer satisfaction and behavioral intentions of customers in Chinas mobile phone sector. Customer perceptions of the quality of a service are traditionally measured immediately after the person has consumed the service. In fact, a consumers perception of service quality at the time he or she next decides whether or not to buy the service may better explain repeats buying behavior (Plamer & ONeill, 2003). Crosby et al. (2003) examined how perceptions of quality were created and maintained in the minds of consumers. The first thing the authors noted was that an understanding of quality was not necessarily something that was perceived, let alone established, in the mind of the consumer upon the first impression. The following hypothesis we can draw for further examination: H1: Service quality has a major influence on customers perception in selecting mobile telecom service provider. The level of acceptance can, thus, be defined as the maximum price that a buyer is prepared to pay for the product (Monroe, 1990). Research efforts have isolated several factors that influence consumers' price unfairness perceptions as well as potential consequences of these perceptions (Bolton et al. 2003; Vaidyanathan & Aggarwal, 2003; Xia et al. 2004). Fairness is the important thing to make customer satisfy. Research in marketing and psychology has shown that satisfaction is positively correlated with fairness perceptions (Bowman & Narayandas, 2001; Huffman & Cain, 2001). Trebing (2001) mentioned that there are three sets of strategies for pricing behavior. The first is limit entry pricing, which is used for protection of the market position of the firm; second is the high access charges for new entrants, and the third one is tie-in sales to write off old plants or standard investment against captive customers. Price plays a vital role in telecommunication market especially for the mobile telecommunication service providers (Kollmann, 2000). According to Kollmann (2000), income from the number of call minutes determine the basic commercial success for the network providers. He also added that the success of the telecommunication sector in a market place largely depends on continuing usage and pricing policies, which need to be considered on several levels. Draganska and Jain (2003) stated that a common strategy for a company extending their product or service is to differentiate their offerings vertically. So we can draw the following hypothesis: H2: Price plays a significant influence on customers perception in selecting mobile telecommunication service provider. Four product quality signals that have received the greatest attention in the marketing and economics literature: branding, pricing, physical features, retailer reputation (often called store name; see, for example, Brucks & Zeithaml; 1991, Enis & Stafford, 1969; Milgrom & Roberts, 1986). In marketing and consumer behavior, perceptions are reality, so that brand images are of primary concern to marketers even in mobile phone operators. A brand image is a mental representation that the brand evokes in the consumers mind. So, we can define brand image is a unique set of associations within the minds of target customers which represent what the brand currently stands for and implies the current promise to customers (All About Brands Index, 2005). Hsieh and Kai Li (2008) argued that

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consumers perception of an organizations PR practice is an antecedent of loyalty. Foxall and Goldsmith (1994) argued that branding and brand perceptions affect the consumers perceptions of products characteristics and attributes. Drawing from this reasoning, it is posited that H3: Brand image is positively related with customers perception in selecting mobile telecommunication service provider. From the above literature review we have found four independent variables, namely, service quality, price, brand image. If we put them into a framework, it looks like the following relationship.
H1

SERVICE QUALITY

H2

PRICE or CALL RATE

H3

Customers perception in selecting mobile phone operator

BRAND IMAGE

Figure 1. Theoretical framework of this study

Methodology
Data was collected through distributing structured questions by following convenient sampling to the consumers in various parts of Peninsular Malaysia, especially five significant cities, Shah Alam, Johor Baru, Kuala Lumpur, Ipoh, and Penang, because from the report of SKMM (Suruhanjaya Komunikasi and Multimedia Malaysia) 2007 these are the states of Malaysia where the users of hand phone are significant. This research used convenience sampling procedure of selecting the cities based on the population size so that major parts of the Malaysias mobile phone subscribers can be reflected through that population. So, in this study 400 samples are used to complete the thesis. However, from the report of Malaysian Communication and Multimedia Commission (MCMC), Malaysia is Southeast Asia's third most developed market with 13.1 million cellular phone users at the end of September 2004, accounting for 52% of the countrys 25 million people. According to that report, Maxis was the mobile leader with about 41% share, followed by Celcom 38% and Digi with about 21%. Total value of the market in 2004 was estimated at approximately $3.5billion. The sector has compounded annual subscriber growth rates of 20-30 percent every year since 1998 and subscriber growth has, predictably, begun to slow. According to the report by MCMC, Merrill Lynch believes that Malaysia may reach saturation levels of around 60-65 percent by the end of 2005, while UOB-Kay Hain Securities forecasts mobile phone penetration to peak around the fourth quarter of 2006 at nearly 70 percent. MCMC estimates that 76% of users are prepaid (Maxis 79% prepaid, Digi 99 % prepaid). So, in this research, the researchers mainly focused on prepaid consumers with most of the respondents selected according to the market share. Out of 400 samples, around 40% were from Maxis, 35% were from Celcom, and 25% of the respondents were from Digi consumers. Questionnaires were distributed to the respondents according to the market share of the operators in the particular market for minimizing bias. A self-administered questionnaire was developed to identify the consumer perceptions towards mobile phone operators. Sections one to three were designed to measure the participants perceptions of the operators services in terms of service quality, brand image, and price. The responses of this measurement were scored using a 7- point rating scale. The measurement items of those variables were both drawn from existing theories and self-created questions based on the literature and the discussions with the marketing professors having expertise in this sector, and statistics professors. The data analysis of this study was organized into five stages, as shown in using descriptive and inferential statistics techniques. Data was

