MVNO Opportunity –
Everywhere but Romania?

• Overview
• MVNO Types
• MVNO MNO Relationship
• MNO Perspective
• Cannibalization
• Conclusions
Summary

“A MVNO is a company that provides mobile phone services but
does not have its own licensed frequency allocation of radio
spectrum, […]” - Wikipedia
“Almost one third of mobile subscribers in the Netherlands are
customers of virtual operators…” - Dutch analyst house Telecom Paper
“The MVNO business continues to exceed expectations. In 2010,
the four alliances combined nearly doubled their contribution to
the total Celcom revenue, […]” - Source: Axiata 2010 Annual report
Overview

“MVNOs' share in Bulgaria, Hungary and Poland rather small -
MVNOs unable to compete with MNOs in terms of pricing, service
offering and quality - In Poland, MVNOs struggle with churn and
high mobile termination rates - In Hungary, bundling of mobile
with fixed, cable TV and Internet helped reduce churn. “
Infocom
Overview
Current status on Eastern European countries

• 550 Active MVNOs with
over 85 million subscribers
• Global MVNO markets will
reach 186 million
subscribers by 2015
• Highest growth in Western
Europe & LATAM;
Overview
Western
Europe, 45%
Eastern Europe,
14%
Africa, 2%
Middle East, 2%
North America,
21%
Latin America,
3%
Asia Pacific,
12%
Source: Informa Telecoms & Media

Differentiation
MVNO Types
Distribution
Segmentation
Expats/
foreign workers
Religious
interests
Enterprise
verticals
M2M apps
Ethnic
VAS
Data/Content
Roaming
Brand
Lifestyle
Captive
audience
Existing
customers
for other
products
POS

MVNO’s Challenges
Source: Informa Telecoms & Media
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
What are the top business challenges for MVNOs?
Top business challenges

• Thin Margins (10%-40% of price)
• 80% of the success is dependent on
the MNO buy price
• MVNO agreements – complex
• Convergence and Bundling
• favor large operators
MVNO’s Challenges
Business challenges

• Contract period and exclusivity
• Prepaid, postpaid or both
• Equity participation and cost-sharing
• Minimum revenue commitment
• Infrastructure leasing / outsourced back-end support
• SIM card production
• Portal and 3rd-party content development and sales
• Guaranteed Traffic / Usage levels
• Distribution channels and commissions
• Inbound and outbound roaming
• Service level agreements
• Dispute resolution framework
• Numbering blocks
MVNO – MNO Relationship
Value for MNOs through well managed partnerships

MVNO – MNO Relationship
Radio
Access
Core
Network
Application and
Services
Billing Customer Care Marketing Sales
MNO Reseller (Thin/Light MVNO)
MNO Service Provider MVNO
MNO Enhanced Service Provider
MNO Full Infrastructure MVNO (Thick/Heavy MVNO)
MVNE
MNO
MVNO
MVNE MVNO

What’s in it for MNOs?
MVNO – MNO Relationship
• Drive revenue to offset the enormous cost of
building 3G/LTE networks
• Opportunity to partner with profitable
MVNOs with strong brands and distribution
channel to turn unprofitable customer segments
into profitable ones
• Use multiple brands to address different
segments
• New revenue streams: focus on profit from
MVNOs success rather than ARPU
• Focus on personalization (large operators
usually offer one size fits all packages)
• Gain strength – from non telco MVNOs’
customers segments, content, brand loyalty and
possibly more money to invest in building future
mobile networks and applications infrastructure
• Broaden the customer base and/or increase volume:
• Address untapped niche markets (sell additional MOU's) without costs
• Use an alternative distribution channel or a different brand
• Expand in other countries starting from an MVNO
• Overcome IT bottlenecks

MVNOs cannot enter the market by force!
MVNO – MNO Relationship
Nowhere did the regulators manage to force
operators accept MVNOs against operator’s will!

• MNOs increasingly see the marketing value that well chosen
MVNOs bring to them
• Increase in market size through better targeting / segmentation
• Incremental revenues in ‘weak segments’ for the MNO
• The economics of mobile data are incentivizing more network
sharing
• Spectrum scarcity is an issue for successful MNOs, leading to more network
sharing (inc. active)
• This may well lead to the de facto ‘virtualization’ of many MNOs
• Successful MNOs are starting to see the benefit of MVNOs for
growth
• MVNOs can increase market size with products targeted to
specific audiences
MVNO as opportunity

Cannibalization. Reality or just a myth?
MVNOs carry strategic risks and advantages for host MNOs
Address
impenetrable
market
Attack
competitors key
segments more
effectively
Cannibalization of
existing
customers
Overall margin
erosion
• Reach customers outside the Operator’s core markets without damaging own
brand
• Reach customers who would never become your customers, for whatever reason
• Attack new segments without costly development of new sub-brands
• Drive net additions, revenue and traffic without high acquisition costs
• Ineffective targeting or fencing of MVNO propositions may lead to mass churn
• Intentional abuse of loopholes by partners to attack beyond agreed segments
• Risk to stimulate competition by other MNOs, resulting in Operators rate
reductions
• Additional CAPEX and OPEX may be required to successfully support MVNOs
Rewards
Risks

Cannibalization. Reality or just a myth?
Use case: Major SE Asian Operator weaknesses
• The operator has strong
position/high segment market share
 MVNO partnership not suitable given
small potential and opportunity costs
• The operator currently has low
segment market share
 Small base but high ARPU, requiring
customized propositions, marketing
and channels
• The operator currently has high
segment market share
 Only consider if MVNO can reduce cost
to serve and increase margins, with
impositions of tight controls
• The Operator currently has low
segment market share
 Large opportunity and ideal for
MVNOs if the operator is truly
unable to effectively capture using
own brands

Cannibalization. Reality or just a myth?
Use case: Major SE Asian Operator weaknesses
• Will compete directly with the
Operator and may not be worthwhile
given limited returns
 Offer basic reseller model with very
low margins
• Partner must have strong segment
expertise and differentiated services
 Offer flexible model depending on
type of service (e.g. voice, VAS, IDD)
and inherent partner strengths
• High risk of cannibalization requires
the Operator management and back
end control
• JV model for control with low
margins to MVNO
• Attack MVNOs, requiring compelling
propositions and strong segment
focus
 Strong fencing to avoid churn from
high risk segments; JV model for
management control

• Price war?
• No regulation?
• No trusted partners?
• No real interest from entrepreneurs?
• How can someone else do this better than the big ones?
Why not Romania?
Opportunities

• MVNOs can bring a completely new perspective to the market
• MVNO cannot succeed without full support from MNOs
• MNOs cannot give support to MVNOs unless they believe in this
business model
• Regulator can ease the licensing but cannot force MVNOs setup
• Hopefully there will be some MVNOs in Romania in the next 5
years
Conclusions

MVNO OPPORTUNITY
– EVERYWHERE BUT ROMANIA?
Thank you!
marketing@computaris.com
www.computaris.com