Overview“AMVNO is a company that provides mobile phone services butdoes not have its own licensed frequency allocation of radiospectrum, […]” - Wikipedia“Almost one third of mobile subscribers in the Netherlands arecustomers 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 tothe total Celcom revenue, […]” - Source: Axiata 2010 Annual report
OverviewCurrent status on Eastern European countries“MVNOs share in Bulgaria, Hungary and Poland rather small -MVNOs unable to compete with MNOs in terms of pricing, serviceoffering and quality - In Poland, MVNOs struggle with churn andhigh mobile termination rates - In Hungary, bundling of mobilewith fixed, cable TV and Internet helped reduce churn. “ Infocom
Overview • 550 Active MVNOs with Asia Pacific, 12% over 85 million subscribers Western Latin America, Europe, 45% 3% • Global MVNO markets will reach 186 million subscribers by 2015North America, 21% • Highest growth in Western Europe & LATAM; Middle East, 2% Africa, 2% Eastern Europe, 14%Source: Informa Telecoms & Media
MVNO Types Expats/ foreign workers Religious Enterprise interests verticals Segmentation Ethnic Captive Lifestyle VAS audience Existing M2M appsDistribution customers Brand Differentiation for other products Data/Content POS Roaming
MVNO’s ChallengesTop business challenges What are the top business challenges for MVNOs?50%45%40%35%30%25%20%15%10%5%0%Source: Informa Telecoms & Media
MVNO’s ChallengesBusiness 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 – MNO RelationshipValue for MNOs through well managed partnerships• 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 Radio Core Application and Billing Customer Care Marketing Sales Access Network Services MNO Reseller (Thin/Light MVNO) MNO Service Provider MVNO MNO Enhanced Service Provider MNO Full Infrastructure MVNO (Thick/Heavy MVNO) MVNE MVNO MNO MVNE MVNO
MVNO – MNO RelationshipWhat’s in it for MNOs?• Broaden the customer base and/or increase volume: • Address untapped niche markets (sell additional MOUs) without costs • Use an alternative distribution channel or a different brand • Expand in other countries starting from an MVNO• Overcome IT bottlenecks• 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
MVNO – MNO Relationship MVNOs cannot enter the market by force! Nowhere did the regulators manage to force operators accept MVNOs against operator’s will!
MVNO as opportunity• 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
Cannibalization. Reality or just a myth?MVNOs carry strategic risks and advantages for host MNOs Rewards Address • Reach customers outside the Operator’s core markets without damaging own impenetrable brand market • Reach customers who would never become your customers, for whatever reason Attack competitors key • Attack new segments without costly development of new sub-brands segments more • Drive net additions, revenue and traffic without high acquisition costs effectively Cannibalization of • Ineffective targeting or fencing of MVNO propositions may lead to mass churn existing • Intentional abuse of loopholes by partners to attack beyond agreed segments customers • Risk to stimulate competition by other MNOs, resulting in Operators rate Overall margin reductions erosion • Additional CAPEX and OPEX may be required to successfully support MVNOs 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
Why not Romania?• Price war?• No regulation?• No trusted partners?• No real interest from entrepreneurs?• How can someone else do this better than the big ones? Opportunities
Conclusions• 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
MVNO OPPORTUNITY– EVERYWHERE BUT ROMANIA? Thank you! firstname.lastname@example.org www.computaris.com
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