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The aim of the thesis is to research and analyze the current status of the MVNO industry, present
different views on implementation approaches, identify markets and market segments served, note
weaknesses and strong points, refer to successes and failures, research current legislation(s)/
regulatory aspects (that are an essential driver for the liberalization of network economies) and in
general show the industry’s evolution path over time. The key element is to see if the MVNO is able to
increase the efficiency and competitiveness of mobile markets in specific.
Additionally, starting from the Western European market, an effort will be made to specifically analyze
the case in the Greek MVNO market by providing some specific data such as type of service
(prepaid/postpaid), airtime replenishment volumes (prepaid case), brand awareness, market segments,
penetration/ adoption rates, etc).
Having gone through the MVNO insights at the end, a description of all the steps involved for an entity/
business, in becoming an MVNO from scratch (in the form of a generic guide) will be prepared. A step-
by-step approach will be used for implementing a Mobile Virtual Network Operator (MVNO), stating
actions to be adopted and mistakes to be avoided. Given that most of the current implementations have
followed different/ diversified paths (depending on the market needs to be served each time as well as
the intended capital investment by the MVNO candidates), an effort will be made to come up with
guidelines (hopefully the most suitable ones, having learned from former/recent MVNO adoptions) for
aiding such future implementations.
Another important aspect is the modeling of a mobile network: the MVNOs will use some components
while other components are un-useful for them. Without such model, it is impossible to derive the right
costs and price to be charged to the MVNO in order to have a win-win industrial model for both the
MVNO and its hosting operator.
There is a lot of definitions for MVNOs in the sector but a sound definition of virtual operators would consist in
saying they are actors not totally integrated who lack at least a part of the asset at the basis of the network..
Applied to mobiles, this means they do not own the radio access.
However they supply to the market a complete mobile service and they own partially or totally their customers.
They rent at least the radio access to their hosting operator but nothing prevents them to rent more than that to the
operator as some elements of the service provided to the end user (billing, contact center, …). They also complete
the radio access by their own assets like a transport network or some switching infrastructure.
However MVNO today are most of the time simple resellers of mobile services that the hosting operator operates
technically.
Scarcity of spectrum has allowed only 3 to 5 mobile operators with a full infrastructure per country via a licensing
process. However it appeared quickly this number was insufficient to have a fully efficient (and competitive) market
despite the existence of 3 to 5 competing networks.
National Regulatory Authorities (NRA) has seen MVNO as a (too) quick remedy at least for the access mobile
market. This new kind of actors was deemed to bring more competition (which is not an objective in itself) that
would boost innovation and economic welfare.
Today NRAs consider other remedies like spectrum trading as a means to enable more innovation in wireless
sector.
However MVNO remain an efficient means to break the vertical integration of MNO that is considered by some
authors as one of the root cause for a player not to innovate any more; the MVNO comes indeed between the
MNO and the end user.
Other authors consider on the contrary that vertical integration allows economies of scale and scope that amortizes
more easily investment. It is an incentive to take more commercial and financial risks. MVNOs too use 3rd parties
for their own innovation so that this argument may not sound completely true.
The multiplication of wireless technologies, the emergence of UMA and IMS will demand new players active on
multiple networks without having the opportunity to own all of them. They will become de facto virtual operators on
other’s assets to operate their services seamlessly across networks and technologies. Such virtual operators will
be innovation-driven.
Another more accepted obstacle to innovation in network economies are the guaranteed incomes that mobile
operators can expect due to their oligopoly situation. The mobile sector is indeed a kind of oligopoly with
guaranteed income. MVNO can break this situation as the guaranteed income is based on the difference between
the costs of the network (assets), the revenues and the limited number of players. An MVNO does not own a
network and is not stuck to this logic.
Full MVNO
Owns everything (including HLR) except the radio network equipments. A full MVNO is one that owns or
provides network facilities and network services such as towers, mobile switching centres, home
location registers (“HLR”) and cellular mobile services. A key feature that distinguishes a full MVNO
from other business models is its ability to operate independently of the MNOs. Full MVNOs are able to
secure their own numbering ranges, offer its own SIM card and have full flexibility on the design of the
services and tariff structures.
So, full MVNOs are likely to require a network facilities provider (“NFP”) individual licence and a network
service provider (“NSP”) individual licence for the network facilities and network services that they own
or provide. In addition, full MVNOs will require an application service provider (“ASP”) licence in order to
provide public cellular services to end users.
Additionally, MVNOs are considered as independent service providers willing to access the mobile
operator’s radio network in order to develop and sell product and services competing directly with the
mobile operators. This type of access could be regarded as unbundling of the radio subsystem in the
mobile telecommunications network, and will to some extent be analogous to local loop unbundling
(LLU).
It all started in 2000 in Denmark with what was then a small start-up called Telmore. Using the mobile
network of the former state operator TDC, Telmore launched an MVNO business solely online.
Customers bought SIM cards only (solely on-line), using phones they already owned. They prepaid a
single per-minute rate regardless of what time of day they made a call or whether they called a mobile or
fixed line. "In the beginning, it went slowly, but gradually it increased mainly by word of mouth. Within
three years, Telmore had attracted 10 percent of the mobile market. Perhaps more importantly, within a
10-month span, the price of a prepaid minute in Denmark had dropped by 50 percent.
MVNOs though will only really have an impact if the incumbents lose their nerve on price and try to
follow them down. If they can hold their nerve and not panic and accept some leakage, the market can
accommodate a few extra niche players.
Along those lines, however pioneering, this first online SIM-based concept was a niche concept and
targeted only a small share of the market.
This first MVNO model however has paved the way for others to follow.
Reseller: Buys bulk airtime from the MNO and resells to target
segments
Enhanced Reseller: Offer their own branded packages but they will not be
able to distinguish their services by their MNC.
Enhanced resellers are likely to carry out customer
care and billing in house.
Service Provider: Provides services over the mobile platform
Enhanced Service Provider: Combines the reseller and the service provider business
models
MVNO: Owns portion of the mobile network with or without
SIM cards depending on choice of mobile technology of
the MNO
Complete MVNO: Has more control of the mobile network and enables mult
operator agreements
‘Thin’ MVNOs will normally source their own billing and customer care services. They will establish their
own tariffs, customer care mechanisms, and provide their customers with basic voice/text services,
usually with simple Internet access and some premium content services. They won’t be able to provide
custom facilities like voicemail, advanced messaging (MMS or SMS) services, or offer advanced
Internet, email services separately from those the host MNO can support.
‘Thick’ MVNOs, in addition to their own billing and customer care, will frequently run some of their own
network services, typically SMS or MMS, voicemail, overseas-call routing, and WAP gateways. This
allows these virtual operators to provide advanced services such as VoIP, routing for overseas calls,
more sophisticated email products or custom-built handsets.
The figure below shows a typical MVNO infrastructure showing (in green) what a ‘thin’ one might provide
and the additional features (in blue) that a ‘thick’ MVNO could offer
Network Rollout
The mobile network roll-out follows three MVNO Lifecycle clear stages.
The standard approach to the analysis of industry attractiveness is Michael Porter’s Five Forces
framework. The attractiveness of an industry, such as the telecommunication industry, depends on the
state of competition. Competition in an industry is rooted in the underlying economic structure of the
industry. The state of competition
in an industry depends on five basic competitive forces. The figure below gives a picture of the Porter’s
“Five Forces” framework: The power of the five forces – Suppliers, Buyers, Potential Entrants,
Substitutes and Rivalry among existing firms – depends on some major factors and characteristics listed
in the work of Porter.
In his book ”Competitive Advantage” [4] Michael Porter suggested analyzing the “cost leadership” and
“differentiation” strategies by means of the value chain model, which has become the standard approach
to these analyses. An effective competitive strategy according to this approach takes offensive or
defensive action in order to create a defendable position against the five competitive forces.
A player is a complementor if customers value your product more when they have that player’s product
than when they have your product alone. A player is a competitor if customers value your product less
when they have that player’s product than when they have your product alone.
In the Service Centric Business Model a Network Provider offers seamless access on a number of core
and access networks. The Service Provider bundles this seamless access with a number of aggregated
services. This is the case exactly for all MVNO types.
Examples of models belonging to the Service centric category are the WEB 2.0 services:
- Model_1 (Flickr, Skype): The model is based on technical innovation, offering a compelling value
proposition. Value adding services are being offered as a premium for which the customer has to pay.
Network effects help to drive the adoption and value of the service. Technology is important as an
infrastructure tool, facilitating the business model.
