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Medium Profitability New Product Launch Break-even Analysis

Jab We Profit

#Telecom #Telecommunications
ProHub Comment

This case tests financial modeling and break-even analysis skills, requiring candidates to synthesize market sizing data from multiple exhibits and evaluate whether fixed costs can be recovered within a tight 2-year timeline. The key challenge is recognizing that high fixed costs ($500M bandwidth lease) make the revenue targets extremely difficult to achieve, and a strong candidate should identify this asymmetry and propose alternative growth strategies.

Estimated Time 15 minutes
Difficulty Medium
Source ROSS
50 / 100
Telecom Co, a large Indian telecom service, has a new CEO who is determined to revive the struggling company. He has come up with the idea to launch a new, unlimited long-distance minutes cell plan called ‘Geet’ to attract new customers. This is a big strategic risk at a time the company is under intense scrutiny from shareholders and the general public, so he has hired us to evaluate if this product is a good idea. Should he launch this product or not?

Clarifying Information

  1. Telecom Co has operations only in India
  2. Telecom Co only has B2B and B2C subscriptions. We’ll treat it as one pool of subscriptions.
  3. Telecom Co does not currently have an unlimited minutes plan; customers looking to make long distance calls must pay per minute.
  4. Telecom Co’s main business is providing mobile communication services (e.g., data and minutes). It has some smaller investments in areas such as television and home internet, but these are minor parts of the business.
  5. There are several telecom players in India; our client is the fourth largest.
  6. The CEO needs the investment to break even by the end of the 2nd year, due to pressure from investors to see improvement to the company’s performance.