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coded and analyzed by using the Statistical Packages for Social Sciences. The first stage of the data analysis conducted an exploratory factor analysis (EFA) to identify the factor structure for measuring the operators services, the customer's perception of them, and the important factor for choosing an operator have been elaborated on and checked validity and reliability of scale. The second part of the data analysis employed a confirmatory factor analysis (CFA) to confirm the factor structure for measuring the operators services, the customer's perception of those operators regarding in choosing an operators service, and check the validity and reliability of the measuring scale. In this study, the goodness of fit testing was conducted by using several criteria, including chisquare test, root mean square error of approximation (RMSEA), goodness-of-fit index (GFI), adjusted goodness-of-fit index (AGFI), normed fit index (NFI), and comparative fit index (CFI) etc. SEM (Structural Equation Modeling) is considered to be an appropriate data analysis technique for this kind of study where multiple dependent relationships are proposed in the models; this combines both exploratory and confirmatory stands in the main model. However, to test Hypothesis 1 to Hypothesis 3, the third part of the data analysis identified the structural relationships between service quality, brand image, and price of the consumer perception of mobile phone operators. This path analysis technique enables estimating simultaneously multiple regression equations in a single framework. All direct and indirect relationships in the model were estimated simultaneously. Thus, the method allows all the interrelationships among the variables to be assessed in the same decision context.

Data Analysis
Factor Analysis The results obtained from 400 respondents were thoroughly analyzed, and the outputs of the results had clearly explained in this section. Applying SPSS, the principal component analysis (PCA) was carried out to explore the underlying factors associated with 25 items. The construct's validity was tested applying Bartletts Test of Sphericity and The KaiserMayerOlkin Measure of Sampling adequacy analyzing the strength of association among variables. The KaiserMayerOlkin measures of sampling adequacy (KMO) were first computed to determine the suitability of using factor analysis. The value of KMO varies from 0 to 1, and KMO overall should be 0.60 or higher to perform factor analysis. If this is not achieved, then it is necessary to drop the variables with the lowest anti-image value until KMO, overall, rises above .60. Results for the Bartletts Test of Sphericity and the KMO reveal that both were highly significant and, eventually, it was concluded that this variable was suitable for the factor analysis (see Table 1).
Table 1. KMO and Bartlett's Test Kaiser-Meyer-Olkin Measure of Sampling Adequacy Bartlett's Test of Sphericity Approx. Chi-Square Df Sig. .871 10033.863 387 .000

Deciding upon the number of factors that can be retained is difficult, but initial runs based on Eignenvalues showed three factors. To determine the minimum loading necessary to include an item in its respective constructs, Hair et al. (1992) suggested that variables with loading greater than 0.30 is considered significant, loading greater than 0.40 more important, and loading 0.50 or greater, are very significant. For this study, the general criteria were accepted items with loading of 0.60 or greater. The values of the following Table 2 indicate the affiliation of the items to a factor. Generally, the factor is the natural affinity of an item for a group. The higher loading (factor) indicates the stronger affiliation of an item to a specific factor. The findings of this study indicated that each of the four dimensions (service, quality, price, and brand image) was homogeneously loaded to the different factors. That means each of the three dimensions that loaded into four different factors, all have proven as significantly related to the consumers need. Table 2 also showed the reliability, which is the degree of

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consistency of a measure is referred to as its reliability or internal consistency. The reliability coefficient (Cronbach, 1951), is generally used to test the reliability of a scale. Values of 0.70 or greater are deemed to be indicative of good scale reliability.
Table 2. Factor Loading Matrices Following Oblique Rotation of Five-factor Solutions
Factor Name EV1 PV2 CV3 Component Variables Factor Loading

Price (Alpha = .87)

2.691

8.116

21.123

Compare price rate by internet (P1) Responsiveness to consumers increase corporate image (P2) Price clear and understandable (P3) Price is acceptable (P4)

.679 .571 .566 .540

Service Quality (Alpha = .86)

1.545

6.101

41.969

Provide services as it promise (Sq1) Perform services right at the first time (Sq2) Performance of stable service (Sq3) Service variety are very attractive (Sq4)

.695 .651 .638 .536 .589 .560 .515 .505

Service provider offers extra talk time (bi1) Advertisement of service providers services (bi2) Positive image enhance brand image (bi3) Perceived brand as selection of operator (bi4) Notes: 1) Eigenvalue (EV1) 2) Percent of Variance (PV2) 3) Cumulative Variance (CV3)