- Model_2: (MySpace, YouTube): The business model is based on network effects created by a user
base and user interaction. A community is built around content like User Profiles for MySpace or
interesting Blogs as is the case for Gawker. Sometimes the SPs syndicate their content to 3rd parties
like Google or Yahoo.
Along the value chain, the involved parties/ players include several types of providers ranging from
service, to content, to network etc, as well as operators.
Mobile Marketing
System Integrators Internet Service Providers
• MVNOs are new breed of wireless network operators who may not own the wireless spectrum, or
wireless infrastructure but give a virtual appearance of owning a wireless network. These
operators lease the wireless capacity from traditional operators and then repackage it for a
specific vertical industry application.
• Main added value that MVNO provides is billing and customer care functions. In that sense
MVNOs own the customers.
• MVNOs generally provide both voice and data services to end users through a paid up
subscription agreement.
MVNO Page 16 of 110
• To become an MVNO, one should cobble together a partnership that consists of a connectivity of
a regular Telco, a customer base, and a sales channel. Most important, they need unique and
compelling data services.
• An MVNO usually provides: Brand, Marketing, Portal, Rights management, billing platform,
Customer base
At its most basic level, an MVNO is a standalone entity. It buys access from a host carrier—often per-
minute or per-megabyte—and resells it under its own brand and marketing. MVNOs typically have a
strategic intent focused on a recognized brand, with existing points of distribution and an already
installed base of customers. That doesn't mean upstarts wanting to become MVNOs can't succeed, as
evidenced by Virgin or Boost—neither of which were pre-existing brands in the mobile space at their
inception. Success for those companies depended on delivering high-quality service, rather than just a
brand. The term ‘MVNO' has become a catch-all for any consumer reseller, so there can be seen a
variety of business models. But a classic MVNO minimizes capEx and keeps expenses as success-
based as possible. That means leveraging outsourcing solutions for billing, customer care and content
delivery. Considering the typical retail and network elements involved in an MVNO, there is a range of
MVNO classifications/ types between Service Providers (SP) and full MNOs. Different functions can be
carried out by the MVNO or MNO. Some may be carried out by a Mobile Virtual Network Operator
Enabler (MVNE) which may simplify the MVNO provisioning for either the MVNO or the MNO. MVNEs
develop systems and processes to help facilitate MVNOs, such as handset distribution, channel
management or billing.
To Fully understand the MVNO, and moreover Next Generation MVNOs, we have to look outside the
legacy network led definitions of an MVNO, as an MVNO is a customer driven, and therefore business
driven business model. From a customer perspective both the MNO and the MVNO are their "Network
Provider". That is in Greece for example Frog is seen to its customer as their network provider, not the
host MNO (Cosmote), just as Cosmote is seen as a network provider.
Customer experience
The customer’s perspective is a simple four-stage process:
Buy -> Use -> Pay -> Care
BUY a SIM card, handset, or starter pack
USE for calling, SMS, or other services
PAY recharge or other payment method
CARE get advice with questions or problems
There are different ways of handling each stage: from the internet through to stores, other point of sale,
invoices, care centres, the handset itself.
Most MVNOs will lack the experience of dealing with handset manufacturers and establishing upstream
and downstream systems for service creation, billing, customer care and data centres, hence the
creation of the MVNE. So a special case of the MVNO model is the MVNE. An MVNE provides the
technical architecture and may enter into a wholesale agreement with a host MNO, to enable mobile
service provision. However, the MVNE does not directly provide services to mobile users. Instead, it acts
as an enabler for any number of MVNOs; an MNO can also become an MVNE in order for it to directly
support MVNO Resellers and Service Operators. In other words, MVNE is a service company delivering
tools & services to companies wishing to market their services over a mobile network, and thus
becoming MVNOs. Those companies are referred to as “MVNO candidates”.
Marketing functions are handled by the MVNO candidate: brand, distribution channels, customer base.
The set-up, operation and evolution of the MVNO service is handled by the MVNE.
An MVNE does not have a relationship with end-user customers. Instead, an MVNE provides
infrastructure (will interface with carriers to deflect the risk and costs) and services to enable MVNOs to
offer services and have a relationship with end-user customers.
MVNEs form the backbone of an MVNO’s business of wireless Network Services providing help in broad
areas of product development and marketing. These outsourced services include: Data Services,
Content Management, Customer Relationship Management, Profile Management, Service Provisioning,
Work Fulfilment, Billing, Invoice and Settlement, Revenue and Service Continuity Assurance etc. In
other words, MVNEs collect usage data and handle rating and billing functions, and may go so far as to
handle provisioning, order management, service assurance, fulfilment, content management and
settlement.
An MVNE offers infrastructure and related services ranging from network element provisioning,
administration and operations to OSS/BSS support. MVNEs often provide the “middle-ground” between
MVNOs that do not want to have any control over network elements and those that want complete
control.
Some MVNOs want to completely rely on the underlying wireless network infrastructure of the host
mobile network operator whereas other MVNOs want to own and/or control their own network elements.
MVNE’s provide the middle-ground in the sense that they can provide options to MVNOs for what they
bring in-house versus what they rely on the host carrier. For example, a MVNE can provide HLR,
SMSC, MMSC, as well as more advanced network elements such as GGSN, OSS/BSS, and other
systems.
Some companies are mistakenly considering themselves as MVNOs, when they are really wireless
resellers. Then there are instances where MVNO and MVNE overlap.
At one side of the spectrum, some MVNOs focus on the low end, where voice is the primary product.
These MVNOs tend to differentiate by brand and customer experience, such as Virgin Mobile.
Sometimes there's a little data flavour, but it's largely a brand play. These companies tend to be largely
prepaid. On the other side are the high-end players looking at postpaid services involving data and
content.
• Many of the growth markets in mobile are riskier segments like the youth market, the credit
challenged and those who dislike most operators' billing methods for minute overages.
• Another reason MVNOs make sense for operators is that they provide an opportunity to gain strength
through relationships with larger, non-telecom companies interested in MVNOs - like Virgin, The Walt
Disney Co. and other media properties. These companies attract or bring with them more content, their
own brand loyalty and, ultimately, more money to invest in building future mobile network and
application infrastructure.
• Building an MVNO will take an enormous amount of cash, to be spent on advertising, partnerships,
wholesale network and content services, customer care support and various kinds of software. All that
cost is an undesirable burden to an MNO (specifically for targeting niche markets), however at the
same time is a key driver for the MVNO’s need to become known, access customers, control data,
billing and customer interactions.
• The MVNOs that prove successful seem likely to win for three primary reasons.
o First, successful MVNOs will target segmented audiences that don't threaten their
network partners' retail businesses, but promise to add minutes to their networks.
o Second, they will not underestimate billing and customer care, nor will be so virtual they
fail to maximize their customer relationships.
o Third, they will use content, in addition to platforms like television, radio and the Internet
to create compelling communities of interest that will, in turn, encourage usage and brand
loyalty.
• Key success factors for MVNOs
The successful development of an MVNO requires the mastery of six key success factors:
3G offers MVNOs an exciting opportunity to offer users a rich multimedia experience. While many of the
MVNOs today are offering low-cost pricing (voice and SMS), 3G will allow them to focus offerings
equally on data.
Some of the opportunities identified for potential MVNOs include:
-- Focus on offering convergence
-- Focus on a pan-European offering allowing for low-price calling while roaming abroad
-- Focus on 3G and in particular data such as mobile music or mobile sports
-- Focus an offering for enterprises, whether based on voice or data, that could potentially be broadened
to include roaming as well
In 2G, network operators generate about 90% of the revenue by selling voice services and simple data
services to their subscribers. Traditional 2G Mobile Network Operators tend to keep end user ownership
instead of opening their radio access network to MVNOs. That situation is changing with the introduction
of broadband wireless services. MVNOs are the direct provider of services to their subscribers and not
merely an entity that puts its content on the services offered by carriers. Most of the consulting groups
predict a shift in the mobile value chain. Where Mobile Network Operators are generating about 90% of
their revenues in GSM by selling network capabilities to their subscribers, in UMTS 40% of the revenues
will come out of the broadband wireless data services (portal and content applications).
