computaris - the mvno opportunity in romania
DESCRIPTION
TRANSCRIPT
MVNO Opportunity –
Everywhere but Romania?
• Overview
• MVNO Types
• MVNO MNO Relationship
• MNO Perspective
• Cannibalization
• Conclusions
Summary
“A MVNO is a company that provides mobile phone services but does not have its own licensed frequency allocation of radio spectrum, […]” - Wikipedia
“Almost one third of mobile subscribers in the Netherlands are customers of virtual operators…” - Dutch analyst house Telecom Paper
“The MVNO business continues to exceed expectations. In 2010, the four alliances combined nearly doubled their contribution to the total Celcom revenue, […]” - Source: Axiata 2010 Annual report
Overview
“MVNOs' share in Bulgaria, Hungary and Poland rather small - MVNOs unable to compete with MNOs in terms of pricing, service offering and quality - In Poland, MVNOs struggle with churn and high mobile termination rates - In Hungary, bundling of mobile with fixed, cable TV and Internet helped reduce churn. “
Infocom
Overview
Current status on Eastern European countries
• 550 Active MVNOs with over 85 million subscribers
• Global MVNO markets will reach 186 million subscribers by 2015
• Highest growth in Western Europe & LATAM;
Overview
Western Europe, 45%
Eastern Europe, 14%
Africa, 2% Middle East, 2%
North America, 21%
Latin America, 3%
Asia Pacific, 12%
Source: Informa Telecoms & Media
Differentiation
MVNO Types
Distribution
Segmentation
Expats/ foreign workers
Religious interests
Enterprise verticals
M2M apps
Ethnic
VAS
Data/Content
Roaming
Brand
Lifestyle Captive
audience
Existing customers for other products
POS
MVNO’s Challenges
Source: Informa Telecoms & Media
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
What are the top business challenges for MVNOs?
Top business challenges
• Thin Margins (10%-40% of price)
• 80% of the success is dependent on the MNO buy price
• MVNO agreements – complex
• Convergence and Bundling
• favor large operators
MVNO’s Challenges
Business challenges
• Contract period and exclusivity
• Prepaid, postpaid or both
• Equity participation and cost-sharing
• Minimum revenue commitment
• Infrastructure leasing / outsourced back-end support
• SIM card production
• Portal and 3rd-party content development and sales
• Guaranteed Traffic / Usage levels
• Distribution channels and commissions
• Inbound and outbound roaming
• Service level agreements
• Dispute resolution framework
• Numbering blocks
MVNO – MNO Relationship
Value for MNOs through well managed partnerships
MVNO – MNO Relationship
Radio Access
Core Network
Application and Services
Billing Customer Care Marketing Sales
MNO Reseller (Thin/Light MVNO)
MNO Service Provider MVNO
MNO Enhanced Service Provider
MNO Full Infrastructure MVNO (Thick/Heavy MVNO)
MVNE MNO
MVNO MVNE MVNO
What’s in it for MNOs?
MVNO – MNO Relationship
• Drive revenue to offset the enormous cost of building 3G/LTE networks
• Opportunity to partner with profitable MVNOs with strong brands and distribution channel to turn unprofitable customer segments into profitable ones
• Use multiple brands to address different segments
• New revenue streams: focus on profit from MVNOs success rather than ARPU
• Focus on personalization (large operators usually offer one size fits all packages)
• Gain strength – from non telco MVNOs’ customers segments, content, brand loyalty and possibly more money to invest in building future mobile networks and applications infrastructure
• Broaden the customer base and/or increase volume:
• Address untapped niche markets (sell additional MOU's) without costs
• Use an alternative distribution channel or a different brand
• Expand in other countries starting from an MVNO
• Overcome IT bottlenecks
MVNOs cannot enter the market by force!
MVNO – MNO Relationship
Nowhere did the regulators manage to force operators accept MVNOs against operator’s will!
• MNOs increasingly see the marketing value that well chosen MVNOs bring to them • Increase in market size through better targeting / segmentation
• Incremental revenues in ‘weak segments’ for the MNO
• The economics of mobile data are incentivizing more network sharing • Spectrum scarcity is an issue for successful MNOs, leading to more network
sharing (inc. active)
• This may well lead to the de facto ‘virtualization’ of many MNOs
• Successful MNOs are starting to see the benefit of MVNOs for growth
• MVNOs can increase market size with products targeted to specific audiences
MVNO as opportunity
Cannibalization. Reality or just a myth?
MVNOs carry strategic risks and advantages for host MNOs
Address impenetrable
market
Attack competitors key segments more
effectively
Cannibalization of existing
customers
Overall margin erosion
• Reach customers outside the Operator’s core markets without damaging own brand
• Reach customers who would never become your customers, for whatever reason
• Attack new segments without costly development of new sub-brands • Drive net additions, revenue and traffic without high acquisition costs
• Ineffective targeting or fencing of MVNO propositions may lead to mass churn • Intentional abuse of loopholes by partners to attack beyond agreed segments
• Risk to stimulate competition by other MNOs, resulting in Operators rate reductions
• Additional CAPEX and OPEX may be required to successfully support MVNOs
Rewards
Risks
Cannibalization. Reality or just a myth?
Use case: Major SE Asian Operator weaknesses
• The operator has strong position/high segment market share
MVNO partnership not suitable given small potential and opportunity costs
• The operator currently has low segment market share
Small base but high ARPU, requiring customized propositions, marketing and channels
• The operator currently has high segment market share
Only consider if MVNO can reduce cost to serve and increase margins, with impositions of tight controls
• The Operator currently has low segment market share
Large opportunity and ideal for MVNOs if the operator is truly unable to effectively capture using own brands
Cannibalization. Reality or just a myth?
Use case: Major SE Asian Operator weaknesses
• Will compete directly with the Operator and may not be worthwhile given limited returns
Offer basic reseller model with very low margins
• Partner must have strong segment expertise and differentiated services
Offer flexible model depending on type of service (e.g. voice, VAS, IDD) and inherent partner strengths
• High risk of cannibalization requires the Operator management and back end control
• JV model for control with low margins to MVNO
• Attack MVNOs, requiring compelling propositions and strong segment focus
Strong fencing to avoid churn from high risk segments; JV model for management control
• Price war? • No regulation? • No trusted partners? • No real interest from entrepreneurs? • How can someone else do this better than the big ones?
Why not Romania?
Opportunities
• MVNOs can bring a completely new perspective to the market
• MVNO cannot succeed without full support from MNOs
• MNOs cannot give support to MVNOs unless they believe in this business model
• Regulator can ease the licensing but cannot force MVNOs setup
• Hopefully there will be some MVNOs in Romania in the next 5 years
Conclusions
