Addressing the mobile market with the MVNO model


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Addressing the mobile market with the MVNO model

  2. 2. Contents 1. About SVP Advisors 2. The MVNO model 3. The international experience 4. Successfully launching an MVNO 2
  3. 3. SVP Advisors in a snapshot SVP Advisors is a management consulting firm, which specialises in Regulation and Business Strategy in the broad telecoms sector SVP Advisors’ clients include:  Int’l Organizations (EC)  Regulators (TRA UAE, CITC, CMT, NITA, EETT, AGCOM, OCECPR)  Operators (Turkcell, Telecom Italia, Telefònica)  Financial Institutions (Citibank, Banco Santander, Inter Development Bank) 3
  4. 4. SVP Advisors’ experience with MVNO Client Project Description and Objectives MNO (EE) • Support in drafting wholesale offer for MVNOs • Development of MVNO pricing model (retail minus, cost plus) MNO (EE) • Support in definition of MVNO strategy • Development of a tool to assess the viability of different MVNO models Private Equity • Review of 2 MVNO business plans Fund (WE) • Assessment of investment opportunity MVNO (WE) • Support in negotiations with host operator • Development of an internal costing model MNO (WE) • Support in lobbying with the Regulator against MVNO access obligation • Mobile market and competition analysis Regulator (WE) • Mobile market and competition analysis • Assessment of impact of MVNO entry in the mobile market 4
  5. 5. SVP Advisors can provide value-added support in different areas  Assess the MVNO opportunity in new markets FOR MVNOs  Develop business case/plans  Support in negotiations with host networks/MVNEs  Develop innovative voice and data propositions  Support in the definition of wholesale and MVNO strategy FOR MNOs  Evaluate proposals of candidate MVNOs  Develop cost-based models to determine wholesale MVNO prices  Design and implement accounting separation systems  Mobile market analysis (wholesale/retail) FOR NRAs  Assess the impact of MVNOs on market and competition  Develop bottom-up models to determine MNO’s access costs  Review regulatory accounts of MNOs 5
  6. 6. Contents 1. About SVP Advisors 2. The MVNO model 3. The international experience 4. Successfully launching an MVNO 6
  7. 7. Definition of MVNO  Mobile Virtual Network Operators (MVNOs) are companies providing mobile services to end users without having their own licensed frequency allocation of radio spectrum  MVNOs buy radio access (airtime) from Mobile Network Operators (MNOs) in order to provide calls, SMS, data and other mobile services  Depending on their type, MVNOs may also lack additional infrastructure needed to provide mobile services, e.g. OSS/BSS  Different to MNOs, MVNOs typically have a narrower range of services/tariffs plans as they focus on a particular market segment 7
  8. 8. MVNO as a mean to reach different objectives  The MVNO model can well serve different type of players • Exploit difference in retail-wholesale prices 1. New Player • Use strong brand to enter a new market • Exploit existing retail distribution network • Sell excess network capacity 2. Mobile Network • Niche products / underserved segments Operator (MNO) • Ease regulatory pressure • Complement offering to existing clients 3. Fixed operator • First low-risk step into mobile • Counter-attack mobile operators 8
  9. 9. 1. The MVNO model for a New Player  Large corporations, small companies or entrepreneurs can use the MVNO model to reach mobile customers with:  Simple and cheap tariffs  New services  Innovative voice and data propositions  Cross-promotions (existing activities)  Examples:  Supermarket chains distributing prepaid SIMs with cheap traffic  Banks enhancing their customers’ experience through mobile  Media brands providing own content directly to end users 9
  10. 10. 2. The MVNO model for established MNOs  The MVNO is one of two models available to MNOs to target market segments (the other being launching sub-brands) MVNO model Sub-brand model MVNO develops and retains MNO maintains customer relationship with customers relationship MVNO develops its own New brand or use existing tariffs and (in some cases) strong brand to market the services services MNO charges MVNO per MNO generates direct airtime and use of other revenue streams from elements of the value chain customers MNO typically hosts several Different sub-brands used to MVNOs at a time address niche segments 10
  11. 11. 3. The MVNO model for fixed operators  FMC pushes operators to move into each others core businesses  Fixed operators can effectively enter the mobile market through MVNO  Quick time-to-market  Low capex commitment (no license fee, network deployment) Mobile BB to minimize F2M substitution GSM homezone 4Play to increase solutions to APRU and reduce bypass fixed churn network MVNO Model 11
  12. 12. An MVNO type could be defined according to the elements it controls in the mobile services’ value chain NETWORK CONTENT & OPERATIONS SALES & MARKETING INFRASTRUCTURE APPLICATIONS VAS & Radio Network SIM Card & Sales & Value Service Billling Support Spectrum Switching Provisioning Distribution Proposition Platform BRAND LIGHT FULL MVNO OWNS MNO OWNS MVNO MAY OR MAY NOT OWN 12
  13. 13. Contents 1. About SVP Advisors 2. The MVNO model 3. The international experience 4. Successfully launching an MVNO 13
  14. 14. MVNOs presence in the World at a glance  There are about 500 active MVNOs worldwide (as of March 2010)  They control an estimated 2% of the total c.4.8bn mobile connections  Their presence outside WE and the US is still largely underdeveloped 31 MVNOs 72 MVNOs 311 MVNOs c. 10% share c. 10% share 4 MVNOs <1% share 27 MVNOs <1% share 7 MVNOs <1% share 4 MVNOs <1% share 42 MVNOs Note: MNOs’ owned MVNOs and sub- brands not included in the chart 14 Source: GSMA Wireless Intelligence, Telegeography