To remain competitive, Mobile Network Operators have to offer innovative services and deploy them
very rapidly on the market. MVNOs represent definitively one of the best solutions to their concern,
because alone, Mobile Network Operators would face far more difficulties in mastering the UMTS
challenge. Partnership with an MVNO is for them one of the most important success factor. Entering the
3G area, Mobile Network Operators will have to face challenges like managing their new network (new
technology), handling financial transactions (m-commerce) and gaining a lot of new partners (for
content, m-commerce, advertising, media partners, etc.). Therefore MVNOs with their respective
background can optimally solve some of Mobile Network Operators challenges in the frame of a win-win
agreement. Due to the investment related to UMTS technology and the price of UMTS licenses in some
European countries, Mobile Network Operators are facing pressure from financial institutes in order to
reduce their ROI period. According to the most optimistic business cases, their ROI period is not likely to
be shorter than 7 years. Mobile Network Operators envisage therefore increasing their revenues and
optimizing the usage of their network capacity by opening their network to MVNOs. As MVNO get
ownership of their subscribers they act much more as a full service provider than a content provider. As
such the MVNO actively contributes to the business development of Mobile Network Operators
(business complementary).
MVNO backgrounds
MVNOs are attractive to companies with strong brands, which usually have not been used previously in
the cellular area. In particular, anyone that can offer innovative services and appeal to different
demographic sections to target niche sectors and tailor services should be attracted to this market.
The MNOs:
• usually have their roots in the fixed line business
• leverage on the existing network and ownership of spectrum licenses
The MVNOs:
• can emerge from a plethora of industries
• leverage on strong brands and extensive distribution networks
ISPs
Internet Retailers
companies
MVNOs
Automotive Financial
& M2M institutions
Niche &
Communities
Fixed network
Media companies
operators
Consumer
MVNOs Retailers
Electronics
Financial
Automotive
institutions
An explosion of the MVNO activity is taking place in the mobile marketplace. Many players from multiple
industries are exploiting the MVNO model, to get revenues from the mobile market. While many MVNOs
have entered the mobile market on a “pure voice play”, their offerings are not very different than
traditional mobile operators. As the voice ARPU declines, MVNOs need to execute effective mobile data
strategies and create innovative ways to differentiate their services to high-margin multimedia, location
based and mobile commerce services.
An MVNO usually offers not only voice services but also value-added services or sometimes referred as
mobile value-added services, which are a combination of voice, data, graphics and video information.
Examples include mobile music, mobile TV, games, ring tones, multimedia messaging, mobile
commerce and location-based services.
While the initial business model of creating new revenue streams without actually having to be an expert
in the wireless industry still stands, today’s MVNOs are far from achieving a license to print money.
Three essential factors have emerged:
1. MVNOs must differentiate themselves with new value-added services orientated around
customer choice and a personalised customer experience. For example, Helio a US MVNO now
offers its customers GPS-enabled Google Maps, OTA music downloads and exclusive access to
MySpace Mobile at no charge.
2. Convergence has become the new driving force behind the Next-Generation of MVNOs. For
example, Virgin Media is now offering a quadruple play package, combining mobile and fixed line
telephone services, broadband and TV.
3. On paper MVNOs present operators with a way to realise revenue from spare capacity and
target niche markets that are peripheral to their core business.
However, supporting MVNOs brings with it burdens and risks for the operators. Qualifying the business
cases of potential MVNOs to a network provider can therefore be time-consuming and distracting
Description
The “MVNO Global” initiative is to create Pan-Europe global alternative GSM/UMTS mobile operator and
service enabler using full infrastructure Mobile Virtual Network Operator (MVNO) concept. Also to
introduce and complete consolidation by horizontal merger of existing MVNO’s, one from each country,
and rising funds to expand globally. The global footprint of operator should cover EU25 countries and
beyond, performing unified and centralized service platform.
“MVNO Global” strategy is to be build in EU’s “Lisbon Strategy” framework which strives to turn the EU
into the world's most dynamic and competitive economy till 2010.
“MVNO Global” mission is to promote and be the part of Single European Information Space offering
affordable and secure high bandwidth communications, rich and diverse content and digital services.
Since the “de jure” EU is single market, “de facto” we still have very defragmented mobile market with
considerable roaming and global services(112 and in vehicle emergency call service) implementation
problems.
To create shareholder value over and above that of the sum of the companies; hence companies together are
more valuable than separate companies.
• This rationale is particularly alluring to existing MVNO’s and SP’s operating in tough mobile markets like
Denmark, Finland and Sweden.
• The companies should come together to benefit from economies of scale, thus reducing duplicate departments or
operations, lowering the costs of the company and increasing
profit.
• The companies in addition benefit from synergy: better use of complementary resources, centralized service
platform and value of global brand name.
The sort of companies most likely to become a virtual operator could be:
- Companies with fixed network licences in several countries and its own international backbone.
Building on this would enable such companies to offer a degree of mobility to their fixed network
customers and reduce their cost base for calls made from and between countries in which they
operate. Also, this provides a basis to offer a common look and feel to their services. All those
fixed network operators that failed to win 3G licences then, if they weren’t currently strapped for
cash.
- Another likely profile would clearly be a well-known company wishing to capitalise on its brand
name and with a strong customer base
The most established business models are focusing on the support of services and customers
MVNO Risks
Unfavourable wholesale agreement & restrictions
Hostile pricing by MNOs - unlimited call tariffs & SMS bulk bundles
SIM locking
Difficulty in setting appropriate relationships with handset vendors
Traditional MVNOs
Rigid wholesale contracts
Lean staffing structure
Selected channels
Simple products
Very easy to understand tariff
SAC lower than MNO
Lower ARPU than MNO
Fixed
Telephony
possible
MVNO
models
Europe presents different business models per country. Full MVNOs and Service Providers
constitute approximately 69% of the total MVNOs number.
- MNOs may sell their network extra bandwidth, thus increasing their market share through the MVNOs
(selling air-time in bulk).
- The MVNOs profit margins (by buying bulk) may aid financially both the MNOs network deployment
investments (UMTS, etc), as well as cover the subscriber acquisition cost (SAC).
Mobile Penetration in Europe and Greece
Source: SATPE
Portugal, Slovenia, Spain, Sweden, Switzerland, The Netherlands, UK Austria, Belgium, Denmark,
Estonia, Finland, France, Germany, Greece, Iceland, Italy, Latvia, Liechtenstein, Lithuania, Luxembourg,
Norway, Poland
MVNOs in Europe have reached different maturity levels and are concentrated in northern Europe
4 Larger
Powered by Cosmote
- Frog
- Ciao (needs of an ethnic group)
Powered by WIND
-Q
- MoMAD
Some Smaller
- AB mobile
- Olympiakos
- Carrefour
Frog Mobile
- Small description
The new prepaid mobile telephony offers very cheap rates, such as:
• very low rates from the first second
• very cheap SMS from the first message
• very cheap MMS from the first message
- Coverage (the best in the country)
- Services: SMS, MMS, CALL LINE IDENTIFICATION, MISSED CALL NOTIFICATION, CALL LINE
IDENTIFICATION RESTRICTION, CALL DIVERT,
CALL BARRING, EMERGENCY SERVICES, ROAMING
Q
- Small description
The dynamic prepaid mobile telephony offers very cheap rates, such as
• per second charging (from the first second)
• very cheap national calls
• Cheap rates towards 25 European destinations
• very cheap SMS
• very cheap MMS
• no monthly fees
- Coverage (Country-wide coverage)
- Services: Basic mobile services, Roaming, SMS, e-mail, who-called, MMS, WAP, Value Added
Services, MyQ services
Mo-MAD
- Small description
A pioneering prepaid offering targeting
• Youth
• music lovers
offering unique services in the music and showbiz areas with
• very cheap SMS
• very cheap MMS
- Coverage (Country-wide coverage)
- Services: Ring Me now, MAD MMS news, Daily SMS, MO Portal, Voice Portals, Ringtones, Java
Games, Roaming, Music news, music charts, Happenings, MAD programme.
According to Pyramid Research, there are three main categories of MVNEs, according to their MVNO
solutions:
The voice-centric, operationally "light" MVNOs of today have generally worked with an aggregator
MVNE that managed the limited back-end operations on behalf of the MVNO. The new breed high-end,
strong brand MVNO is transforming the dynamics of the MVNE market. Besides leveraging their own
existing assets, they choose to won more of their platforms, particularly their logistics, distribution and
customer care systems. They still work with MVNEs, but they tend to opt for specialised ones with best-
of-breed solutions and a strong reputation.
- There is the fear that permitting MVNO "first mover" advantage in the provision of lucrative data
services will mean the Host Operator will become a "dumb pipe" starved of these extra revenues.
- MVNOs, as a largely unregulated area of the market, will have all the benefits of being an operator
without any balancing licensing obligations.