Brand Image (Alpha = .83)

1.338

5.762

47.731

Confirmatory Factor Analysis CFA was conducted for each of the three constructs to determine whether the 12 indicators measured by the construct they were assigned to. Maximum likelihood estimation was employed to estimate the three CFA models. The SEM program AMOS was used throughout the study to conduct the analyses. Empirical evidence in CFA (and SEM in general) is generally assessed using criteria such as the goodness-of-fit index (GFI), adjusted goodness-of-fit index (AGFI). Table 3 summarizes the results of these tests. CFI index compares a proposed model with the null model assuming that there are no relationships between the measures. CFI values close to 1 are generally accepted as being indications of well-fitting models. The CFI values for the eight CFAs are displayed in Table 5. An analysis of the table reveals that all the CFI values are very high ranging from 0.98 to 0.99, which suggests very good model fits. GFI: The goodness of fit index, tells what proportion of the variance in the sample variance-covariance matrix is accounted for by the model. This should exceed 0.9 for a good model. AGFI: Adjusted GFI is an alternate GFI index in which the value of the index is adjusted for the number of parameters in the model.

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International Management Review Table 3. The Results of Model fit

Factor Indicator X2 df P value GFI AGFI

Vol. 7 No. 1 2011

CFI

Service Quality Sq1 Sq2 Sq3 Sq4 Price P1 P2 P3 P4 Brand Image bi1 bi2 bi3 bi4

9.48

0.00

0.94

0.93

0.96

12.49

0.00

0.96

0.95

0.95

8.32

0.02

0.93

0.92

0.97

Figure 2 below describes the degree of relationship between consumer perceptions of selection of an operator towards Service Quality (SQ), price, and Brand Image (BI).
e1 e2 e3 e4 e5 e6 e7 e8 e9 e10 e11 e12

sq1

sq2

sq3

sq4

p1

p2

p3

p4

bi1

bi2

bi3

bi4

.65

.75

.56

.48

.73

.48 .80 .57

.83 .63

.58 .55

SQ

BI

.51

.37

.17

e17

CP
.74 .70
cp2 cp3 cp4

.56

.71
cp1

e16

e15

e14

e13

Hypotheses Testing The structural equation model was examined to test the relationship among constructs. Goodness-of-fit indicates for this model were chi-square/df = 1.2833, GFI = 0.95, AGFI = 0.94, CFI = 0.97, RMR = 0.021. Figure 2 depicts the full model. Of the 4 paths hypothesized in the model, all the paths were significant at p < 0.05. Service Quality directly affects customers perceptions in selecting mobile telecom. Therefore, H1 is not rejected at 0.5 level of significance p > 0.000. Regarding the H2, Price has the direct effect on customers selection process in telecom service. Our results revealed that factor Price has positive effect on consumer perception in selecting telecom operator. Therefore, this

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hypothesis is accepted at p < 0.000. The study also shows that the brand image has positive impact on the customers perceptions. Therefore, H3 is accepted as p > 0.000.
Table 4. Fit Measures Fit Measures X2 Degree of Freedom (df) Root mean square residual (RMR) Goodness-of-fit index (GFI) Adjusted Goodness-of-fit index (AGFI) Comparative Fit Index Main Model 12.823 10 0.021 0.95 0.94 0.97

Table5. Standard Estimation of the Main Model Standardized regression weight

S.E. 0.067 0.052 0.043

C.R. 5.687 5.476 3.261

P value 0.000 0.000 0.001

H1 H2 H3

Service Quality Price Brand Image

Perception Perception Perception

0.324 0.463 0.214

Results indicate that all the variables are significant. So, we accept H1, H2, and H3. However, among all the significant variables, from our results, price is the most important among our respondents followed by service quality, brand image. As a point of relevance, we see that a study by Wal et al. (2002) measured service quality at cellular retail outlets in the South African environment. Results in the study also show a significant relationship exists between the importance of a dimension to the customers and the perception about the service price or call rate; service quality, brand image of an operators selection.

Conclusion, Limitation and Direction to Future Research

This study was undertaken to examine and understand the consumers behavioral perceptions and choices in selecting mobile telecommunication service providers. Network quality is one of the important factors of overall service quality. The study contains few limitations. The first limitation was based on the sample area for the study which is confined to west Malaysia. Second, this study used convenient sampling procedure to collect the data. Third, this study was also unable to perform analysis on three races (Malay, Chinese, and Indian) separately; rather, this study reflected combined perception of all three races. The outcome of this research shows a comprehensively integrated framework in which to understand the vibrant relationships among several dimensions of service quality, price, and brand image to have a handful idea on the consumers perceptions. However, further research is needed to examine these factors in Malaysia with additional samples before generalizations can be made.

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