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ONE DEVELOPMENT
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www.weconnectthailand.com
ONE DEVELOPMENT is the next generation, independent, Mobile Virtual Network Aggregator and Enabler
(MVNA/E) with hands-on experiences from both MVNO and Mobile Network Operations worldwide.
ONE DEVELOPMENT | WE CONNECT THAILAND
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TABLE OF CONTENT
DEFINITIONS USED THROUGHOUT THIS DOCUMENT ............................................................................................2
PART 1 INTRODUCTION TO MVNOs .....................................................................................................................3
a) How does an MVNO work? ..................................................................................................................................3
b) How does an MVNO make money? .....................................................................................................................4
c) Do all MVNOs require a lot of technology? ..........................................................................................................4
d) I need to offer the same (or better) tariffs than my competition can I do this? ..............................................5
PART 2 WHY DO I WANT AN MVNO? ...................................................................................................................6
PART 3 WHY WOULD SOMEONE BUY MY PRODUCT? .........................................................................................9
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PART 1 INTRODUCTION TO MVNOs
1. Introduction
Many of the factors influencing an MVNOs business success are the same as those you would encounter
running any business: hiring, cost control, quality control, customer service, sales and marketing effectiveness,
bad debt management and so on. We do not intend to cover these more general questions in this series. Here
we intend to look at some of the issues specific to MVNOs and provide some thoughts, based on years of
experience, which might help you start your MVNO with the best chance of success.
We suggest you ask yourself two important questions:
Your answers these two questions will provide you with a great deal of guidance for the implementation of
your MVNO. Later we will look at some of the usual answers and how they influence plans regarding your:
wholesale deal
technology strategy
product
distribution and sales
brand strategy
But first, we will introduce some basic concepts so that you have a framework to assist your understanding of
the details of these plans.
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b) How does an MVNO make money?
MVNOs make money by taking a margin of the amount that their customers spend through the MVNO for their
mobile phone costs.
There are two ways this margin is made, these are referred to as: Cost-Plus and Retail-Minus.
Cost-Plus
On this model, the Wholesale Agreement stipulates a set of charges, which the MVNO must pay the
HNO for voice minutes, SMS messages and MBs of data. The MVNO then adds a margin to these
wholesale costs and charges the marked-up cost to their subscriber base.
Retail-Minus
On this model, the Wholesale Agreement allows the MVNO to sell products at specified prices. In
return, the MVNO is given a set percentage of the total amount paid.
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If you are not sure, which approach will work best for you some MVNE/A companies can enable you to
start working on a flexible model, which can grow with your business.
You can start on an MVNA basis which will give you access to the Wholesale Agreement and technology
implementation of the MVNE/A company (this requires minimal investment at start-up).
If this is successful you might like to negotiate your own Wholesale Agreement but then migrate to the
MVNE/As MVNE platform, while using your own wholesale terms. If you then want to migrate to your own
technical deployment this option may be open to you at a later date.
If you are interested in taking this approach it is important to check that the MVNE/A will support this
migration path.
d) I need to offer the same (or better) tariffs than my competition can I do this?
As with any product, the price you offer your products to your customers depends on two key inputs: (a)
your Costs (wholesale + operating) and (b) your desired net margin.
Wholesale costs generally vary with the size of your business.
If you are in a position to guarantee the HNO a very large wholesale revenue and you are prepared to back
these up with minimum commitments (i.e. you will commit to pay the HNO whether or not you are
successful in selling the full amount prescribed in your Wholesale Agreement) you have a good chance of
obtaining a low wholesale price.
It is unrealistic, however, to think that an HNO will give you the same rates as their largest wholesale
clients without a commitment to a similar overall expenditure.
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PART 2 WHY DO I WANT AN MVNO?
In our experience, the majority of MVNOs are started for one of the following reasons:
a) I want to invest in a business which I can sell at a later date for capital gain
WHOLESALE DEAL
TECHNOLOGY
STRATEGY
For maximum value at exit, you will want to maximum amount of control
over your subscribers. You need to really own your subscribers otherwise
the only realistic acquirer of your company is your host HNO which is a
situation which clearly limits your ability to gain an exit at all, let alone the
maximum valuation.
There are two ways to achieve this:
Manage your own technology on a Thick or Full MVNO model, or
Work with an MVNE or MVNA, which is prepared to provide the same
depth of technical implementation on your behalf.
PRODUCT
DISTRIBUTION AND
SALES
BRAND STRATEGY
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b) I want a business which returns consistent profits for the shareholders
WHOLESALE DEAL
TECHNOLOGY
STRATEGY
In general, if you are planning a smaller business with limited funding you
can get by using a Reseller model.
If you are looking at a larger business and have some funding available, it
is well worth looking at either using an MVNE / MVNA model or, for even
larger business plans, looking at deploying your own technology.
PRODUCT
DISTRIBUTION AND
SALES
BRAND STRATEGY
Brands are generally expensive to develop and are a valuable asset for a
business, however, if your aim is to generate profitable sales you may
prefer to take a more tactical, product-oriented approach to your
marketing and minimise brand development costs in order to maximise
EBIT.
