MVNO Africa Industry Summit 2013 : The Chairman’s perspective !!

Presentation1The MVNO Africa Congress in Cape Town was extremely interesting despite the fact that Mobile virtual network operators in Africa are yet to achieve real success. According to Informa Research there are around three million active SIM cards on MVNO networks across the continent, with that number expected to increase to 3.6 million by the end of 2013 and 14 million by the end of 2018.Hardly encouraging !!

The international speakers really stole the show with their stimulating presentations. Sprint USA ‘’ largest wholesale carrier hosting MVNOs lauded the benefits of partnering with other brands. Sprint hosts 110 of the country’s 123 MVNOs and accounts for 8.2 million of its subscribers. Some of the motivations cited for mobile network operators to partner with MVNOs were pre-empting regulatory requirements, selling excess network capacity and addressing additional markets.Infact Sprint has formalised evaluation protocols and raft of support services to on board MVNO’s and ensure their success. An enlightened win win relationship based on trust and sincerity is Sprint’s “ Leit motif ”

Vodafone International Services (VIS) surprised us that they have built a ‘mobile virtual network operator (MVNO) business in a box’ package to offer to clients interested in building a MVNO.VIS, part of the Vodafone Group and based in Cairo, provides a host of services including customer care centres and value added services (VAS) to Vodafone’s own networks as well as other players in the telecom and technology industry. They have created a model, backed by our experience as a MNO, of a MVNO business in a box . They have offerings for national and no frills markets, retailers, the corporate segment and niche players.

France Telecom Orange were less enthusiasticabout their MVNO prospects in South Africa. They insisted that without favorable regulation for MVNOs they will not launch an MVNO . Any investment in customer acquisition will tank if the wholesale price is higher than the retail price. Any wholesale rate agreement must have protections against price cutting by the host network so the agreement should incorporate an element of retail minus pricing so that the effective wholesale rate is the lower of the agreed rate or the host’s retail rate minus x%. This ensures the host network cannot reduce their own customer facing prices below the negotiated prices with the MVNO. Orange is adamant that formalised MVNO regulatory regime will encourage companies to launch in South Africa and ultimately improve competition.

Globally the combination of an increasingly favourable regulatory environment and market maturity has led to a significant growth in MVNOs. Despite the improving environment and the more favourable wholesale terms being offered by networks the list of failed MVNOs continues to grow, demonstrating that creating a viable MVNO remains challenging. The main challenge for an MVNO is no different to any other business and that is to have some form of competitive advantage, a source of differentiation. This is most effectively achieved when the business can leverage existing assets such as existing customers, brand, distribution, content or infrastructure. The greatest challenge is securing a network deal at a wholesale rate which allows the MVNO to create value for shareholders. The chances of negotiating a good deal are significantly enhanced if the underlying business proposition is strong. The chances of successfully securing a network deal are increased if the target host network is selected with care and the MVNO’s network architecture is carefully matched to the business needs.

The best case study by far was presented Poste Mobile Italy ( division of the Italian Post Office ). Mobile communications in Italy is one of the most lucrative, but also the most saturated, marketplaces in the world. In addition, although virtual operators have existed for several years in Europe and the United States, only a few countries have seen MVNOs capture a significant share of the market. Therefore, Poste Italiane saw the success of this new initiative resting on several key factors. The company needed to provide differentiated, innovative services through its mobile offering. It also had to move rapidly through the planning and launch phases in a cost-effective way, putting in place a completely new organization in a very short time frame.

The right technology platform had to be created that could enable the company’s 13,800 existing postal offices to act as the PosteMobile retail network. At the same time, the integration of existing postal offices went beyond technology—it also required significant organizational change management skills and a large training effort. Post Mobile worked with an MVNE who provided the support for the core elements needed to launch and operate the new MVNO.These included:

• Business support system (BSS) functions such as customer relationship management, billing, dealer portal and data warehouse
• Network elements, including IN Service Control Point and GGSN (GPRS Gateway Support Node)
• Service delivery platform, including a mobile portal to enable SIM-based value added services

PosteMobile’s market leading services allow customers to conduct a variety of financial and communications activities easily, securely and inexpensively. Customers can check their PosteMobile accounts, make money transfers and pay bills through the easy to use SIM menu. They can refill their accounts easily, and can monitor the movement of funds in both the PosteMobile prepaid card and Poste Italiane accounts. PosteMobile and Poste Italiane have achieved important business results that are propelling them toward high performance. In the first month of operation as a startup company, PosteMobile attracted 100,000 subscribers and now has over 4 million subscribers—making it the largest virtual mobile network operator in Italy.

Post Mobile Italia is a classic : leveraging their existing customer base and loyalty they built their own billing system and combined mobile payments and VAS into a devastating MVNO success. Poste Italiane has revolutionized the offerings of the traditional postal industry and set new terms of competition. The company can now provide customers with new, highly attractive mobile services by integrating and making its traditional offerings (national post office network, bank and certification authority) accessible through any mobile handset incl NFC believe it or not ! Viva l’Italia !!

Sadiq Malik ( Telco Strategist )

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