Corporate Governance Mobile Industry

Question: Discuss about the Corporate Governance for Mobile Industry. Answer: Introduction: Mobile industry is growing rapidly in the wider industry for communication. Initially, mobile industry was engaged only in mobile phone and mobile accessories manufacturing. However, the mobile industry is growing rapidly with regard to technology and it is the fastest growing industry in the world, moving forward with innovations, technologies. It is not only the technology that has changed, but the design of mobiles also changed significantly with regard to its shape, weight and size. Mobile phone has become more comfortable and sleeker. The regulatory duty for mobile phones lies with Federal Communication Commission (FCC), in U.S. Despite of having various advantages of Mobile phones, one of the major disadvantages of mobile is the exposure of mobile communication could affect the health of people. Background: T-Mobile USA is countrywide provider of data services, wireless voice and messaging and has the capability of reaching more than 308 million Americans, where they work, play and live.. T-Mobile US is having their headquarters in Bellevue, Washington and they offer services through its subsidiaries and functions through its flagship brands Metro PCS and T-Mobile and also play the role of host network for various mobile operators. At present, 50000 employees are working under them and Deutsche Telecom from German telecommunications are their major shareholder. T-Mobile is 3rd largest wireless network service provider in United States (Chow and Joul, T-Mobile USA, Inc. 2013). Last year, ATT Inc. planned to buy the US branch of this struggling wireless service provider from Deutsche Telecom, T-Mobiles parent company. However, in December, ATT had to cancel their plan as the department of justice sued to block the acquisition and the reason he explained that the deal will reduce the competition in the industry. 4-G services of T-Mobile in US lags far behind compared to other three-service provider. They also voted as one of the awful among wireless network, as per the annual poll of MSN/Zogby (Daley 2014). Though T-Mobile is planning to improve their services, the real fact is that the improvements may be too late and too little. They had an extraordinary loss of 1558000 users in 1st nine months of the year, out of total 33 million it had towards the end of 2011. However, during that period, Verizon Wireless and ATT continued to increase their customers (Chow and Joul, T-Mobile USA, Inc. 2013) Business strategy: They generate earnings by offering cheap services of wireless communication to their wholesale, prepaid and post-paid customers and selling wide variety of wireless accessories and devices. Most of their expenditure are related to getting new customers and retaining them through providing compensating employees, providing various devices, expanding and operating their network. They provide accessories and devices through their flagship brand Metro PCS and T-mobile (Besen et al. 2013). Customer: Wireless communication services offered by T-Mobile to three major classes of consumers are namely branded prepaid, branded post-paid and wholesale. Users who generally pay after using the services are branded post-paid customers. Branded prepaid customers normally pay in advance and wholesale customers include virtual mobile network operators and machine-to-machine operators. They earn major portion of their earnings from branded post-paid customers amounting to 66%, from branded prepaid customers 30% and 4% from roaming, wholesale customers and other services, in 2015. Therefore, acquiring and retaining branded post-paid customers is most important to their business (Caldwell et al. 2016). Risk related to wireless industry and their business: The scarcity and cost of new wireless spectrum, tough regulations regarding the use of spectrum are adversely affecting their financial planning and business strategy. They need to acquire more spectrum to continue maintain growth of customers, enlarge their business to new cities, maintain better quality of service, meet increasing number of customers demand and employ new and improved technologies. They will have to face competitive disadvantages and experience erosion in service quality in various markets, if they fail to get access to required spectrum (Raina 2015). Although FCC has planned an auction programme but there is chances that the programme will be delayed. Any delay can adversely affect their ability to execute their efforts and plan to improve network. Their financial condition and reputation materially get adversely affected if there is an incident related to business disruptions, system failures and unauthorized access to their network takes place (Yami and Nemeh 2014). To maintain their sustainable growth, they must provide their consumers with trustworthy, reliable services and protect the locations, communications and personal information generated or shared by their consumers. Failure of network, infrastructure and system may create barrier in providing consistent services or may allow hackers to have unauthorised access to their system. Such risks include Errors made by human being like responding to unreliable communications, or implementing malicious code unintentionally Delays or failures by suppliers Theft of proprietary or consumers confidential data offered for sale for corporate extortion or competitive advantages. Physical damage, outages, power surges, equipment failures including those as a outcome of natural disasters, severe weather, acts of war and attacks by terrorists. Any other outages or system failures (Simons-Morton et al. 2014). The agreement