CUSTOMER SATISFACTION TOWARDS BROADBAND SERVICES

OF TELEKOM MALAYSIA

Wong Chiung Kiet

Corporate Master of Business Administration 2013

P~~at Khidmat MakJumat Akademik UNIVERSITI MALAYSIA S.u. WAK P.KHIDMAT MAKLUMAT AKADEMIK

1IIIIIIIIIfliffi 111111111 1000246878 CUSTOMER SATISFACTION TOWARDS BROADBAND SERVICES OF TELEKOM MALAYSIA

By

Wong Chiung Kiet

(11031902)

A Research Paper Submitted in Partial Fulfillment of

the Requirement for the Degree of

Corporate Master in Business Administration

Faculty of Economics and Business

UNIVERSITY MALAYSIA SARAW AK

(2013)

11

I APPROV AL PAGE

I certified that I have supervised and read this study and in my opinion it conforms to acceptable standards of scholarly presentation and is fully adequate in scope and quality as a research paper for the degree of Corporate Master in Business Administration.

Associate Professor Dr. Venus Khim - Sen Liew Supervisor

This research paper was submitted to the Faculty of Economics and Business, UNIMAS and is accepted as partial fulfillment of the requirements for the degree of Corporate Master in Business Administration.

Dr. Mohamad Affendy Arif Dean, Faculty ofEconomics and Business UNIMAS

III

STATEMENT OF ORIGINALITY

The work described in this Research Paper, entitled

"CUSTOMER SATISFACTION TOWARDS BROADBAND SERVICES OF TELEKOM MALAYSIA" is to the best of the author's knowledge that of the author except where due reference is made.

Date

WONG CHIUNG KIET 11031902

IV

ABSTRACT

CUSTOMER SATISFACTION OF BROADBAND SERVICES OF TELEKOM

MALAYSIA

By

WONG CHIUNG KIET

( customer satisfaction is well known among service provider sectors in the last three decades. Many companies have adopted and implanted it as a high priority operational goal in order to expand their businessev

This research aimed to investigate the customer satisfaction of broadband services provided by Telekom Malaysia (TM) in Sibu, Sarawak. The researcher studied the factors influencing satisfaction among the customers. It is crucial that internet is a part of life for everyone in today.

Finally, the results of this research show that service quality and employment status have significant relationship with customer

satisf~ction.

Meanwhile, package price, age,

gender, education level and monthly income do not have relationship with customer satisfaction.

v

ABSTRAK

KEPUASAN PELANGGAN PERKHIDMATAN BROADBAND DARIPADA

TELEKOM MALAYSIA

Oleh

WONG CHIUNG KIET

Kepuasan pelanggan adalah terkenal di kalangan sektor pembekal perkhidmatan dalam tempoh tiga dekad yang lalu. Banyak syarikat telah memakai dan menanam ia s ia sebagai matlamat keutamaan operasi untuk mengembangkan perniagaan mereka.

Kajian ini bertujuan untuk menyiasat kepuasan pelanggan perkhidmatan jalur lebar yang disediakan oleh Telekom Malaysia (TM) di Sibu, Sarawak. Penyelidik mengkaji faktor­ faktor yang mempengaruhi kepuasan di kalangan pelanggan. Ia adalah penting bahawa internet adalah sebahagian daripada kehidupan untuk semua orang pada hari ini.

Akhir sekali, hasil kajian ini menunjukkan bahawa kualiti perkhidmatan dan status signifik~n

pekerjaan mempunyai hubungan yang

dengan kepuasan pelanggan. Sementara

itu, harga pakeg, umur, jantina, tahap pendidikan dan pendapatan bulanan tidak \

mempunyai hubungan dengan kepuasan pelanggan.

vi

ACKNOWLEDGEMENT

My sincere gratitude and appreciation to God, who has granted me the ability and willing to start and complete this research study.

Foremost, I wish to thank my supervisor, Associate Professor Dr. Venus Liew for his suggestions and advice and for his guidance in completing the thesis. Thank you very much for the invaluable guidance, suggestions, comments and assistances throughout the period of this thesis.

I also wish to thank to my course mates in accompanying me along the CBP journey. Big thanks for you all in assisting me in solving the difficult part of the thesis.

