Computaris mvno-opportunity

18 Sep 2015

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Computaris mvno-opportunity

  1. MVNO Opportunity – Everywhere but Romania?
  2. • Overview • MVNO Types • MVNO MNO Relationship • MNO Perspective • Cannibalization • Conclusions Summary
  3. “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
  4. “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
  5. • 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
  6. 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
  7. 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
  8. • 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
  9. • 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
  10. 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
  11. 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
  12. MVNOs cannot enter the market by force! MVNO – MNO Relationship Nowhere did the regulators manage to force operators accept MVNOs against operator’s will!
  13. • 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
  14. 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
  15. 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
  16. 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
  17. • 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
  18. • 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