managing their indebtedness applies various financial and operating restrictions on them. These restrictions includes the following Generating liens on their assets Bearing additional indebtedness and issuance of preferred stock Engaging in acquisitions, mergers, amalgamations and other transactions Entering into agreements with affiliates Developing assets, licenses and properties which they have or may procure in future Imposing restrictions on subsidiarys ability to make any payments or pay dividends (Gao et al. 2013). Legal proceeding: hey have to involve in legal proceedings frequently before various federal agencies, local and state regulatory agencies. These legal proceedings may be costly, complex, time consuming and highly disturbing to the business operations by diverting the energies and attention of management. The evaluation of the result of legal proceeding, involving their potential liability paid or received for settlement final order, judgement or decree may fluctuate as compared to the accrued amount of financial report. Possible outcomes involving awards, settlements, order and judgements may have substantial adverse effect on financial condition, business, operating results and compatibility to do business (Xu et al. 2015). Criticism against T-Mobile: Their services has been criticised due to non-performance of video optimization to the promised 1.5 Mbps bandwidth speed. If the provider of video can scale and detect the quality of stream to match with cap, the service works, otherwise it creates buffering and stuttering mess (Nwogugu 2015). Another problem people had to face with T-Mobile was with T-Mobile Binge On, which led to the problem that customers were opted for the service by-default and the service applied for all the video suppliers and not only for the providers who signed agreement with T-Mobile (Hildner et al. 2013). Controls and procedures: They maintain procedures and disclosure control to assure that the required information for disclosure of periodic statements submitted or filed under Exchange Act is processed, recorded, reported or summarized within the permitted time in the SECs forms and rules. Their disclosure controls are designed in such a way that it can assure that required information for disclosure under Exchange Act is collected and communicated to their principal financial officer, principal executive officer and management, to allow decisions in appropriate time related to required disclosures. (Falk et al. 2016). Executive Officers, Directors and Corporate Governance: They maintain a code of ethics for their Chief Accounting Officer, Chief Financial Officer, Chief Executive Officer, controller and treasurer, which is a Code of Ethics for Senior Officers in Finance as explained by implemented rule of SEC. This code is available for public in their website. If they amend this code other than administrative, technical or other non-substantive change or grant any waiver, they will reveal the type of waiver or amendment, its date of coming into effect and the category of consumer or investor to whom it is applicable in their periodic report or on their website (Brown 2015) Organization Governance: Purpose: The board of director of T-Mobile US, Inc has generated the guidelines for organizations governance to assist them to execute their responsibilities towards the organization and their stakeholders. The guidelines are applicable in a consistent manner with all applicable rules and laws of stock market and the companys amended byelaws are effected on time-to-time basis. These guidelines are aimed to provide as flexible structure for conducting business and not as legally binding set of regulations. The board may amend or make any modifications to the guidelines in its judgement and with regard to their responsibilities and duties to the shareholders and company (Campbell et al. 2014). Role of the board: The board reviews the activities of management and suggests on strategic and long term issues, with a view to improve the long term worth of the organization to their shareholders. It is the managements responsibility to control the financial condition and operation with regard to the boards ultimate control and oversight. Among their major activities, the board approves reviews, oversees the execution of the organizations capital, major business, strategy, financial objectives, and plan, and oversees the operation of organizations business by management. The board is answerable to the shareholders, but identifies that shareholders long term interest are proceeded by addressing responsibly the issues of other shareholders, involving consumers, employees, suppliers, public and government. The board has the option to do its task directly or can pass on to its committee. However, the task, which is cannot be delegated as per the bylaws, charter or any other applicable law, the board cannot pass it on to committee. While taking any action, the board must be aware that judgement on business has been applied properly and the action has been taken with regard to best interest of the organization (Garg, Dua and Chandra 2013). Board selection and composition: Independence: The board shall include minimum three directors (all members from audit committee), who meet the independence standards for directors, which are included in the NASDAQ Stock Markets listing standard or any other applicable listing requirement of company on timely basis. At times when the company does not meet the criteria of controlled company, under the NASDAQ requirement, the board should consist of majority of such directors who meet required standards of independence. As per the agreement between the Charter and the Stockholder, dated 30th