Lastly to my wife, Yvonne, thank you for being a friend and all your supports. You gave me strength to move forward to something better. Thank you for everything.

vii

Pusat Khidmat Maklumat Akademik

Ul\lVERSlTI MALAYSIA SARAWAK

TABLE OF CONTENTS Page

LIST OF TABLES

xi

LIST OF FIGURES

Xll

CHAPTER ONE: INTRODUCTION 1.0

Introduction

1.1

Background of the Study

1.2

Overview ofTM 1.2.1

3

TM's Outstanding Perfonnance

1.2.2 TM's Dominant Position

5

8

1.3

Broadband Panorama

1.4

Concept of Broadband Services

11

1.5

Broadband: Leverage to National Growth

11

1.6

Broadband Rank & Scale

13

1.7

Customer Satisfaction

14

1.8

Conceptual Framework

15

9

1.8.1 Price

16

1.8.2

16

Service Quality

1.8.3 Personal or Demographic Factors

17

1.9

Problem Statement

18

1.10

Objective of Study

19

viii

I

I'

1.1 0.1

General Objective

19

1.10.2 Specific Objectives

19

1.10

Significance of Study

19

1.10

Scope of Study

20

CHAPTER TWO: LITERATURE REVIEW

2.0

Introduction

21

2.1

Customer Satisfaction

21

2.2

Measuring Customer Satisfaction

22

/'

2.3

Customer Satisfaction and Expectation

23

2.4

Effect of Customer Satisfaction on Company's Profitability

27

2.5

Consequences of Customer Satisfaction and Dissatisfaction

29

2.6

Demographic and Customer Satisfaction

31

2.7

Customer Behavior Intention

33

2.8

Conclusion

37

CHAPTER THREE: METHODOLOGY

3.0

Introduction

38

3.1

Research Framework

38

3.2

Research Hypothesis

39

3.3

Research Design

42

3.4

Population and Sampling

43

3.5

Data Collection Method

45

ix

3.6

Measurement of Variables

46

3.7

Technique of Data Analysis

48

3.8

Conclusion

49

CHAPTER FOUR: ANALYSIS AND RESULTS

4.0

Introduction

50

4.1

Descriptive Analysis

50

4.2

Customers' Expectation towards Broadband Services

54

4.3

Customers' Reaction towards Broadband Services

56

4.4

Normality Test

57

4.5

Hypothesis Testing via Spearman Correlation

58

4.6

Conclusion

60

CHAPTER FIVE: DISCUSSION AND CONCLUSION

5.0

Introduction

61

5.1

Results Discussion and Suggestion

61

5.2

Limitation of the Study

68

5.3

Recommendation for Future Research

69

5.4

Conclusion

70

REFERENCES

71

APPENDIX A : SURVEY QUESTIONNAIRE

88

x

LIST OF TABLES

Page Table 4.1

Demographic Characteristics of Respondents

53

Table 4.2

Experience of Customers towards Broadband Services

55

Table 4.3

Reaction of Customers towards Broadband Services

56

Table 4.4

Tests of Normality

57

Table 4.5

Correlations between Overall Customer Satisfaction and Selected Variables

59

Table 4.6

Summary of Hypothesis and Findings

60

xi

LIST OF FIGURES Page

Figure 1.1

Conceptual Research Framework

xii

15

CHAPTER ONE

INTRODUCTION

1.0

Introduction This study aims at investigation the overall customer satisfaction level towards

the broadband services of Telekom Malaysia (TM). The study also identifies the important factors that can affect the level of customer satisfaction of the broadband services in TM.

This chapter provides a general description about the outline and direction of research. {t contains the following sub-sections: (1.1) Background of study, (1.2) Overview of TM, (1.3) Broadband PanorartJ.a, (J .4) Concept of Broadband Services, (1.5) Broadband: Leverage to National Growth, (1.6) Broadband Rank & Scale, (1.7) Customer Satisfaction, (1.8) Concept Framework, (1.9) Problem Statement, (1.10) Objectives of the Study, (1.11) Significance of Study and (l.12) Scope of Study.

1.1 Background of Study When we start enter into the new era of convergence between wireless network, broadband Internet, and the data sector, it had boosted the rapid growth of telecommunications industry. Information and communication technology (lCT) become an important criteria in fast changing telecommunication world as it had significant

contribution in several areas for the purpose to enhance the services. Through ICT, the utilisation of the resources can be managed effectively and efficiently. Broadband can be considered as a key indicator to become competitive advantage in changing economy environment and consistently economic growth and sustainable. Governments in most of the developed and developing countries are realised the important of broadband network to the countries growth by increasingly committed to extending broadband networks to their nations.

