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Producing An Effective Wholesale Offer For Mvn Os Marco Gatti August 2009
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Producing An Effective Wholesale Offer For Mvn Os Marco Gatti August 2009

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Producing An Effective Wholesale Offer For Mvn Os Marco Gatti August 2009 Producing An Effective Wholesale Offer For Mvn Os Marco Gatti August 2009 Presentation Transcript

  • Implementing a attractive Wholesale offer for MVNOs: converging diverse needs For information please contact: marco.gatti@svpadvisors.com
  • About us –SVP Advisors is a management consulting firm specialized in Business, Financial and Regulatory Strategy –SVP Advisors is recognised leader in strategic costing –Our team have more than 20 years experience in the communications and financial sector “Creating value in a flat world” 2009 © SVP Advisors
  • 3 Our track record •Euskaltel (MVNO, Spain) •EETT (Greece) •Jazztel (MVNO, Spain) •CMT (Spain) •Tesco (MVNO, UK) •Telecom Italia (Italy) •Telefonica •OFCOM (Switzerland) •Navento (Spain) •COFETEL (Mexico) •Aquamobile (Spain) •AGCOM (Italy) •diAx (Sunrise, Switzerland) •Dubai Holding Business & Regulatory Corporate Strategy strategy Regulatory New Venture cost modelling Launch Operational Support in and tariffs •Telefonica Deutschland Corporate benchmarking •AOL •Blackstone Finance •TPSA France Telecom •Permira Market (Poland) Due diligence •Citigroup bechmarking •Inter-American Development Bank •Virgin Play •Oger - Turk Telekom * It includes relevant customers from SVP Advisors and its employees 2009 © SVP Advisors
  • Agenda 1. Introduction 2. The MVNO Model: case studies 3. The Hate then Love relationship 4. The Wholesale Offer 5. Conclusions 2009 © SVP Advisors
  • 5 1 Introduction 2009 © SVP Advisors
  • 6 The MVNO market is characterised by strong competition that drives margins down In the first year MVNOs usually don‟t capture more than 2,5% of market share, their maximum market share in mature markets is 25% EU MVNO benchmark (SVP Advisors estimates as of Jun 09) 2009 © SVP Advisors
  • 7 Experience shows how important adaptation is, a wholesale offer has to change with the market Marked is crowded Germany Italy Netherlands Spain France UK High growth Switzerland Maturity: Growth „Only a few survive‟ Denmark Ireland Early Oman penetration Turkey 2009 © SVP Advisors
  • 8 An effective wholesale offer can be produced only by defining, adapting and converging different needs MNO MVNO Preserving the Other MVNOs Business Commercial Status Quo vis a vis me Model Evolution not revolution Acquiring my space and identity Competition Financial activities Financial / My Prospective Investors Regulatory threats Target Market 2009 © SVP Advisors
  • 9 The Hate, then Love evolving 2 relationship 2009 © SVP Advisors
  • 10 The relashionship between MNOs and MVNOs evolved gradually during the last two years The transformation in relationships between MNO and MVNO is the result of more intense competition between MNOs in getting the best/most successful MVNOs, and the seek for new revenues streams 2009 © SVP Advisors
  • 11 … MVNOs wholesale offers depends on momentum MVO’s Vision  “A firm should view its suppliers, customers, rivals and potential new entrants as competitors” (Porter 1990)  “Competitive advantage comes from owning unique, valuable, inimitable, non-substitutable capabilities” (Lippman and Rumel, 1982)  “Competitive advantage can be eroded by technological change” (Tushman and Anderson, 1986)  Competitor advantage also can come from co- opetitors (Nadar, 1996), suppliers, customers, complementors and alliance partners. 2009 © SVP Advisors
  • 12 Thus, the initial gaps between MNO and MVNOs expectations are often the cause of an unsuccessful wholesale and MVNO offer MNO MVNO  Initially with little interest in producing a First mover advantage: the first successful wholesale offer MVNO in the market wins MVNOs commercial non-regulated  Non-discrimination obligations can foreclose offers that permit higher margins competitive offers than competitors, but also fair rates to compete with MNOs “MVNOs are champion of nice  Lack of knowledge of the market markets!” - not always true The best partner is not only the one  Looking for the best partner with the lowest price, but also the best service 2009 © SVP Advisors