  15. 15. MVNOs presence in Western Europe >20% SHARE NED 10%-19% SHARE SWE 41 MVNO 6%-9% SHARE 7 MVNO <5% SHARE BEL FIN 24 MVNO 5 MVNO UK DEN 28 MVNO 36 MVNO FRA GER 30 MVNO 65 MVNO POR AUT 5 MVNO 3 MVNO SPA ITA 25 MVNO 14 MVNO 15 Source: SVP Advisors estimates, GSMA Wireless Intelligence
  16. 16. Overview of MVNO models [1] MVNO MODELS DESCRIPTION EXAMPLES Ethnic Targets international communities providing cheap calls to home countries Discount “No frills” simple and cheap mobile services targeting price sensitive customers Retail Offered by retailers with strong distribution network targeting the mass market Telecom Mobile services offered to landiline customers in addition to existing services Media/Youth Value added music and video content targeting young people 16
  17. 17. Overview of MVNO models [2] MVNO MODELS DESCRIPTION EXAMPLES Banking Targets existing customers providing additional services such as mobile banking Data MVNOs that provide only mobile data and broadband access (no voice) Business Targets corporate customers with tailored voice and data solutions Web Offers innovative services e.g. call filtering, personalised voicemail and online inbox Advertising Free calls and SMS subsidized by targeted advertising to subscribers 17
  18. 18. Current trends in the international MVNO market  In mature MVNO markets (e.g. Northern Europe) mass market generic MVNOs are losing ground to niche MVNOs targeting specific segments or offering innovative services and solutions  Several MNOs are becoming increasingly active in the MVNO market  Buying MVNOs hosted in their network (e.g. Sprint-Virgin Mobile)  Launching sub-brands  As mobile markets approach maturity and regulation promotes competition, MVNOs are expected to appear in many new countries  The market characteristics, the business initiative and the strategy of MNOs will drive the process in each country 18
  19. 19. Contents 1. About SVP Advisors 2. The MVNO model 3. The international experience 4. Successfully launching an MVNO 19
  20. 20. The different phases of an MVNO launch 1. Selecting the 2. Setting-up the 3. Preparing for MVNO model business launch Negotiations Branding Regulation with MNOs Market & Value Agreement competition proposition with host MNO review Selection of Sales & Gap analysis the enabling distribution platform strategy Preparation of Marketing Positioning business plan 20
  21. 21. The selection of the model is driven by the market opportunity and the positioning of the MVNO ILLUSTRATIVE MARKET/GAP ANALYSIS POSITIONING MVNO MODEL • Limited competition on price DISCOUNT Simple, cheap RETAIL mobile services • Significant retail-wholesale gap • Competitive market Competitive offer ETHNIC tailored to target BUSINESS • (some) underserved segments segment YOUTH • Poorly differentiated offer Innovative MEDIA service & WEB • Limited availability of VAS/data applications BANKING • Mature telecoms sector Extend fixed TELECOM service offering • Fixed-mobile convergence DATA to mobile 21
  22. 22. The selection of the MNO and the consequent agreement is a fundamental step in the MVNO launch  Identify MNO which fits better with the selected MVNO model  Overall market positioning  Target segment penetration  Put first on the list candidate MNOs:  With clear wholesale/MVNO strategy  Seeing MVNO as a partner (not a competitor)  Use “regulatory” threat in case of:  Hostile approach by all/most MNOs  Excessive wholesale rates 22
  23. 23. The pricing model is the single most important element of the wholesale agreement Works well in case of MNO and MVNO working well as Commercial partners Margin risk for Retail Minus Cost Plus Max flexibility the MVNO as it for the MVNO is dependent on to compete on MNO’s moves cost and differentiation - Retail Minus and Cost Plus are often imposed by Regulators 23
  24. 24. Selection of the Enabling Platform: the role of MVNEs  MVNOs owning the elements in the mobile value chain relating to infrastructure and operations can either  Develop these in-house  Outsource them to a Mobile Virtual Network Enabler (MVNE)  An MVNE is a company whose mission is to facilitate MVNOs market their services, acting as:  A “One-stop-shop”, providing the whole back-end enablement (including the airtime)  A provider of specific applications/services required by the MVNO (e.g. service platform, billing, customer care, VAS, etc…) 24
  25. 25. Preparing for launch • Brand should reflect MVNO’s mission and positioning Branding • Use existing strong brand (if available) • Consider partnership with existing brand • Should be tailored to target customers’ needs Value proposition • Differentiated from other mobile players • Commercial implications should be taken into account Sales & • Coverage very important especially for prepaid distribution • Consider partnership with host MNO (or other retailers) strategy • Local regulations should be taken into account • Define strategy for launch (brand awareness) Marketing • Define ATL and BTL mix based on budget • Consider innovative low-cost mechanisms • Focus not only on acquisition but also on retention Other • Exploit synergies with existing operations (if applicable) • Maximize efficiency in all operations 25
  26. 26. Any questions? Please contact: Dimitri Kallinis Partner Company Address (main offices): THANK YOU C/ Almagro 15, 5th floor 28010, Madrid Spain Telephone number: +34 91 310 2895 Fax number: +34 91 141 28 11 2009 © SVP Advisors STRICTLY CONFIDENTIAL