In Malaysia, the usage of internet and multimedia by corporate, public sectors, and government is increased rapidly. The information technology is one of the key determinants in obtain global competitiveness. The increased use of data communication and rapid expansion of information technologies by residential users and business encourages the growth of internet-based'services and generates a greater demand for an availability of high-speed internet service access. The introduction of electronic mail and internet has created a new paradigm shift in people's behaviour in communication. Besides, the rapid expansion and demand of application and content is now a key indicator boosting high-speed development in the countries. Developed and developing countries have prioritised the development of broadband or high-speed internet infrastructure as their countries development direction.

Previously, internet users need to fixed to a specific area when using the network and spend lots of time in downloading large files or contents before the introduction of high speed broadband. The development of the broadband facilitates the users to use the

2

network everywhere and any times. The high-speed broadband can transmit five or more times faster than the speed of a previous dial-up modem without disrupting telephone use.

Having continuously available of internet access is important for business email use, and it is useful in sending or receiving important business data files, photographs, videos, or graphics for business purpose such as promotion or advertisement. Broadband allows wider internet accessible coverage than a routine fixed line modem. With the development of broadband, network user especially business users and working people can have much easier and faster access to websites. This consequently enables better quality of other usage of the features that internet can offer, better conununication; and better potential for video conferencing.

1.2 Overview of TM

TM was established as the Teleconununications Department of Malaysia in 1946. Telecommunication services in the country were transferred from Jabatan Telekom Malaysia to Syarikat Telekom Malaysia (STMB) in 1987 to form the first Malaysian private company. In 1990, STMB was listed on the Main Board of Bursa Securities.

In 1997, TM launched "Corporate Information Superhighway" (COINS), a globally connected multimedia network that supported multimedia applications, networked computing and communications. TM also launched services focused on lifestyle related content in 2001, based on code division multiple access (CDMA)

3

technology, broadband services and "BlueHypoo.com". The broadband service or so called Streamyx was launched at speed 384 Kbps (Kilobits per seconds). Meanwhile, the maximum speed of Streamyx was upgraded to 4Mbps (Megabits per seconds) in June 2007 and 8Mbps in January 2013.

TM fonned several alliances and partnerships in overseas market in 2003. It merged its mobile phone business TM Touch with Ce1com (Malaysia) to become the largest cellular operator in Malaysia. In 2008, TM was demerged its mobile and fixed businesses into two distinct entit,ies, which brought us "Telekom Malaysia International" (TMI or named as "AXIATA" currently) and TM.

In the same year, TM entered a public-private partnership with Ministry of

Energy, Water and Communications (MEWC). They agreed to launch national High Speed Broadband (HSBB) which is a broadband service with speed of 10Mbps to 100 Mbps for residential customers and up to I Gbps (Gigabits per seconds) for business delivered through fiber optic infrastructure.

In March 20 I 0, TM launched its next generation HSBB retail service "Unifi". It is a broadband service that uses fiber optics to deliver high speed internet, phone and IPTV services to customers' premises. Packages of 5Mbps, 10Mbps and 20Mbps were provided to customers nationwide.

4

Pusat Khidmat Maklumat Akademik VNlVERSITI MALAYSIA SARAWAK

1.2.1 TM's Outstanding Performances Telekom Malaysia Berhad (TM) is Malaysia ' s broadband champion which leading communications group and integrated infonnation by offering a comprehensive range of communication services and solutions in data, fixed-line and broadband. TM as a market leader is highly driven by stakeholder value creation in competitive environment. TM has a strong believe that continuous improvement in customer service quality and innovations through focusing on increased operational efficiency and productivity can deliver an enhanced customer experience.

TM is now well positioned to boost Malaysia as a digital gateway and regional Internet hub for South-East Asia by leveraging on its collective expertise, extensive global connectivity, and network infrastructure. TM is opening up possibilities through communication, collaboration and connection, towards the sharing vision of elevating the regions into high-income economies. This request TM to be remains steadfast in its transfonnation into a new generation communications provider which deliver an integrated and enhanced digital lifestyle to Malaysians.