It is, therefore, a critical prerequisite to success that the Host Operator is convinced that the selling
power of the MVNO name can be used to increase the number of customers on the Host Operator’s
network by attracting new subscribers that the Host Operator would not have been likely to attract or by
churning customers away from other networks.
Europe vs. US
MVNOs need to control back office costs without sacrificing quality. So regarding:
Cost: Start-up expense should be limited so funding can be used for brand development–Incremental
costs for capacity increases
Quality:
• Support systems should be scalable without lengthy delays to avoid service issues
• Consistent user experience during the upgrade process should be available
• Long-term high volume capability should be ensured
Overview
The mobile virtual network operator (MVNO) model has gained popularity over the past years; more
ventures have followed in Virgin’s path (the model’s pioneer), with the MVNO model going through a
number of iterations. Today, concerns about overcapacity and potential consolidation are emerging, in
both the MVNO and MVNE spaces.
MVNO service revenue has been expanding in line with the growth of virtual operator subscriber bases,
but is arguable whether this is enough to sustain the MVNO business model.
For a brand to have any value it must mean something to the customer and to do so it needs to be
exclusive. This is not compatible with trying to own all areas, sectors and parts of the market with just
one brand, as most mobile operators do today. Because of this, most mobile operators' brands are all
over this matrix. Note that successful MVNOs, like Virgin Mobile started as a challenger and are now
becoming brand leaders, whilst minimising any association with the "follower" values.
Regarding the Greek MVNO market, the brand identity type classification may look as follows:
Follower
1) Frog Mobile as:
o they are housed by an MNO (operational from the past)
o Compete on price
o They don’t have a competitive advantage
o They don’t have a clear product differentiation
MVNO Page 51 of 110
o Brand is not distinguishable from competition
2) Q Prepay
o Lives on the legacy of Q-Telecom
o Competes on price or promotion
3) AB Prepay
o Not premium competitive advantage
o Not clearly defined customer base
o Unclear product differentiation
4) Carrefour Prepay
o Not premium competitive advantage
o Not clearly defined customer base
o Unclear product differentiation
Challenger
1) Ciao mobile as:
o targets a gap in the market (needs of a specific ethnic group)
o strategy focused on customer needs
2) Mo-MAD
o Targets a gap in the market (music funs mobile services needs)
o Identifiable brand (MTV)
o Well defined customer base
3) Olympiakos Prepay
o Targets a gap in the market (football funs mobile services needs)
o Identifiable brand (Olympiakos)
o Well defined customer base
MVNOs are attractive to companies with strong brands, which usually have not been used previously in
the cellular area. In particular, anyone that can offer innovative services and appeal to different
demographic sections to target niche sectors and tailor services should be attracted to this market.
Some corporations already active in other areas of the telecoms sector are attracted to the model. In the
United Kingdom, some established fixed line and broadband network operators are using the concept to
offer customers bundled cellular services. European cellular companies that were unsuccessful in
acquiring 3G licences and require a pan-European network are attracted to the concept as a cost-
effective way of filling gaps in coverage. An example of this was seen in Sweden where the incumbent
2G operator Telia concluded an agreement in January 2001 with Swedish 3G Swedish licence holder
Tele2 AB in order to access this new market.
Complexity reduction
Screen opportunities
- Business development
- MVNO candidate education
Refinement of project to adapt MNO objectives
- Market segment
- Distribution channels
- Specific traffic usage
- Differentiated services
- Easy start
- Economies of scale
- Time-to-market
- Innovation & differentiated services
- Field trial with light integration work for MNO
- Risk reduction
Financial advantages
- Mutualisation of investment between MVNOs customers
- Lower upfront and operating costs and investments
Multi-country access
MVNE positioning
The Full MVNO model suits businesses that aim to engage fully in the telecommunications industry, to
offer leading edge services and to create and capture new markets.
The choice of MVNO operating model is complex. The benefits, shown in Figure 2, need to be weighed
against the issues of operator acceptance and infrastructure complexity.
Generally, the various MVNO operating models fit with the MVNO business models as follows:
• The Reseller model suits an organization that can leverage its existing distribution channels to sell
mobile services, but has little need to innovate in the services it provides or differentiate itself from
other players. Typically this means no-frills voice and messaging services.
• The Service Operator model suits those organizations that wish to gain control over the services
they provide, both in terms of pricing and service innovation.
This means the Service Operator model suits players that seek to address specific customer segments,
by differentiating themselves from other players in those segments through innovation in pricing or
service content or both.
• The Full MVNO suits players aiming to achieve additional differentiation from Service
Operators and MNOs, by offering leading edge products and services, and also achieve a high degree
of independence at the outset.
However, the Full MVNO model may be the best approach for some players who would otherwise select
the Reseller or Service Operator models and introduce differentiating services into their offering at a
later date. This is because the control provided by the Full MVNO model may offer better short term and
long term opportunities.
For example, an MVNO may want to introduce an innovative bundle of video call, push-to-talk and other
value added services, with campaign pricing to kick-start the take-up of services. Acting as a Reseller or
Service Operator would often mean persuading the host MNO to plan, source, procure and implement
the underlying solutions. This would mean implementing service offerings within the host MNOs
infrastructure but with differentiated billing. Such projects can easily take more than a year, negating the
clear advantage of flexibility, responsiveness and speed.
However, by adopting the Full MVNO model, the MVNO would have full control of services decisions,
delivery models (for example hosted services) and the project’s timelines. The Full MVNO would be in
full control to ensure timely introduction of services, business models, pricing and promotion to the
market.
Market saturation
Increased end-user and network competition
A focus on customer differentiation and customer loyalty
3G service opportunities and new wireless access technologies
The separation of access and services
Regulatory pressure
The value of service bundles in strengthening competitiveness and dealing with competitive
elements
As a result, Full MVNOs are likely to play an increasingly important role in providing mobile services
across several markets.
Launching an MVNO or MVNE involves many of the practices and processes required to implement any
new business: business planning, confirming the viability of the plan, designing business and technology
systems, implementing the business, and then managing it for growth. However, there are a number of
decisions and processes that are unique to the MVNO and MVNE. This section provides an overview of
these items.
Good planning is essential for an MVNO or MVNE. Effective planning is built on a solid understanding of
the commercial or consumer mobile telecommunications market and is essential to determine both the
service offering and the appropriate operating model.
Planning the service offering
typically involves:
Definition of the target market
Selection of appropriate services and service charges for the target market
Ensuring, for an existing brand, that the products and services reflect the brand’s core values While
service offering goes a long way towards determining the appropriate MVNO model and the required
investment in infrastructure, the level of knowledge and experience within the telecommunications
industry must also be considered. Issues such as service delivery and Quality of Service, assurance,
interconnection management, number portability management and regulatory requirements help to
1. First describe each offer, its targeted segments, and list current competitive benchmarks from
major carriers/competitors (both MNOs and MVNOs).
2. Add justification for the offer by identifying a unique value proposition for the targeted segment.
3. Next, estimate the potential market size for the offer.
4. Finally, calculate gross and net subscriber life-time value.
Gross life-time value should take into account only the value of the offer, while net life-time value
discounts the value lost due to cannibalization of existing plans. In the case of offers that are add-ons to
existing plans, it is simply the incremental value of the offer. Also conduct a sensitivity analysis of net
life-time value (LTV) to different price points, cannibalization levels, and retention gains.
These systems must be interfaced with the host MNOs infrastructure, other networks and service
operators, as well as common support systems, such as a number portability platform, legal interception,
interconnection with other networks and roaming arrangements.
Implementation
Once the business and technical infrastructure has been defined, an implementation plan can be
devised and executed. The critical activities will include:
Service specification and testing
Interface development and testing
Hardware and software procurement and installation
Hardware and software integration
System, integration, interoperability, interconnection and performance testing
Data conversion from existing systems
Delivery system content population
Live deployment and switch-over
Finding the right business partner can be the key to success for an MVNO or MVNE. Nokia Siemens
Networks is in a unique position to offer support. As a supplier to more than 600 mobile, fixed and hybrid
customers in 150 countries, Nokia Siemens Networks’ world-leading experience in all areas of the
mobile industry offers a low risk approach. The key Nokia Siemens Networks products and services
include:
• Mobile services, innovative and proven solutions for value added services
• Infrastructure hardware, for service delivery platforms and core network infrastructure
• Managed Services, for on-site management of infrastructure components
• Mobility Hosting, for full off-site hosted service of applications and infrastructure
• Convergent online charging, billing and care, flexible and pre-integrated solutions with advanced and
rich connectivity to support interfaces to all networks for MNO and MVNO voice and data services
• Consulting services, for business and technical planning, design and implementation
4.2.17 Conclusion
As traditional MNOs concentrate on optimizing their Radio Access Network usage and delivering mass
market systems, the scope for MVNOs and MVNEs is increasing. Ovum estimated in 2005 that by 2009
around 10% of all mobile subscribers could be served by an MVNO, with compound annual growth rates
of between 8% and 20%. While many businesses will be served well by implementing Reseller and
Service Operators MVNO models, the Full MVNO operating model offers compelling advantages,
regardless of the underlying service offering. With full ownership of the customer, the ability to terminate
calls, and close control over the service, a Full MVNO offers the greatest flexibility in going-to-market
and then sustaining long term growth.
