mvno case story - oman

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MVNO CASE STORY - OMAN May 2015

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TABLE OF CONTENT

DEFINITIONS USED THROUGHOUT THIS DOCUMENT ............................................................................................2

Background Oman ...................................................................................................................................................3

The introduction of MVNOs in Oman .....................................................................................................................4

Oman Mobile’s strategy towards MVNOs ..............................................................................................................5

MVNO Renna Mobile ...............................................................................................................................................7

MVNOs – a game changer for Oman Mobile ..........................................................................................................9

CONCLUSION ......................................................................................................................................................... 12

DEFINITIONS USED THROUGHOUT THIS DOCUMENT

HNO - HOST NETWORK OPERATOR It is as a Mobile Network Operator that owns its network infrastructure and allocated spectrum.

MVNO - MOBILE VIRTUAL NETWORK OPERATOR It is an organization, which offers mobile services. The MVNO does not own spectrum, instead it enters into an agreement with either a HNO or MVNA to obtain bulk access to network services at wholesale rates, and then sets its retail prices independently. An MVNO may use its own customer service, billing support systems, marketing and sales personnel or it may employ the services of a MVNE

MVNE - MOBILE VIRTUAL NETWORK ENABLER It is an entity, which provides infrastructure and services to both HNO and MVNOs, which enables existing, and new MVNOs to offer their services on the HNO network, while leaving the back-end enablement to the MVNE. The MVNE provides services, such as billing, business workflow, product setup, service delivery, customer care, fraud management, web services, reporting, sale platforms, etc.

MVNA- MOBILE VIRTUAL NETWORK AGGREGATOR The MVNA is an entity, which purchases mobile airtime in bulk from the partner HNO, and then wholesales this airtime and service to multiple MVNOs, who each in turn sells the mobile service to end-users.

MVNE/MVNA - MOBILE VIRTUAL NETWORK ENABLER & AGGREGATOR (ONE DEVELOPMENT) is a combination of, Mobile Virtual Network Enabler and Aggregator. The MVNE/A is an entity, which purchases mobile airtime in bulk from the partner HNO, adds its service platform (MVNE) on top, and then wholesales this airtime and service as end-to-end to multiple MVNOs.



Background Oman

The Sultanate of Oman is located on the Arabic Peninsula in the Middle East. It is in a key location at the

entrance to the Arabian Gulf and acts as a gateway to India and South East Asia.

Until 1970, the country was under-developed however, after the current Sultan took over as ruler, the country

has progressed steadily. Oil is one of Oman’s main sources of income. In addition, Oman is also focusing on

developing other sectors including tourism. Among the Gulf countries, Oman is often acknowledged as a country

of particular beauty and tranquility.

The telecommunication sector has also progressed – partly due to Oman’s Free Trade Agreement with the US –

and being the first country in the Middle East to open for MVNOs.

GSM services established in 1997

Organizational separation of Oman Mobile from Omantel since May 2004

Second GSM license awarded to Nawras (now Ooredoo) in June 2004

3G services launched in 2007

4G (LTE) services launched in 2013

First MVNOs launched in May 2009

Total mobile subscribers: 6,194,169 (2014)

Mobile penetration: 155% (2014)

Prepaid share of total mobile subs: 91.5% (2014)

Mobile services ARPU: 7.75 OMR = ~20 USD (2014)

Total number of active Mobile Broadband subscribers: 2,893,561 (2014)

Mobile Broadband penetration rate: 72%



The introduction of MVNOs in Oman In 2007, Oman’s telecommunication regulator (TRA) took steps towards the introduction of MVNOs. They

involved the two licensed mobile network operators – the national incumbent Oman Mobile and challenger

Nawras owned by the Qtel group (now Ooredoo) – and by the end of 2007 TRA had issued a license framework

for MVNOs.

This kicked off a beauty contest amongst 8-10 consortia who all expressed their interest in signing an MVNO

agreement with Oman Mobile or Nawras.

Oman Mobile and Nawras took different approaches to this. Oman Mobile decided that since it seemed that it

was TRA’s clear intention that MVNOs must be launched in Oman, it was better that they embraced the concept

and make use of it. They weighed the potential extra competition and erosion of its own market shares against

the additional traffic, subscribers and revenue that the MVNOs could bring to their wholesale unit, and

concluded that MVNOs’ potential to increase their business was significant and decided to embrace the MVNO

model.