TM holds its promise to ensure the integrity of people, reputation and processes, as well as the

sustain~bility

of its operations as a corporate citizen model which

committed to transparency and good governance. TM's Corporate Responsibility (CR) encourage reinforces responsible behavior in four major segments which are workplace marketplace, community and the environment. TM is now further boosting markets in

5

education, community/nation-building and environment with the focus oriICT through our Reaching Out programmes.

TM has proved its high standards in Corporate Governance with the recognition consistently for two years consecutively, in 2009 and 20 I 0 as well as the Anugerah CSR Perdana Menteri for Best Workplace Practices. TM is also a multiple corporate awards winner, TM was most recently honored with 5 National Annual Corporate Report Awards (NACRA) 2010, notably the Platinum Award for CSR; and 4 Frost and Sullivan Malaysia Excellence Awards 20 II, including Best Broadband Service Provider of the Year.

TM is the biggest integrated communications solution provider in Malaysia. TM is also one of the Asian leading communication companies with market capitalization of RM I7.7Billion and 26,667 employees in 2011. The company has been highlighted Malaysia to be the highest HSBB SUbscription rate in Southeast Asia after signing a Private Public Partnership (PPP) with government in September 2008. TM IS acknowledged as one of the fastest but most cost efficient in the world with its implementation of the new generation fiber network.

TM took the risk convert into broadband in 2001 with offering Streamyx for usage of general population. TM played an outstanding role in achieving 50.0% hou ehold broadband penetration by 20 I 0 through leveraging on Streamyx and UniFi under the National Broadband Initiative. The Company is now further supporting the

6

Government's vision of boosting the economy into high-income · economy by transforming the country into a multimedia hub with building up a world-class ICT infrastructure. TM

has

significant development since its establishment as

the

Telecommunications Department of Malaya in 1946. Its performance in recent years has been propel by a quest to become Malaysia's new generation communications provider market leader where embracing customer needs through execution and innovation excellence.

The High Speed Broadband (HSBB) service Unifi subscribers had surpassed 500,000 in January 2013, and more than 2,000,000 broadband subscribers (Streamyx and Unifi). The service has continued to stamp its leadership in the domestic broadband market and there is no sign of slowing down. TM is a pioneer and plays a vital role in enhancing the growth story in broadbancl segment of the communication business. This motivated in keeping with the stated ambition of Malaysian Government with its development objectives to increase the household penetration rate of broadband in the country simultaneously.

Unifi currently available in 95 locations which covering more than 1.34 million households, which including sixty-four areas in the Klang Valley, nine in Johor, five in Penang, four in Kedah, three in Sarawak , two in Negeri Sembilan, two in Melaka, two in Perak, one in Pahang, one in Terengganu, and one in Sabah. The coverage areas include key industrial and economic zones in the Cyberjaya, Putrajaya, Klang Valley, Iskandar Malaysia and Kulim Hi-Tech Park. TM is moving beyond its contribution as a service

7

provider and taking more proactive role as a trusted partner to local Small Medium Enterprises (SMEs) through efforts that would further enhance the competitiveness of SME products being offered to the market.

1.2.2 TM's Dominant Position Malaysian Government has various initiatives to address both demand and supply of broadband. The Tenth Malaysia Plan (lOMP) shows that the government will invest and develop the ICT nationwide. The total domestic ICT spending will achieve RM175billion by 2020.

Under the Public Private Partnership (PPP) plan, government partnering with TM in an arrangement to implement HSBB Project. The Ministry of Energy, Water and Communication (MEWC) and TM signed the PPP agreement to launch the national HSBB initiative. HSBB is a premium broadband service with speed of 10Mbps to 100Mbps for residential customers and up to 1Gbps for business for high economic impact areas delivered via fiber optic infrastructure. The infrastructure will be rolled out over a period of 10 years with the Malaysian Government investing RM2.4billion and TM RM8 .9billion to provide HSBB access to over 1.3 million premises by 2012.

At the mean time, broadband subscribers are given incentive to install broadband. Under Budget 2010, Malaysian Government proposes giving taxpayers a tax relief on broadband subscription fee up to RM500 per year. On the demand side, Malaysian

8

Communications and Multimedia Commission (SKMM) administer a Networked Content Development Grant (NCDG) that assists in funding content project. A total of RM 50million is available under NCDG programme. Malaysian Government also enlisting other agencies into the campaign to spur content development. The government has announced that it will set aside RM300million for content industry development. Besides, Multimedia Development Corporation (MDeC) is administering the Integrated Content Development Taskforce (ICON) funding programme that opens more funding opportunities to content developers. These content projects are expected to spur demand for content.