To be successful as an MVNO, any player must create the right mix of products and services, and
support it with the correct infrastructure. In choosing an infrastructure partner, an MVNO or MVNE
needs to consider the depth and breadth of mobile telecommunications skills that their partner brings to
the venture.
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There are three primary motivations for mobile operators to allow MVNOs on their networks. These are
generally:
- Segmentation-Driven Strategies – mobile operators often find it difficult to succeed in all customer
segments. MVNOs are a way to implement a more specific marketing mix, whether alone or with
partners and they can help attack specific, targeted segments.
- Network Utilisation-Driven Strategies – Many mobile operators have capacity, product and segment
needs – especially in new areas like 3G. An MVNO strategy can generate economies of scale for better
network utilisation.
- Product-Driven Strategies – MVNOs can help mobile operators target customers with specialised
service requirements and get to customer niches that mobile operators cannot get to.
MVNO models mean lower operational costs for mobile operators (billing, sales, customer service,
marketing), help fight churn, grow average revenue per user by providing new applications and tariff
plans and also can help with difficult issues like how to deal with fixed-mobile convergence by allowing
MVNOs to try out more experimental projects and applications. The opportunity for mobile operators to
take advantage of MVNOs generally outweighs the competitive threat
Even the biggest MNO in Germany could benefit from selling data capacity to OPEN
or other MVNOs if customer churn (in and out) was proportional to market share
New growth opportunities, benefits to core businesses, applicability of existing relevant assets and
attractive economics are among the factors encouraging private labels to consider MVNOs.
Four main differentiation strategies have generally been adopted by European MVNOs:
- MVNOs seldom lower their prices by more than 10 to 15% compared to MNOs, although some
markets have fallen into aggressive price wars.
In this very competitive market environment, operators are facing many challenges that can have a
direct impact on profitability. Amongst the key competitive factors that can stimulate revenues are:
• Prices: changing price elasticity can provide the right balance between volumes (voice and
data) and price erosion as sudden price drops can lead to a drop in revenue. Rationalising the
portfolio of voice and data services with such price competition has led to widespread large
bundled deals, fixed-mobile substitution and innovative tariffs such as flat rates.
• Network coverage: expanding high-speed network coverage nationwide can accelerate the
adoption of mobile broadband and other high-speed data services. In highly penetrated
markets, some operators have set up shared network ownership arrangements to reduce their
cost structure.
• Loyalty schemes: targeted promotions and loyalty programmes are playing an important role
in managing churn and also in migrating users from prepay to contract.
• Quality of service: QOS is playing an important role in customer retention.
• Value Added Services: as voice revenues remain under pressure, data usage is showing
strong organic growth and also acts as a key differentiator amongst operators. Partnerships
with content providers, mobile advertising services and PC to mobile convergence can lead to
fast adoption of VAS that will stimulate non-voice revenues.
• MVNOs: maintaining market share through market segmentation where MNVO development
is key.
In addition, main operator groups can stimulate revenues by leveraging international economies of
scale and synergies with their operations in other markets, including emerging markets. Considering
the level of maturity in the region, consolidation in Western Europe is another topic that can also be
expected to have an impact on revenue growth.
- MVNO must display a light cost structure to deal with operators price per minutes
Deep understanding of the of MVNO market and MNOs concerns and strategy to gain trust
Looking at the Market Strategies from a different view, we have the following:
5.14 Timing
Voice Usually free or next to nothing for on net/ flat rate off-net nationally
Messaging Very cheap on-net/ Follow the competition for off-net
Data Calls Cheaper than MNOs
Voice Mail Cheaper than MNOs
International Calls Cheaper to certain targeted destinations
National Calls: Per second
Billing
International Calls and Roaming: per minute
Refills/credit Availability of a variety of refill cards is a must
It is almost universally agreed that successful MVNO’s will have some combination of scale, branding,
and or a particular important niche. DATA MVNOs, some times referred to as Machine-to-Machine or
“M2M” MVNO’s facilitate communications between various machines with the help of a wireless network.
Applications supported by M2M MVNO’s are many and varied including telemetry, monitoring, remote
asset management, and more. In a world of expanded M2M communications, we believe that Data
MVNO’s will evolve from a successful niche business into a booming opportunity for vendors and service
providers alike.
The process starts with developing a strong business case and negotiating a viable wholesale
agreement. However, even with a strong business case, a potential MVNO (which usually lacks mobile
expertise) has a major challenge in designing the right entry strategy, and developing and executing the
launch plan. A very feasible MVNO can fail due to an undifferentiated market entry strategy or poor
launch execution.
Of the three strategies mentioned above, bundling is probably the most attractive to many businesses,
but it is also the most risky as it has yet to be proven on a large scale. It is always dependent on the type
of implementation, however the bundling option seems to present significant importance.
Finally, the market segment for any of the options of strategy has to be selected very carefully.
The last strategy above for setting up a successful MVNO is the one that bundles together mobile with
other services. Typically these services (e.g. music, video, photos, etc) can be consumed on a mobile
device but there could also be other telecom services such as fixed-line calls or Internet access. Also
most of the bundling experiments in telecom world have been realized for media companies destined
primarily for wired/fixed Internet communication channels (e.g. ADSL) while most mobile operators sell
content over their networks over the last years, as well.
There is a feeling among many media companies that the large revenue percentage taken by MNOs is
unjustified. Some of these companies would like to move up their value chain by creating their own web
portals and a few are now being set up by their own MVNOs. They have however viewed cautiously by
many operators that see potential competition with a strong brand-based offering, particularly from the
more aggressive media organizations (e.g. Rupert Murdoch’s empire).
By bundling media content together with voice and data traffic, a media MVNO can avoid price
competition and gain significant customer loyalty without the need for extensive marketing of the
products.
In some cases, the content services may not even be owned by the media company that starts the
MVNO.
• Evaluate and quantify opportunities in various strategic roles from service provider and partner to
competitor
• Identify threats and ramifications of current market developments and understand their wider
strategic impact
• Anticipate market as it moves forward and formulate strategies to tackle it
Potential MVNOs
• Understand the MVNO business proposition from the service provider perspective
• Identify key players and scope for partnerships
• Recognise evolving roles and opportunities in the MVNO service provisioning value chain
Vendors
• Understand the MVNE value proposition and platform/software providers role within it
• Identify opportunities for service provisioning and support
• Formulate service provisioning strategies for clients based on best-case approaches
Mobile operators: To quantify the long-term revenue potential of the wholesale market to support
decisions whether or not to work with MVNOs and MVNEs. The MVNO profitability calculations will help
benchmarking the MNO performance against MVNOs.
MVNOs: Need to develop a strategy using external help (a consulting firm) with objective long-term
analysis of the MVNO market. Also benchmarking of costs and profitability against industry averages
and other key players is definitely required. Finally, determination whether MVNEs will strengthen the
MVNO service and increase their profit (could be based on external analysis).
MVNEs: Need to understand the long-term market potential and MVNO perception of MVNEs. Also
determination of an optimal strategy to attract MVNOs (end-to-end solutions vs. specific expertise), is
needed. Finally assessing of key competitors and benchmarking of the MVNE positioning against them,
will help.
Vendors: Must assess the MVNE opportunity for a long-term strategic entry (partnerships or
acquisitions); Also determine if MVNEs are competitors or complementary, and if there is an opportunity
beyond application hosting. Finally, quantify the long-term equipment and service opportunity in the
MVNO space based on revenue, profitability, and subscriber forecasts.
Financial institutions: Need to assess the viability of MVNOs and MVNEs to support a decision on
whether to finance MVNOs and MVNEs. The MVNO profitability calculations (NPV, CPGA, CCPU, and
ARPU) will help financial institutions to benchmark such data against existing cases.
