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
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