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c) I already have a large user base and/or brand and I want to offer them more products
If you are in the fortunate position of having an existing customer base,
brand and distribution network your approach to your wholesale deal can
be quite open.
In many ways, you already have much of the infrastructure you need to
make profitable sales and are probably already working hard to manage
your existing business.
WHOLESALE DEAL
TECHNOLOGY
STRATEGY
PRODUCT
DISTRIBUTION AND
SALES
BRAND STRATEGY
This is the key question and the answer will usually be fairly obvious when
you take into account the strength of your existing brand and the costs
involved in building a new one.
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PART 3 WHY WOULD SOMEONE BUY MY PRODUCT?
a) Its cheaper than the competition
You will need an aggressive wholesale deal in order to support a pricebased proposition. It is highly likely that this deal will need to be based on
a Cost-Plus model.
You may be competing with MVNOs, which have made large minimum
commitments to the HNO. Unless you are able to compete in this, it is
unlikely you will be able to obtain a very cheap wholesale deal.
WHOLESALE DEAL
You should look carefully at the niche you intend to target can you
compete on price by focusing on a niche market and product (e.g. calls to
specific international destinations, data-only deals, etc.).
You might be wise to work with an MVNA which has its own wholesale
deal and who can offer you the advantage of their own scale to keep the
rates down.
TECHNOLOGY
STRATEGY
PRODUCT
Choose a niche in which you believe you can offer low prices and compete
successfully. It is impractical to think that a low price strategy will work
without targeting a specific niche your wholesale costs will never be as
low and the HNO and without a clear focus it will be difficult to gain
subscribers.
The niche can be defined by calling destination (e.g. international
destination), special product features (e.g. low cost family and friends
calling, charitable focus, etc.), target demographic (e.g. youth, seniors, one
city or province, etc.) or affinity group (e.g. clubs, societies, etc.).
DISTRIBUTION AND
SALES
BRAND STRATEGY
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b) It has special features which they will love
WHOLESALE DEAL
If you are looking to create products and tariffs, which are new to the
market you will almost certainly, require a Cost-Plus Wholesale
Agreement.
You will need to work with a technology platform, which gives you the
flexibility to design new product types, whether these are defined by tariff
or special features (e.g. family credit sharing on prepaid, free WhatsApp
calling on data, etc.).
TECHNOLOGY
STRATEGY
You are free to choose from MVNE, MVNA or your own platform but
ensure that whatever platform you choose has maximum flexibility in
product design.
Some platforms can give you total control over products and tariffs,
whereas others are limited in the flexibility to innovate.
Innovative product design is fun to do but remember that you need to
offer this product to a market, which will want to purchase.
Innovative product design is pointless unless there is a clear and sizeable
market for which it will be appealing.
PRODUCT
Overly complex tariffs and products are hard to market. On the other
hand, some products are easy to market but hard to make money from.
Free advertising-supported plans have often been successful in gaining
subscribers but rarely succeed in making money.
This is always a key question in MVNO design and for innovative products,
it is clearly a critical part of the mix. An innovative product needs to be
available to its intended target market if it is going to gain subscribers.
DISTRIBUTION AND
SALES
Start by asking who you are trying to reach, how your product makes their
lives better and how you are going to reach them with SIMs.
Sometimes the distribution model becomes obvious from the nature of
the product: family products often work well on a peer-to-peer
distribution model; products targeting an affinity group have an obvious
distribution strategy.
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c) It has a brand that people are enthusiastic about
WHOLESALE DEAL
TECHNOLOGY
STRATEGY
PRODUCT
A strong brand often calls for some customisation of the product. This can
be in terms of the core telephony product or in terms of some nontelephony add-ons (such as integration with loyalty schemes, preferred
access to other products in the brand portfolio and so on).
Your brand might already reach its market via an established distribution
model. If so, you are in luck and the comments in Part A (c) above will
apply.
If you do not have an existing distribution channel, you will need to
examine the costs of taking this product to market and design your
strategy accordingly.
DISTRIBUTION AND
SALES
Do you need to use existing SIM distributors or does your brand enable
you to use a different approach (via affinity groups, online marketing,
etc.). Can you target subscribers via branded events (e.g. football matches,
club meetings)?
There should be some ways in which your already established brand can
assist in distribution and sales, taking advantage of the brand can avoid
competing directly with other SIM offers.
Clearly, you already have the brand as an advantage. However, you will
need to ask yourself how the brand can adapt to a telephony product and
what advantages it can bring to the product. Simply putting a logo on a
SIM does not guarantee that it will sell.
BRAND STRATEGY
The brand will need to do real work for the MVNO in positioning the
MVNO as better than the competition in the mind of the target market. It
will be up to you to create ways in which you build the MVNO-value into
the brand activities.
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There is always risk in a new venture, but ONE DEVELOPMENT helps MVNOs manage their exposure. Making
your MVNO simple and flexible, with expert advice and low upfront cost - this is how we help companies
increase their likelihood of succeeding.
ONE DEVELOPMENT is the next generation, independent, Mobile Virtual Network Aggregator and Enabler
(MVNA/E) with hands-on experiences from both MVNO and Mobile Network Operations worldwide.
ONE DEVELOPMENT
WE CONNECT THAILAND
www.weconnectthailand.com
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