MVNO Study

MVNO in Telecommunications

The MVNO (Mobile Virtual Network Operator segment of the telecommunications industry is experiencing tremendous growth. The increasingly competitive telecommunications market, both wire line and wireless, has increased carriers' awareness of the importance of MVNE's (network enablers). As a result, companies are investing millions of dollars in their services in order to improve operations and create a competitive advantage.

In terms of aggregate spending on services, projections differ, mainly because there is no consensus on the exact definition of MVNE services. The slight decrease in spending is the result of more companies choosing to build, rather than buy, certain components of their services.

Market Segmentation

Telecommunications MVNE Market Segments

To better understand the market for MVNE applications and services, it is useful to consider the market by segments. With respect to the companies that are true “enablers”, three main criteria for market segmentation are particularly important: geographic, technological, and subscriber. Within these segments, the number of operators will be examined, since it is operators who buy and use Enabler services.

Geographical Market Segments

The available market for MVNE services (Companies like Telogic of Denmark, who are the European leaders in the MVNE market) is indeed global. Literally every country on earth has some type of telecommunications infrastructure in place. However, the degree of tele-density within countries and the number of competitors within countries varies greatly. Therefore, it is useful to segment the available MVNE/MVNO market into global regions.

The segmentation has identified four individual regions: Europe, Latin America, Africa, and Asia. Together, these regions account for the scope of Enabler offerings and partner delivery, and Enabler's potential customers.

Technological Market Segments

Another useful way to look at the overall market is through product services. In this case, the total market was segmented based on whether the operator is a wireless service provider, a wire line service provider, or a niche provider. The number of wireless operators is greater than that of wire line operators. This is to be expected given that in many developing countries wireless is the most cost-effective type of infrastructure. In addition, competition has been active in the wireless market longer than it has been in the wire line market.

Subscriber-Based vs. Pre-paid Segments

The last type of market segmentation to consider is subscriber-based and Pre-paid. The distinction by subscriber size is important because operators' needs, with respect to MVNO applications, typically change with subscriber levels. Enabler's primary focus is on delivering the same cost effective services to both segments of customers which represent the vast majority of available operators.

Market Analysis
Potential CustomersGrowthCAGR
Fixed Telecom Operators26%4815195616066547,98%
Wireless Telecom Operators55%2,0112.1232.2602.3962.5406,01%

Target Market Segment Strategy

A measurement of total available market is the compilation of the number of telecom operators that will replace their service offerings and the number of new operators coming online each year. With over 3,500 Wireless and fixed telephone operators currently in operation, and a projected 1,500 new "niche” operators coming online over five years, this means that over 5,000 MVNO solutions will be needed in the next five years.

Enablers have projected three primary products in their forecast:

  1. Post-paid solutions
  2. Prepaid solutions
  3. Consulting Services projects

The post-paid solutions will be offered to the number of operators listed above, specifically, new operators and those who are choosing to replace their current offerings. Prepaid systems have a much broader market opportunity given the small penetration of Prepaid in Tier 2 and 3 providers. Operators in developing countries project that over 50% of all calls will eventually be prepaid, while developed countries may reach 35%. This growth, coupled with the fact Prepaid is an add-on, increases the number of new services operators will purchase.

Geographic Market

The Enabler Strategy has been used to develop geographic markets by first developing the geographic market closest to home and expanding as one develops experience. With a large center of excellence in Northern Europe, this was the first market to utilize. Africa and Europe are predominately GSM. As a result, moving from Europe to Africa makes perfect sense. Africa is expanding the installed base of GSM systems. Therefore, Enabler has made its first step in Africa and will move forward from there. In addition to Africa, Latin America is another target for services because much of the technology and new solutions are being developed in these regions.

An Enabler's target market is focused on providing solutions to both Tier 3 and Tier 2 operator worldwide. The priority of issues which drive the purchase decision for Tier 3 operators is slightly different than for Tier 1 operators. Understanding these priorities is key to developing the Enabler value proposition within its target market. A list of drivers is given below to compare Tier 3 priorities against Tier 1 priorities as part of the selection criteria for selecting a vendor. These priorities are important to consider when differentiating Enabler from competitors.

Service Business Analysis

The economics of the telecommunication markets support thousands of companies. These companies include direct service providers, hardware suppliers, software suppliers, consultants, and numerous other supporting organizations. However, for the purposes of this report, it is useful to focus only on the companies that provide MVNE applications and services. This industry segment is the main focus of Enabler.

Competition and Buying Patterns

With the increasing demand for MVNO services, many MVNE providers have entered the market. It is estimated that there are over 50 vendors for MVNE systems worldwide. There is an increasing move by telecom operators to develop in-house MVNE solutions for customers. They are formidable competitors with deep pockets, large existing customer bases, and significant influence on customer decision-making. In addition, the majority of players (both large and small) are extending product service portfolios to provide all services, i.e. Internet, mobile, cable, fixed, and convergent services. Enabler will compete in his market by providing high-value products and services at competitive prices.

Competition from MNO’s; We see many MNO’s trying to launch “telco in a box” products - some MNO’s uses their sub-brands (CBB) platforms for doing so. We will have this form of competition but we do not believe that they will be successful if the market works for MVNO (margin available).