Nawras, on the other hand, attempted to resist the MVNO process. As a result, the two strongest consortia –

Friendi Mobile and Renna Mobile – signed up with Omantel in the 1st quarter of 2009 and only later did a

reluctant Nawras make deals with the remaining consortia, which ended up leaving the market a short time

later.

As we will learn in the following sections, the result was that Oman Mobile managed to reverse the trend of

declining market shares that had been the situation since Nawras’ launch in 2005.



Oman Mobile’s strategy towards MVNOs

Friendi, the first-ever MVNO in Middle East, launched in April 2009, soon followed by the second, Renna Mobile

in May 2009.

Their partnerships with Oman Mobile are based on a “retail minus” or similar to a revenue-sharing model, with

Oman Mobile receiving a different percentage of the MVNOs’ revenue for each type of service with preset

discounts when the MVNOs reach specific traffic volumes.

Oman Mobile took a clever approach to the way they selected and negotiated with the two MVNOs focusing on

working with them to attack market segments that were regarded by Omantel as:

1. Market segments that were not core segments for Oman Mobile, and 2. Where their main competitor Nawras was strong.

In this way, Oman Mobile could use their own internal resources and focus on retaining and building their

customer base on their own core market segments while letting their MVNOs fight for them in other segments

and gain market share1.

1 Some of the points made in the remainder of this document are taken from a presentation made by Yasser Redha Al Lawati, Manager, Wholesale National Accounts at MVNO Summit Middle East, 24 Sep 2013.



Omantel have subsequently stated the following key achievements of their collaborating with MVNOs:

Demonstrated Omantel’s intention to develop the telecom sector in Oman.

Minimized the risk of new direct competitors

Gained network market share with no Subscriber Acquisition Cost while slowing competitor’s growth

Addressed specific/niche market segments through MVNOs

Introduced a new business stream via Wholesale operations

Assisted in the development of healthy and sustainable MVNOs

Utilized idle network capacity on Omantel network.

Became a “case study/example” of MVNO success.

In May 2014 Omantel was selected as one of the top three wholesale operators in world



MVNO Renna Mobile

Renna Mobile (legal name: Majan Telecommunication LLC) was established in 2007 when the Oman regulator

TRA announced the license framework for MVNOs.

Renna Mobile launched in May 2009 with a focus on cost conscious parts of the population including low-

income expatriates and non-affluent Omanis. Services were tailored to the intended market positioning.



In June 2011, Renna was the first MVNO in Middle East to reach operational break even (EBITDA) and by April

2015 Renna Mobile had approximately 5% overall market share. At the time, Renna was the fastest growing

mobile telecommunication service provider in Oman.



MVNOs – a game changer for Oman Mobile

Oman Mobile’s own view is that the introduction of MVNOs on its network has been a game changer, with a

significant value-add for the company.

The numbers clearly show that Oman Mobile’s MVNOs have had a positive impact on Oman Mobile’s total

network market share as well as its wholesale revenue.



Sources outside Omantel also noted Omantel’s successful use of MVNOs and their positive impact.

Nawras’ mother company, the Qtel Group (now Ooredoo Group), made a remark in their financial report from

Q1 2012 that Omantel’s MVNOs had had an impact on Nawras’ financial performance.



CONCLUSION

The evidence of the Oman experience demonstrates that a successful implementation of MVNOs can be a

significant game changer for the Host Network Operator.

After Nawras launched as Oman’s 2nd GSM operator in 2005 Omantel’s mobile business unit saw 15

consecutive quarters of declining market share

But after Omantel’s MVNOs – Renna Mobile and Friendi Mobile – launched their operations in April/May

2009 Nawras’ market share has declined steadily each quarter

By the end of 2014 Omantel’s market share, including the MVNOs attached to its network, was 59%. The

MVNO’s of Omantel contributed a combined market share of 12% (or 20% of the total of Omantel’s reach)

to this figure.

Omantel’s wholesale revenue from the MVNOs has increased steadily since the MVNOs’ launch, adding

further testimony regarding MVNOs’ positive impact on Omantel.

Both Renna and Friendi are profitable, and Renna, is now the fastest growing mobile operator in Oman. This

clearly shows that the MVNO business model is working and sustainable in the longer term.

A mobile network operator can use MVNOs as a strategic value-add to their operations, resulting in stronger

operational and financial performance, higher returns for their shareholders, as well as an increased number of

jobs in the sector with a positive impact on the society in general.

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mvno case story - oman

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