Over the past 15 years, MVNOs have helped stimulate competition in the mobile market, launching innovative tariffs and services and attracting niche consumer segments at a lower cost than mobile network operators (MNOs). But the landscape has changed; the innovative offers that once made the MVNOs successful are no longer profitable. Moreover MVNO profit margins are notoriously low, as most of the revenue any MVNO takes in goes to paying for network access. There’s also no guarantee that consumers will take to whatever new hot new idea an MVNO comes up with. Samba Mobile tried to fund a free 3G service in the U.K. through advertising, but it shut down in 2014.
According to GSMA as of the end of 2015, the world’s MNOs hosted 1038 MVNOs and 277 MNO sub-brands. This represents a total of more than 1300 mobile service providers worldwide hosted by MNOs, in addition to their own core brands. Research shows that MVNOs remain most prevalent in mature markets where penetration (based on connections) has surpassed one hundred percent. Europe is home to two thirds of domestic MVNOs (599), followed by Asia Pacific (137) and Northern America (113). ‘International’ MVNOs, i.e. those that target roamers and thus operate across multiple markets, make up ten percent of global MVNOs.
Perhaps the most interesting development in the Chinese MVNO market is the list of organisations that have acquired MVNO licences, which includes internet players such as Baidu and Alibaba (HiChina) and handset vendors Xiaomi, Lenovo and Foxconn. While the extent to which these companies will use their licences remains to be seen, in each case they will have seen the potential benefits of vertically integrating an MVNO with their core businesses and playing a bigger role in the overall mobile customer ecosystem.By contrast, the MVNO sector remains in its infancy in Sub-Saharan African markets with just 13 MVNOs across the region.MVNO’s are struggling to gain traction in Africa ( and i daresay other developing Regions ) for several key reasons :
1. They are undercapitalised …aspiring MVNO’s enter the fray with very little capital because they have completely underestimated the cash required for advertising and marketing to convert subscribers in their selected niche.
2. The delta between the wholesale and retail price is at best razor thin or non existent at worst.They just don’t have enough margin to make a decent profit because the MNO’s do not support MVNO’s with better pricing models. Infact some incumbent MNO’s go out of their way to sabotage MVNO’s by competing in the same target segments with heavier AD spend.
3. MVNOs have long been encouraged in Europe by regulators as a way to increase competition and reduce prices…unfortunately no Regulatory support in Africa for example.The European Commission (EC) has used the Regulatory tool by applying conditions related to MVNO access before approving mergers between MNOs. Prior to its merger with O2 (Telefonica) in Ireland, 3 was required to commit to selling up to 30 percent of the merged company’s network capacity to two MVNOs.To gain EC approval for its takeover of E-Plus in Germany, Telefonica itself agreed to similar conditions which could potentially create up to three new MVNOs in the country.
When MVNO’s enter the market without a full understanding of their target customers and precisely how satisfy their particular needs they are setting up for disaster. Simply competing on pricing is as we all know is a prize idiots’s zero sum game.Thankfully some of the newest MVNOs aren’t just competing on price; they’re trying to shake up the mobile industry by packaging traditional mobile service in new ways.
For instance , FreedomPOP in the U.S. offers a bare-bones voice and data plan every month at no charge. Google is using its MVNO Project Fi to explore metered data pricing – in the U.S. you pay $1 for every 100 MBs consumed – and a Wi-Fi first business model, which moves the majority of data traffic onto cheaper unlicensed networks. Truphone is trying to create an international data plan that allows you to cross borders without paying roaming fees.
Therefore the aspiring MVNO’s need to look at alternative business models to succeed. Take the case of Gifgaff another of the new age Digital MVNO’s : Giffgaff is a Mobile Virtual Network Operator (MVNO) using the United Kingdom O2 network and was launched on25 November 2009. The key elements of the strategic positioning were around addressing technology savvy youth. Its aim was to create a simple, transparent and engaged mobile operator: As part of the service launch a community was set up (technology supported by Lithium).
The community together with GiffGaff collaborated to define the product and services. Community members could contribute and present ideas, which were reviewed, rewarded ( gamification) and incorporated into the overall service plan. In return help and support was provided through the community in all care and support questions. This GiffGaff had no inbound call centre (only agents monitoring the community), no below the line marketing and the number of employees are at a minimum (at the start only 14 employees.
Myavon a Polish-based MVNO has taken the unusual route of targeting the clients and consultants of Avon Cosmetics consumer products. Myavon, which runs across the Orange network,differentiatesitself through the use of incentives rather than mobile tariffs. The service incorporates a points-based system allowing pre-paid top-ups and discounts on Avon products. Avon resells the telecoms services with PTK Centertel managing the billing and customer service aspects to the service.While the Avon Cosmetics consultants are freelance, the Myavon MVNO service is more akin to a B2B solution than is typical with most other MVNOs. Also, its use of incentives will likely assist with its longevity in the fast-developing Polish market.
As traditional MNO’s reconfigure themselves under the mantra of “ Digital Telco “ it might be in their interest to build their Digital Units in an MVNO model outside their traditional business with their legacy processes. In a digital telco, IT is a cornerstone of the overall strategy whereas the network is the overall business enabler A digital Telco which could compete with OTTs should have more freedom in designing its customer experience than the rigid product life cycles adopted by most telcos where a business case for each new product is required up front.In simple terms the Digital Unit of a traditional MNO has greater chance of success operating as an MVNO rather than within the traditional structure which inhibits agility and customer centricity.
Going Digital means retooling the network for Virtualisation , Cloud , CXM, reconfiguring the Organisation structure , revamping the IT Core with analytics capability , creating a new business model based on thorough understanding of the digital consumer….YES EVERYTHING AND MORE. In the final analysis Digital Telcos aim to provide the digital products and services which will help to improve the lives of our customers by leveraging the power of technology.
Breizh Mobile is a regional MVNO operating in the Brittany and Loire-Atlantique regions of France and is part of the larger Omer Telecom’s MVNO business.This company, which also operates the Virgin Mobile MVNO in France, has a strategy of targeting under-penetrated regions of France with locally-branded mini-MVNOs, such as Breizh Mobile. This particular MVNO has specialised in attracting residents to the service who consider themselves Bretons rather than French. The company continues to offer cut-price services while maintaining a strong regional identity. With the French government encouraging the launch of more MVNOs to provoke more intense competition, Breizh Mobile looks likely to prosper given its decision to focus on consumers wanting to work with a clearly identifiable local provider.
The point is MVNO’s can be a very profitable enterprise as long you get the business model and modus operandi right. MVNO’s need to be operated on a LEAN MEAN DIGITAL AGILE basis. The Gurus say “The art is to set up a sensible balance between SACs and average lifetime ARPU….because the time is gone when an MVNO’s value is determined by the number of customers it has. In the future, the key issue for any MVNO will be its ability to generate profit.
MVNO is not a ponderous business like a traditional Telco….its more like an OTT Web player that moves fast and delights the new age digital consumer with something radical and pleasing. Both service delivery and corporate culture have to be rethought to satisfy the so called digital natives with IT and Social Media tools that enhance Customer Experience. So play the MVNO game for the right reasons and the right way… not some half baked strategy that was cooked up with stale ingredients from a traditional Telco mindset or just because you think MVNO is a steal !!
Sadiq Malik ( Telco Strategist )