The reason for this is:

  • No MNO ever have the right cost structure for an MVNO, O2 in Germany for example used 200 man years for the Tchibo setup. (their Enabler uses approx. 0,5 man years per new start)
  • Nobody with MVNO knowledge will trust the MNO -  they will never have freedom when it comes to ownership of customer, products and pricing etc.
  • One is dependant on one of your major competitors for everything and you have no option of getting away – “on your own”.

Competition from others; with a market worth 100’s of Billions $ - there will be competition, where again, most of these setups will build on a high cost platform, cumbersome processes not covering the whole range (e.g. Convergys, CSC). We strongly believe competitors who have good financial resources will be the most qualified competitors.

Competitive Edge

The Enabler will strive to intimately understand the customer in order to provide solutions that match their specific needs. To be successful, they will develop long term relationships and choose customers that share this model.

In the best-selling publication "Discipline of Market Leaders," customer excellence is defined as "specializing in satisfying unique needs." These unique needs are recognizable only by a vendor with a close relationship and intimate knowledge of the customer.

An Enabler's plan will include:

  1. Develop long-term relationships with its customers.
  2. Avoid clients who do not have long-term potential.
  3. Avoid pure transactions or one-time deals.
  4. Do whatever it takes to please the customer.
  5. Educate employees to be adaptable, flexible, and multi-talented.
  6. Create an unmatched value proposition of best total solution for its clients.
  7. Search for new areas of mutual cooperation.
  8. To constantly improve the value model, develop a value proposition around solutions, and aggressively evolve and improve each solution.
  9. Develop an operating model dedicated to delivering unmatched value.

Complementary to the Enabler range of services, there should be an offering of a turn-key managed-service MVNE platform through arrangements with a select set of partners and supporting vendors. These platforms offer a total solution for ongoing MVNO service management including front and back-office operations, billing and customer care.

Marketing Strategy

This description is intended to be a brief input to a Go To Market strategy for the Enabler. The plan is not specific and it is a very rational reason for that, the respective country is very different on all aspects and will need different approaches due to for example:
  1. MNO agreements, do they allow aggregators or is it as facility management we are able to act
  2. Legislation, what are the pressure for fair pricing and number porting
  3. Maturity of market ( Denmark 50 MVNOs, Spain 0)
  4. Government policies, Italy for example not allowing MVNO’s
  5. Market size and mechanism. For example in US with non GSM networks as Sprint it is Not SIM cards, but handsets one uses for access which make a huge difference.

Customer Care & Billing Overview

An Enabler encompasses a broad range of applications and services. Although definitions vary, these typically include services geared toward customer acquisition, service provisioning, asset management, network management, customer care, and billing. Increasingly, these applications are becoming more interdependent and carriers are beginning to realize how important world-class service offerings are needed to effectively eliminate competition.

Of equal importance one has to concurrently offer customer care and billing (CC&B) solutions. At its highest level, a CC&B system provides a carrier with the means to bill its customers for service. However, bill generation is but one aspect of a complete CC&B application. The data captured by the billing system provides valuable information to both the carrier and the customer on how services are used, what additional services are necessary, how services can be used more efficiently, or even how effective particular promotions or operations have been. Today's CC&B systems collect, collate, manage, and report this valuable information to management, usually in real time.

CC&B systems are also vital in terms of customer service and satisfaction. By having real time access to customer information, customer service representatives can better respond to customer needs in a timely and efficient manner. In addition, modern CC&B systems can turn the monthly bill into an invaluable marketing tool; this is important since the customer's bill is the only regular contact a company has with its customers. As a result, a great deal of attention is typically placed on a company's CC&B applications.

Spanish Market Analysis Summary

In September of 2001 the CMT (Spanish telecom Regulator) published their findings regarding a proposed introduction of the MVNO product into the Spanish market.

Hitherto, there had been various attempts to further this solution but were generally of no consequence. The main obstacles were that on the one part the CMT was mandated to protect the three mobile operators from outside interference ie other EU mobile operators entering the market under the guise of obtaining operator licenses locally, thus to utilize the networks of the encumbents at no cost. The other and much more relevant obstacle was that the then legislation made it obligatory for the mobile operators to disclose their rates to all and sundry. This made the concept of the MVNO untenable. Since that time, new legislation has been introduced and the disclosure element has been dropped. This paves the way for MVNOs to set up in Spain.

More recently, the CMT have set up procedures by way of License Applications, for parties wishing to become an MVNO. It can be seen as two separate camps. On the one hand you have organizations who, by nature of their extensive customer base wish to have the facility of offering mobile services to its customers and on the other, you have resellers who wish to re-sell mobile services to numerous companies.

Spain is one of the next countries to open up. More then 100 MVNO’s has applied for license and more prospects emerge every day.

Spain will offer great opportunities due to the size of market and low level of competitors for the moment. However in a very short term the competition will be fierce and the need for low Capex/Opex will be very apparent.

The need for competence will be huge 50-100 MVNOs and with only three mobile network operators in place (discounting a fourth) in order to obtain professional mobile competence from within Spain will signify an enormous need for finding external competence that will be possible to price at a reasonable level over a twenty-four month period, when it is expected that they will manage between 2.5m and 3m CLIs in Spain.