The traditional values of brand, functionality and quality will be more important for the MVNO than any
mobile technology. This is worth bearing in mind, since the benefits of mobile data services may vary
greatly by applications area and segment. The mobile market is changing from an environment
dominated by voice to one where mobile data services are equally as important. This is not an easy
transition, as it requires adaptation to new services concepts and new technologies. It also demands
cross-industry partnerships and new business models, accompanied by a re-organization of the value
chain.
Despite the attractiveness of wireless, setting up an MVNO is a daunting task. The wireless business,
though potentially lucrative, possesses entry barriers and launch risks that are high enough to
discourage most outsiders from making the plunge alone. MVNOs must manage a wide array of
responsibilities and relationships, which increase in number and complexity as one moves up the
different steps of the wireless service delivery chain, from network leasing to channel development.
As seen in the figure below, an MVNO requires a network leasing agreement with one or more MNOs.
Next steps include the selection and integration of back-office systems and processes, and the selection
and integration of mobile data platforms. Design of an offer, including custom mobile content and user
interfaces, and the selection of handsets, follow. The final steps are brand and channel development.
Each of these steps is linked with potential obstacles and partnership dependencies that could derail an
MVNO’s launch plans.
6.7.1 Barriers
Lack of wireless skills and expertise, economies of scale and high peak funding are among the major
barriers to entry faced by potential MVNOs. Prospective MVNOs often have little
Once in the business, most MVNOs will face a few years in the red before they can break even. Launch
can be preceded by six to nine months of start-up costs, and post-launch subscriber acquisition costs
range from € 65 for a low-end pre-paid offer to over €360 for a high-end post-paid service (based on
MNOs current CAC –Customer Acquisition Cost).
These costs can delay an MVNO’s EBITDA breakeven and require considerable investment (in the
range of millions) in peak funding.
Potential MVNOs also face a number of launch risks, including risks associated with the selection of
partners, and risks related to the execution of the launch.
The first class of risks belongs to the selection of the appropriate partners, and the negotiation of
partnership terms and conditions. An MVNO’s long-term prospects depend largely on whether the
selected MNO places strategic and not only financial value in the MVNO’s target segments and
proposed offer. If the MVNO can demonstrate strategic value to the MNO partner, the MVNO can
extract a more favorable deal that is not just based on volume of subscribers. In addition, MVNOs need
to partner with individual backoffice systems/process providers, MVNEs and mobile data platform
providers, as well as content providers and handset OEMs to profitably deliver a differentiated value
proposition to their target segments. Finally, MVNOs must identify and form relationships with the
relevant distribution partners
MVNEs are increasingly relieving the pressure that MVNOs continue to experience as they seek to enter
markets quickly and effectively. Outsourcing the complex business of billing and customer care for
converged services to an MVNE creates real flexibility for the MVNO. Indeed the very best MVNEs are
those that have given their MVNO clients the opportunity to fine tune their service portfolio and be most
responsive to changing market conditions or new technologies.
MVNEs are becoming an integral part of a maturing converged communications industry. This already
includes network providers and the branded service businesses that have a direct relationship with a
customer. As these proliferate and seek competitive advantage, the role of the MVNE will grow.
Naturally, there is a rush of businesses positioning themselves as MVNEs, as well as brands evaluating
the MVNO model. The criteria for success in this MVNE field obviously must include assured
capabilities in running a network service business, however close collaboration between all players is
absolutely essential to success. Specialist skills, experience and systems are of little good unless the
MVNE has worked out how to share risks and responsibilities with its MVNO client and the other third
parties involved. An open relationship with clean demarcations is critical.
Managed carefully and integrated successfully, quite often requiring the support of an MVNE, Next-
Generation MVNOs have certainly got the potential to cause even more excitement than they already
do.
The MVNO is a business, not a network, and should never be driven by the network. The whole point of
wholesale is the resale of excess capacity, to create extra capacity is to completely misunderstand the
underlying concepts of Virtual and Wholesale model, and to completely underestimate the complexity,
expense and overheads required of running a mobile network. Those who fall quickest into this trap are
existing fixed or other operators. Wholesale mobile is vastly more complex than wholesale DSL, fixed or
other telecoms models running an MVNO is also vastly different from running an MNO. To successfully
pull of an MVNO you need to keep costs to a minimum, which means having staff that understand the
whole end-to-end process of delivering a mobile service and a call.
Mobile and therefore MVNO is vastly different from other wholesale and even other telecoms models, in
that and MNO or MVNO owns and/or manages the very complex and expensive customer equipment
(handset and SIM). in the DSL world this would be the equivalent of the DSL provider not only providing
a DSL line and a wireless modem/router, but also the first, second and third line support on behalf of the
manufacturer, as well as the authentication, passwords and the process of the user being able to use
anyone else's wireless modem router in the same way as they do at their own home or office. Mobile is
never to be underestimated, and the MVNO requires a very different skill set than managing a fixed
network, where you are only generally responsible for part of the end-user process, not all. It is also far
different from running an MNO; with an MVNO you need a small group of people who understand the
whole process and service, as the MVNO model cannot support delegation to masses of employees,
and the host MNO cannot support the MVNO delegating this to its staff.
Finally, this brings us on to the most important fact of understanding wholesale and the MVNO. the
model should bring value to both parties and be mutually profitable. A follow-on to the buzz-word "Brand
MVNO" loved by those who aimlessly follow trends from the back-seat, now seems to be the "low-cost
MVNO". The low-cost MVNO does not offer the host operator any value. an MNO can cut prices or
launch a budget service whenever it likes. The only way a low-cost MVNO can offer value to an MNO is
if the MVNO takes customers that are so low value that only the MVNO running a much leaner business
model could make money from them. This is obviously a finite market and one which could fin itself in
serious problems if and when the operators engage in a price war. Selling on cost also only acquires a
customer with cost as the only value, which paves the way for someone else prepared to offer an even
worse service even cheaper, and as Ruskin said, they are his lawful prey.
So far MVNOs have not been regulated in any country. The ITU has received several requests to study
the issue, specifically to provide input on whether government intervention is necessary to allow MVNOs
to offer services and applications at a lower price to consumers. This would help to ensure a more
efficient use of the spectrum but some incumbent providers argue that the market is already competitive
and intervention is not necessary.
There are arguments from both sides as to whether the MVNO model will bring otherwise unreachable
revenue or unwelcome competition to the MNOs. For instance, the GSM Association, which represents
more than 500 GSM operators and key mobile vendors around the world, is cautious about regulation
surrounding the MVNO model. It is keen to see legislation that helps companies provide and take
advantage of the financial potential of MVNOs, but it is equally keen that network operators should not
be legally required to open their networks to anyone wanting access. At the same time, some UMTS
The universally held view on regulation of the MVNO is that it should be defined by commercial
agreements and not regulatory intervention. Whilst this is wise on the one hand, on the other it has also
been an excuse for some regulators to wipe their hands of the MVNO and any regulatory issues it may
have. This is very unwise; as whilst the MVNO may reach a mutually beneficial commercial agreement
with one MNO, it is still essentially or potentially even a competitor with it, and most certainly a
competitor of the other MNOs it did not reach a commercial agreement with. To boot, this MVNO will
almost certainly have shared important commercial and strategic information with these competing
MNOs before reaching an agreement with its chosen host MNO. It goes without saying that the MVNO
requires regulatory assistance and support from these MNOs and indeed even other MVNOs.
Additionally there is the issue in the EC of an MVNO in one member state, like any other business within
one EC member state, having the right to freely move goods and services and even set-up in other EC
Member States... there are still large, practical barriers to this that need addressing and regulatory
support, beyond reaching commercial agreements with a host operator in each member state.
Effect on Consumers and the Way Forward: Regulation on international roaming tariffs will, in the
short term, push prices down; however, it will slow innovation and decrease the health and longevity of
the mobile market. Such regulation only focuses on prices and carriers. It is obligatory to consider the
processes affecting pricing, service innovation, and all mobile telephony players.
Regulation for opening the market to competition through full infrastructure MVNOs will definitively
reduce roaming and long distance tariffs and, at the same time, encourage innovation of new services,
benefiting subscriber productivity and increasing the health of the industry. In the long term, this strategy
will benefit all consumers and players in the market.