1.3 Broadband Panorama

"BROADBAND" is typically llsed to describe an internet connection with download speed faster than traditional dial-up connection at 64Kbps (OECD, 2008). Broadband connection is faster than narrowband which is suitable for large amount of data transferred (Kidokoro, 2007). The world of communication is experiencing phenomenal global change all over the world, as we enter the era of convergence between broadband internet, wireless networks and the content sector (Beard & Hartmann, 1999).

The important of ICT is undeniable and it is applied in plenty type of fields for the purpose of service enhancement, worldwide. Networked ICT plays an ever increasing role in all societies with 2.4billion people using the internet and telecommunication services

revenues

now

exceeding

two

9

trillion

USD

annually

(International

Telecommunication Union, 2012). Many governments around the world are rapidly extending broadband network to their citizens (Broadband Advisory Group, 2003).

Broadband enables access to wide variety of applications such as e-govemance, telemedicine, education and many more (CII, 2009). Broadband also has the potential to improve the quality of education and health services and provide jobs and prosperity (Lucy Firth & David Mellor, 2005). In the area of education, it is facilitating information sharing spans distances from web conferencing in offices to the e-education of children in rural areas. It is a powerful supplement to the teachers and enhances their reach.

Healthcare initiatives benefit from advanced data and diagnostic technologies to mobile monitoring of patients' heath at the hospital and at home. By 2014 in India, all doctors and paramedical personnel will be provided laptop and broadband connection which will enable the cost effective and medical knowledge transfer. This will enable affordable healthcare to reach 168million rural household in India (CII, 2009). By implementing the broadband technologies, it will contribute to economic and social development (Mukhetjee & Hahn, 2007) . Broadband has become an important key to boost the economy in Paksi tan at national level and improve the living standard of the citizens (Dwivedi, Khoumbati, Williams & Lal 2007).

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1.4 Concept of Broadband Services

Broadband is a concept that comes from telephony world. In general, the speed of the broadband must not less than 2Mbps (Sternad & Aronsson, 2003) although different service providers will

have different definition

of broadband.

Broadband

is

comm unication technologies which provide high speed, "always on" connection to the Internet for large numbers of residential and smal1 business subscribers (Lee, 2007) . Broadband offers the improvement of its efficiency, connection and access towards specific operation that suggest new methods in doing business and new business model to the organizations.

1.5 Broadband: Leverage to National Growth

Broadband is akin to utilizes like water and electricity these days. The economic and social impacts that come from the implementation of broadband are well documented in many countries. Countries like Malaysia, Korea and Hong Kong have benefited by growth in broadband (CII, 2009). The Governments had shown strong will in creating digital infrastructures. There are significant changes in nation life style and improvement in productivity with the existence of broadband. Broadband had set its penetration as a catalyst for generates new service, enhance efficiencies in nation economic development activities, which had significant contribution towards national Gross Domestic Product (GDP) growth.

11

According to McKinsey & Co Inc (2011), the collective GDP of Asia can generate an extra USD15billion-USD180billion as well as create more than 6.5million jobs if broadband penetration in Asia can be on par with Western Europe. Broadband is believed to have positive influence towards economic growth. Typically, there will lead to increase of 0.6%-0.7% in GDP growth if broadband penetration had increase of 10%.

The correlations among the broadband penetration and competitiveness of a country are very clear to be applied across both emerge and matured markets. The impact is more direct to economic growth of developed countries like Australia, New Zealand, and Britain. However, the impact of broadband penetration to Malaysia economic growth is smaller where 25% broadband penetration only boosting 0.1% GDP growth. Broadband

directly

and

indirectly

enhance

the

economic

growth

through

foreign/domestic direct investment in the" development of network and multiplier effects. With competitive broadband infrastructure, the country could definitely attract more inflow of foreign direct investment Google Inc is the leading companies that set up its operation in Argentina.

1n 2010, the internet contributed 4.1% or USD9.75billion or RM30billion of

Malaysia'S GDP. Malaysia was identified as the Top 30 highest fast growing countries crucial to the benefits of internet. This represented money spent by Malaysian Government, consumers and business on internet related goods and services produced in Malaysia. Malaysian Government and some private companies had derived a lot of money from exporting equipment that allow people to use and connect to the internet.

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