April, 2013 between Deutsche Telekom AG and the company, if the board require one or more member to be independent to meet the qualification requirement, it can take from other committee. The board shall make an confirmatory declaration annually about the independence of all the directors. Every director has an confirmatory obligation to inform the board about any material changes regarding his independency (Tricker 2015). Qualification: a director should have professional and personal integrity, should have excellent moral character, and have good judgement about business, required skills and experience. They should be able to devote sufficient energy and time to perform their duties diligently. Any director should not be director of any rivalry company or any company holding the authorization of Federal Communications Commission that requires the divestment of authorization. Size of the board: With regard to the terms of Stockholder and Charter agreement, the board shall decide on appropriate size of the boards, within the prescribed limit of Bylaws and Charter (Kadiyala and Bergman 2015). Selection process: With regard to the terms of the agreement between Stockholder and Charter, the nominating committee and corporate governance is liable for recommending, evaluating and identifying the potential nominees for director, who are eligible to be appointed as director, to the board for approval, when vacancy arises for director. The Corporate Governance and Nominating Committee judge candidates recommended by Committee members, management, other directors and stockholders. With respect to the terms of the agreement between Charter and the Stockholder, the Committee also judges candidates for re-election, if the candidate has agreed to stand for re-election. After the Corporate Governance and Nominating Committee have completed its assessment, it presents its suggestion to the full Board for its approval and consideration, subject to the Agreement of the Stockholder and Charter (Linkola, Caldwell and Hassan, T-Mobile USA, Inc., 2016). Circumstances Requiring Tender of Resignation: If a director retires from or changes, his/her primary occupation outside, permanently or becomes conscious of situation that may adversely affect the director of the Company or may create a potential difference of interest with the Company, such director should inform the Corporate Governance and Nominating Committee of such situation. The Corporate Governance and Nominating Committee will reconsider the continued correctness of service under the situation. It includes a revaluation of the capability of such director to give independent opinion to the Company and to fully meet the tasks of a director, and in certain cases may consider requesting that the director to give in his or her resignation from the Board (Annamalai and Jin, T-Mobile USA, Inc. 2013). Service on Other Boards: The Company supports directors to play the role of directors of other companies so that the Company can gain from the knowledge, perspective and experience of best practices gathered from such other positions. Despite of the foregoing, directors shall limit the number of other company boards on which he or she serves so that he or she is able to devote enough time to his or her duties in Company, including attending and preparing for meetings. In addition, no member of the Audit Committee of the Board may serve for more than three committees of audit of public companies (including the Audit Committee of the Company) at the same time. Directors shall recommend the Board Chairman and the Nominating and Governance Committee Chairman, before accepting an invitation to serve the board of another public company. Directors should avoid service on boards and/or committees of other organizations that raise or create, or raise the emergence of interest conflicts Terms of directors: Directors are selected by vote annually for the term of one year. The board also appoint one Chairman for the board, who should be an independent director. Compensation: Non-employee directors of the company are entitled to sensible and reasonable compensation in compliance to the approval of board. They are also entitled to (i) reasonable expenses and cost reimbursement incurred in attending board meeting, (ii) benefits of indemnification agreements and applicable law, (iii) benefits of officers and directors reasonable liability insurance (Nwogugu 2015). Recommendations: From the above discussions, the following recommendations can be offered to T-Mobile to keep their consumer happy Sharing of family data: they have not come up yet with a data plan that is modelled as sharing data among family members. They should introduce one such plan. Notification to prime consumers before any action: Consumers should be notified before any change in data plan and their consent must be taken before any change Elimination of up gradation fee: Presently they charges $18 to upgrade phone, which seems mysterious to consumers. They should eliminate this to make consumer happy. Up gradation bonus for loyal customers: It would be great, if T-mobile offer free up gradation of phones to their long time customers and based upon this may extend the contract period of existing customers (DeMaria, Magee and Sullivan 2015). References: Annamalai, M. and Jin, Z., T-Mobile Usa, Inc., 2013.System and method for determining device location in an IP-based wireless telecommunications network. U.S. Patent 8,364,746. Besen, S.M., Kletter, S.D., Moresi, S.X., Salop, S.C. and Woodbury, J.R., 2013. An Economic Analysis of the ATT-T-Mobile USA Wireless Merger.Journal of Competition Law and Economics,9(1), pp.23-47. 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