Traffic Management
International traffic should be managed to ensure that customers get the best possible combination of
quality and service:
- 24 x 7 monitoring helps ensure reliability
- High quality connections maintained by the routing and switching teams (own or the MNO’s)
- Low costs guaranteed through global carrier agreements
Thus international calls should be switched to international destinations via the optimal route
Regarding Roaming fraud (case where MVNO core business is offering the roaming service), the
implementation of the NRTRDE solution, via which:
• Send NRTRDE files to MVNOs (IMSI splitting feature)
• IMSI provisioning
• File Splitting and naming of new files created
• Distribution of file to respective Service Provider
• Reporting on splitting activity
• Fraud Management System tailored to the MVNOs needs
• Suspicious Dialed Digits (SDD)
• Pattern Matching
• Suspect Equipment
• High Usage
• Premium Rate Service
• Mobile Data Evaluation
Note: However NRTRDE is mandatory for MNOs, its implementation is expensive (300K €)
Contract management
Following issues are to be covered in the contract management phase:
Numbers, own number space or part of MNO space
SIM card production / logistics, how to be arranged
Network Infrastructure, Systems, location and interfaces
Billing, Invoicing, Reporting issues
Software programs and their administration
MVNO service package (basic / options)
MVNO activation / set-up project
All relevant items in the contract to be executed, e.g. deployment, site set-up,
both MVNO and HNO side.
Sales and technical support
Sales Outlets, SIM card logistics
Support, Customer Care / CRM
MVNO life-cycle management
Changes and modifications in MVNO portfolio
Agreement updates / extensions / phase-out
MVNO deregistration / transfer of customer base
Customer Care
Customer care features, should be easily integrated in existing call center environments. Such features
may include:
Using such features the MVNO Customer Care environment, is enabled to perform their own customer
care services (outsourcing of these services is always a possibility).
Self Care
The Self Care function (automated customer service) may decrease the amount of calls on the customer
care department. Such a function is usually easily integrated with existing websites and could
offer services such as the following:
E-Commerce
An e-commerce functionality that is fully integrated with online payments and distribution & logistics
should be sought. In the online shop not only physical products should be offered, but also service
products (for instance a paper bill), which could be paid using Credit card payments, Pay-Pal, Direct
Debit, etc. A credit check can be integrated into the payment process if necessary.
The shop can thus be integrated with distribution, self care, customer care and can be
seamlessly integrated with existing websites.
Revenue Assurance
Revenue assurance takes place on the field of collections, e-commerce and fraud detection.
Collections
Can be obtained through standard interfaces to third parties who can offer collections services.
Additionally, the possibility of offering SMS alerting or sending paper reminders may be adopted.
Fraud Detection
The basic fraud detection has to do with high usage. When usage amounts of postpaid customers
exceed a specific level, the system should inform certain users of the system. Additionally via interfaces:
to the OSS system that can trigger events (for instance e-mail) or to BSS reps in case of a fraud event.
Vouchering
Dealer Support
The dealer support enables the connectivity provider to:
• manage dealers;
• manage volume discounts and bulk ordering levels per dealer;
• perform order approval for dealer orders.
System Management
System management should provide information about running tasks, imports, services, users, loggings
etc. In configuration management (as a part of system management), settings should be changed for
prices, actions, interfaces etc.
Number Porting
The number porting is specifically required for MVNO's, fixed and VOIP suppliers. Using porting, the
connectivity provider can manage the porting process, creating an overview of all number porting
requests & status and the possibility to modify these.
It should be possible to outsource the number porting process to third parties, provided there are
standard interfaces to existing parties which offer these services.
Reporting
Reporting must offer real-time standard reports, which can be exported to various formats (HTML, Excel,
CSV, PDF or Word), creating the possibility to analyse the data. On request, additional user-specific
reports should also be possible to be generated.
Time to market
The actual implementation duration depends on:
• number of interfaces
• proposition (prepaid, Postpaid, hybrid or flat fee);
• Availability of third parties and MVNO.
To become an MVNO, one should cobble together a partnership that consists of a connectivity of a
regular telco, a customer base, and a sales channel. Most important, they need unique and compelling
data services.
Generic
• Identify latent opportunities
• Create innovative services
• Flexibility to provide customer-centric solutions
• Spread awareness of enterprise mobile messaging
• Ease of use
• Back office what can and should MVNO do and what can MNO and MVNE handle
o Actual possibilities?
Legal
MNO
Competence
o Business case?
MNO – trafic margin
Cost for the different scenarious
Be aware of all the ”extra” cost from the MNO
o Can you find a flexible solution?
Enabler
Outsourcing partner
As little as possible at least from day 1
Only tasks that is business critical for your overall mission
Only tasks that make financial sense from day 1
o Evaluate what you must own and what you can rent - go on “pay as you go” to keep your
operational options open and your fixed opex and capex costs to a minimum
o Keep your dependencies to complex system at a minimum
o You do not need to control everything – but be in control
• Is prepaid THE optimum solution for an MVNO? Is the cost significant lower then postpaid?
o Prepaid upsides:
– Better Cash flow
– “No” bad debt
– Pre-provisioned
– No or lower billing cost
– Transaction cost low
– Often first service deployed for MVNO from MNO
o Prepaid downsides
– Worth of customer database lower
– Churn higher
– Residebntial ”only”
– Channel cost high
– Arpu lower (30-50%)
– Services available
• Roaming
• GPRS
• MMS
• Content
New players are making their move: MVNOs are entering the wireless market because of its revenue
potential, the large pool of churn customers, emerging broadband wireless technologies and compelling
economics.
With the increasing number of MVNOs, concerns are growing about the dangers of excess competition
and price commoditization. These worries are unfounded. A new business model in the wireless industry
is emerging in which consumer spending on telecommunications and entertainment will merge, then
expand, to create a much larger and more profitable market. There will be casualties, but virtual
operators and network carriers have the best chance of survival. MVNOs will have the dual benefit of
making the market more efficient on the cost side and turbo charging the adoption of services on the
revenue side. While individual performance will vary, MVNOs will change the structure, economic flows
and culture of the wireless industry for years to come.
Once an MVNO has partnered with a network operator and acquires a certain number of customers, it
becomes difficult to move these subscribers, thereby locking the MVNO customer to the network.
Separating from the carrier is not impossible, but a painful exercise. This highlights the importance of
crafting a solid MVNO contract that includes margin protection to reduce business risk for the MVNO. If
not undertaken correctly, this contract can become the weal link in the MVNO model, while if done well,
it can power a strong value-creating business.
Carrier choice will vary by MVNO, with a decision based on variables such as network protocol, network
quality, wholesale price and MVNO operational-support capabilities. Each carrier will be strong in some
categories and weak in others. An intimate understanding of these elements is essential for MVNOs.
Aside from the carrier selection and deal negotiation, new MVNOs will need to craft an engaging value
proposition for their target customers, supported by a business case built on assumptions and based on
deep wireless expertise. This expertise is readily available from outside providers. The same is true fro
back end support structures (customer care, billing) where expertise is widely available, to help
determine the course of action to be taken. The key here is the decision to either do-it-yourself or
leverage through a third-party. Such decisions, to some degree, determine the risk-reward profile of the
venture.
To be Adopted
Try to turn the market from offline to Online
There is low cost setup implementation (in doing this)
Have a strong technical platform with no or minimal maintenance or service failure
Avoid fraud
Utilize Outsourcing as it works better than in-house
Partners DO contribute with their core knowledge
Make sure that Supply chain is 100% solid and work with NO errors
Arrange Risk sharing with MNO and/or MVNE
Focus primarily on sales
Make sure that Online marketing is available
Approaching Communities is easy
To be Avoided
It is hard to get into the market (existence of strong players)
Operators know how to compete
o Long binding periods
o Free minutes and SMS
Regulation is non-existent or slow and ineffective
Turning the market from offline to online is hard and takes time
E-payment is not user friendly and it takes time for the user to get familiar with it
The market is not as price sensitive as usually expected – even 30% lower prices is not
enough
Physical distribution is hard to beat online if you’re not patient
o Is needed
Viral marketing is misused by everybody in the Telcomarket
Launching a low-cost proposition using an established brand is a key element for being prepared
to the increasing level of aggressiveness and price pressure
Brand compatibility makes the difference, especially when it is possible to combine best-price
image with quality reputation
Being the first makes also the difference
Being the cheapest makes also the difference
Mobile telephony offer is a good opportunity for extending a fashioned product line of a retailer
MVNO or not MVNO is not the question : the best partnership must be the goal
Considering a strong partnership rather than just one singular revenue sharing model opens door
for other future interesting co-operations…
Beware
• end-users have already experienced the deregulation activities in declining prices and simplified
pricing schemes
• many MVNOs have entered the market to learn the business and prepare themselves for the
emerging, more content and data-based 3G market, but in several cases that was fatal
Referring to telecoms, It is because telecommunications are by essence a network economy that the
market is inefficient from a competition point of view, as:
There is a guaranteed income due to the monopoly or oligopoly that popped up because the 3 or 4 GSM
national licenses were not awarded at the same time.