  • 13 THE WHOLESALE OFFER: 4 BUILDING THE OPORTUNITY FOR MVNOS 2009 © SVP Advisors
  • 14 The final wholesale offer is often the result of the combination of several interdependent factors COMPETITORS COMPETITORS MVNOs NETWORK MARKET STRUCTURE MARKETING AND SALES WHOLESALE CHARACTERISCS STRATEGY OFFER FINANCE REGULATORY DTP REGULATORY AUTHORITY COMPETION AUTHORITY 2009 © SVP Advisors
  • 15 PRODUCING A WHOLESALE 4c OFFER 2009 © SVP Advisors
  • 16 there are three possible options available for calculating wholesale rates for MVNOs  RETAIL MINUS: Positive: 1. Best practice in Europe 2. Easy to implement • Calculated from retail price minus avoidable Negative: retail costs for the different kinds of MVNOs 1. What Retail rate? 2. Might be seen as anti-competitive practice Positive:  COSTS PLUS: 1. Complex to implement 2. Cost can be traced and profitability evaluated 3. Non discrimination proved • Offer entirely based on costs Negative: 1. Complex and time consuming  MARKET PRICE Positive: 1. Easy to implement • When other operators have set the market 2. Common in light regulated markets price Negative: 1. Non transparent and discriminatory 2009 © SVP Advisors
  • 17 RETAIL MINUS • Avoidable costs: costs avoided with the sell at wholesale instead of retail • It preserves a reasonable gross margin for MVNO Retail even if market chanes • The margin is included Network p MVNE • What kind of retail rate? Network – Nominal Single / Multi Tariffs or ARMU Operations Overheads - Most common - Basket of tariffs - Average – Flat tariff / max. consumption 2009 © SVP Advisors
  • 18 ARMU the most common methodology for RETAIL MINUS in voice • Important issues to consider: – ARMU calculation (allocation of revenues) – Average ARMU or per direction – Relevant period (1 month, average six months) Selection of tariffs, basket or all tariffs – Preserve confidential information but have transparency • For other non-voice services nominal tariffs are generally used, because of less differentiation between ARMU for the basket and directions retail tariffs 2009 © SVP Advisors
  • Major Avoided Costs: per type of MVNO A list of services, functions and network equipment that is avoided with the MVNO is usually prepared, costs are retrieved per function Marketing Sales Operations Network functions Taxes Illustrative list 2009 © SVP Advisors
  • 20 The selection process continues in the accounts to select avoidable costs Determination of what is avoidable (in part or total) Determination of Services Provided by MVNE 2009 © SVP Advisors
  • 21 COST PLUS… Essential to a highly regulated environment, even if not used for pricing…  includes costs for network and operational functions that are rented by the MVNO  usually preferred by MNOs for full MVNO offers when regulation requires cost-based MVNO wholesale rates m  it is possible that for some tariffs and type of MVNO margins are higher than they are with retail minus c  gives complete control on profitability of products  needs very high level of granularity on accounts, ideally an accounting separation system 2009 © SVP Advisors
  • 22 5 Conclusions 2009 © SVP Advisors
  • 23 Conclusions 1. Innovation and differentiation proved to be best business models in EU for many MVNOs 2. The right “partner” is key for success, it is a two-way truth 3. MVNOs can give precious intelligence to the market, exploiting new opportunities 4. Wholesale offers should change as the market evolves, meaning that control on costs is essential 5. Wholesale offers are dependent on major external and internal factors 6. MNOs should be aware of their costs and profitability to adapt to the internal and external environments 2009 © SVP Advisors
  • 24 Please contact: Marco L. Gatti marco.gatti@svpadvisors.com Thank You, Company Address (main offices): Any Questions? C/ Almagro 15, 5th floor 28010, Madrid Spain Telephone number (direct): + 34 6 688 600 16 Fax number: +34 91 141 28 11 2009 © SVP Advisors