The GSM operators are vertically integrated and so can behave independently from upstream and
downstream, even in a non collusive way
As within most network economies, the limiting factor for a fully efficient market is the owning of a rare
resource not easy to replicate (the local loop in fix telephony, the spectrum in mobile telephony).
The limited spectrum allows - per country - only 3 or 4 operators with a radio access network; if the first
entrant can exploit the spectrum ahead of its competitors, the market shares it acquires during that
period create this guaranteed income typical in an oligopoly market.
The MVNO brings a solution as it forces the mobile operators to unbundle its vertical integration and
multiply the number of players. As such they are a remedy at least for the access/origination market.
Also, the termination and the roaming market could benefit from MVNO as a remedy. The MVNO model
can in fact apply to any network economy with a technological context and with assets not easily
replicable.
The MVNOs of today are customers centric. However, it is expected that the emergence of new (agile)
wireless techniques will create new kinds of mobile operators not relying on GSM or UMTS. These new
operators will need the GSM network to complete their coverage and so will need to become MVNO.
These new operators operating a different radio access networks will eventually become MVNO
between each other. IMS has as an objective to create services that are irrespective of the underlying
1. Implement MVNOs with fixed interconnection cost and the network capacity bought
virtually from nowhere
− MVNOS implement the cost leader strategy
− significantly lower capital (approx. 20% of MNOs costs) and operational expenditures
− fixed interconnection prices determined by the game operator
− restricted set of services a MVNO can offer
2. Introduce means for negotiation, the network capacity is bought from actual players
− network capacity is bought for a certain period of time
− switching costs for a MVNO due to investments to the network infrastructure (e.g. VAS
servers, billing and charging systems, integration costs)
− wholesale pricing options for MNOs who decide to sell excess capacity
3. Give the players a possibility to act as MVNOs with different strategies
− service leaders must select a service mix they intend to offer
− requires for modelling financial flows based on service demands per customer group and
actual costs to produce a certain service
9.
Total Revenues generated by mobile operators in Western Europe reached EUR155.1 billion in 2007,
3.32% growth from 2006. In EU15 countries, cellular revenues represent 1.5% of Gross Domestic
Product. Our key finding is that in most countries, mobile revenues have been growing faster than
GDP which demonstrates that the telecom sector has proven to be resilient to the general economic
downturn. In 2008, we expect to see a similar relatively healthy growth in mobile revenues.
Non-voice revenues appear to be driving growth as voice revenues remain under strong pressure. As
market penetration continues to rise, mobile operators are turning their strategies to increasing
revenue share and focusing on customer retention.
Western Europe recently passed the 500 million cellular connections mark and the most highly
penetrated region in the World (120% on average). Greece and Italy have registered penetration
rates above 150% in early 2008. Most countries are now home to 3-4 mobile operators, and in a time
of general economic slowdown, competition is getting tougher.
In Western Europe, the top 5 operator groups (Vodafone, Orange, T-Mobile, Telefonica O2 and TIM)
generated revenues of 106.6 billion Euros, or 69% of the total revenues for the region. In markets
such as Germany, Italy, Belgium, Switzerland and Austria, cellular revenues have decreased year on
year, partly due to: new European roaming regulations, domestic regulations (Bersani Decree in
Italy), weakened ARPU, and decline in effective voice price per minute.
Operators are now focusing on revenue stimulation and fighting churn through key competitive
factors such as: price elasticity, network coverage, loyalty policy, quality of services, value added
services and market segmentation which includes MVNO development.
Western Europe cellular market has reached a level of maturity that is intensifying the level of
competition amongst mobile operators. Total revenues in the region reached 155.1 billion Euros in
2007, which equates to a 3.32% growth year on year. Keeping the right balance between CAPEX and
profitability is sure to be a key challenge for service providers that operate in the region.
Figure 1: Western Europe Mobile Operators Total Revenues vs. Penetration Rate
The seasonality in revenue figures has remained unchanged since 2006: 24% in Q1, 24.8% in Q2,
25.7% in Q3 and 25.5% in Q4. This shows that the second half of the year is the period when
operators generate the highest revenues. Q3 holds the summer holiday season and is the
battleground of prepay campaigns whilst Q4 is characterized by strong activity during the
winter/Christmas holiday season. Whilst there is nothing new in this, those two quarters have always
ruled the market dynamics, what has changed is that operators are now primarily focusing on
customer retention instead of customer acquisition. By default, it also means that market leaders are
turning their strategies to increasing revenue share instead of customer share.
In terms of the dominance of major operator groups in the region, Vodafone, Orange, TIM, Telefonica
O2 and T-Mobile’s operations in Western Europe altogether reached 106.6 billion Euros last year,
representing nearly 70% of the total revenues in the region. The remaining 30% is left to local
operators and smaller groups such as Telenor, KPN, or 3.
Figures 2 and 3 show the top 10 fastest and slowest growing operators in terms of total revenue
growth in 2007 along with their average quarterly connections growth. It is interesting to note that a
few markets have rapidly changed over the last two to three years mainly due to high penetration
rates and new regulatory initiatives.
For instance, Germany and Italy are showing signs of a high level of maturity that may lead to a
plateau of development throughout 2009. T-Mobile Deutschland (2.7% revenue growth) and
Vodafone Germany (7.1%) have reported negative growth in their total revenues from 2006 to 2007
although their connections base grew by an average of 2% last year. This is partly due to pressure on
voice pricing, weakened ARPU and the implementation of cuts in termination rates. Although both
operators reported an increase in their installed base, they were unable to offset the consequences of
price pressure. O2 Germany, in contrast, has reported a higher revenue growth (15.9%) over the
same period.
In Italy, the same rules apply for Vodafone and TIM. Both operators have reported a decline in total
revenues of 5% and 2.3% respectively between 2006 and 2007. The decline is also justified by the
Figure 2: Top 10 fastest growing operators: Revenue growth vs. average quarterly connections
growth, 2007
Figure 3: Top 10 slowest growing operators: Revenue growth vs. average quarterly connections
growth, 2007
According to the OECD (Organisation for Economic Co-operation and Development), the average yearly
growth in GDP in 2007 was set at 2.6% in Western European markets (EU15 countries). Over the same
period, mobile revenues accounted for 1.5% of GDP.
Figure 4 shows mobile revenues as a share of GDP for the EU15 countries, and compares it to revenue
growth and GDP growth in 2007. It shows how disparate Western European countries are and the
difficulty in correlating cellular revenues growth and GDP growth. However, we came to the conclusion
that in most countries, mobile revenues are growing faster than GDP. We can identify some groups of
countries that seem to follow similar patterns and profiles:
Greece, Finland, Ireland, Spain and Netherlands: all 5 markets have reported a growth in mobile
revenues faster than GDP growth. In those markets, the average penetration is around 120% (a part
from Greece already at 165%) and GDP growth in 2007 is around 4%.
United Kingdom and Sweden: both markets have reported mobile revenues growth faster than GDP.
The average penetration is around 120%, GDP growth in 2007 is around 3%.
Portugal and Denmark: both markets have reported mobile revenues growth (around 6-7%) faster than
GDP growth. The average penetration is around 120%, GDP growth in 2007 is around 3%.
Germany, Belgium, Switzerland and Austria: average penetration is around 110%, GDP growth in 2007
is around 3%, but all four markets have reported a decline in mobile revenues in 2007.
France and Italy: two exceptions.
France is showing a market penetration below the 100% mark (82%) and GDP growth below the 3%
average in 2007. Although it is reporting a 3.1% growth in mobile revenues last year, the market is
lagging behind in terms of high-speed network coverage.
Italy is highly penetrated (153%) and is reporting the slowest GDP growth amongst those countries
(1.4%) in 2007. Its decline in mobile revenues is mainly due to implementation of new European and
domestic regulations as well as price pressure amongst operators.
Source: OECD, Wireless Intelligence, 2008. GDP figures have been extracted from the OECD online database on the
02/09/2008.
Conclusions
1. There is price flexibility also in the mobile communication sector
2. Brand diversity is new in the mobile communication sector–but a recipe for success in many
other lines of business.