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ADDRESSING THE MOBILE MARKET WITH
THE MVNO MODEL
SVP ADVISORS
March 2010
RETHINKING COMMUNICATIONS
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Contents
1. About SVP Advisors
2. The MVNO model
3. The international experience
4. Successfully launching an MVNO
2
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3
SVP Advisors is a management consulting
firm, which specialises in Regulation and
Business Strategy in the broad telecoms
sector
SVP Advisorsclients include:
Intl Organizations (EC)
Regulators (TRA UAE, CITC, CMT,
NITA, EETT, AGCOM, OCECPR)
Operators (Turkcell, Telecom Italia,
Telefnica)
Financial Institutions (Citibank,
Banco Santander, Inter Development
Bank)
SVP Advisors in a snapshot
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SVP Advisors experience with MVNO
Client Project Description and Objectives
MNO (EE) Support in drafting wholesale offer for MVNOs
Development of MVNO pricing model (retail minus, cost plus)
MNO (EE) Support in definition of MVNO strategy
Development of a tool to assess the viability of different MVNO models
Private Equity
Fund (WE)
Review of 2 MVNO business plans
Assessment of investment opportunity
MVNO (WE) Support in negotiations with host operator
Development of an internal costing model
MNO (WE) Support in lobbying with the Regulator against MVNO access obligation
Mobile market and competition analysis
Regulator (WE) Mobile market and competition analysis
Assessment of impact of MVNO entry in the mobile market
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Assess the MVNO opportunity in new markets
Develop business case/plans
Support in negotiations with host networks/MVNEs
Develop innovative voice and data propositions
Support in the definition of wholesale and MVNO strategy
Evaluate proposals of candidate MVNOs
Develop cost-based models to determine wholesale MVNO prices
Design and implement accounting separation systems
Mobile market analysis (wholesale/retail)
Assess the impact of MVNOs on market and competition
Develop bottom-up models to determine MNOs access costs
Review regulatory accounts of MNOs
SVP Advisors can provide value-added support in different areas
FORMVNOs
FOR
MNOs
FOR
NRAs
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Contents
1. About SVP Advisors
2. The MVNO model
3. The international experience
4. Successfully launching an MVNO
6
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Definition of MVNO
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Mobile Virtual Network Operators (MVNOs) are companies providing
mobile services to end users without having their own licensed
frequency allocation of radio spectrum
MVNOs buy radio access (airtime) from Mobile Network Operators
(MNOs) in order to provide calls, SMS, data and other mobile services
Depending on their type, MVNOs may also lack additional
infrastructure needed to provide mobile services, e.g. OSS/BSS
Different to MNOs, MVNOs typically have a narrower range of
services/tariffs plans as they focus on a particular market segment
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MVNO as a mean to reach different objectives
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Exploit difference in retail-wholesale prices
Use strong brand to enter a new market
Exploit existing retail distribution network
1. New Player
Sell excess network capacity
Niche products / underserved segments
Ease regulatory pressure
2. Mobile NetworkOperator (MNO)
Complement offering to existing clients
First low-risk step into mobile
Counter-attack mobile operators
3. Fixed operator
The MVNO model can well serve different type of players
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1. The MVNO model for a New Player
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Large corporations, small companies or entrepreneurs can use the
MVNO model to reach mobile customers with:
Simple and cheap tariffs
New services
Innovative voice and data propositions
Cross-promotions (existing activities)
Examples:
Supermarket chains distributing prepaid SIMs with cheap traffic
Banks enhancing their customersexperience through mobile
Media brands providing own content directly to end users
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2. The MVNO model for established MNOs
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MVNO model
MVNO develops and retainsrelationship with customers
MVNO develops its owntariffs and (in some cases)services
MNO charges MVNO perairtime and use of other
elements of the value chain
MNO typically hosts severalMVNOs at a time
Sub-brand model
MNO maintains customerrelationship
New brand or use existingstrong brand to market theservices
MNO generates directrevenue streams from
customers
Different sub-brands used toaddress niche segments
The MVNO is one of two models available to MNOs to target market
segments (the other being launching sub-brands)
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3. The MVNO model for fixed operators
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FMC pushes operators to move into each others core businesses
Fixed operators can effectively enter the mobile market through MVNO
Quick time-to-market
Low capex commitment (no license fee, network deployment)
MVNOModel
4Play to increaseAPRU and reduce
churn
Mobile BB tominimize F2Msubstitution
GSM homezonesolutions tobypass fixed
network
An MVNO type could be defined according to the elements it
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An MVNO type could be defined according to the elements itcontrols in the mobile services value chain
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SIM Card &Provisioning
VAS &ServicePlatform
Sales &Distribution
ValueProposition
Billling SupportRadio
Spectrum
BRAND
NetworkSwitching
MVNO OWNS MNO OWNS MVNO MAY OR MAY NOT OWN
LIGHT
FULL
NETWORKINFRASTRUCTURE
CONTENT &APPLICATIONS
OPERATIONS SALES & MARKETING
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Contents
1. About SVP Advisors
2. The MVNO model
3. The international experience
4. Successfully launching an MVNO
13
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MVNOs presence in the World at a glance
There are about 500 active MVNOs worldwide (as of March 2010)
They control an estimated 2% of the total c.4.8bn mobile connections
Their presence outside WE and the US is still largely underdeveloped
4 MVNOs
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MVNOs presence in Western Europe
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SPA
25 MVNO
POR
5 MVNO
FRA
30 MVNO
UK
28 MVNO
BEL
24 MVNO
NED
41 MVNO
ITA
14 MVNO
AUT
3 MVNO
GER
65 MVNO
DEN
36 MVNO
FIN
5 MVNO
SWE
7 MVNO
Source: SVP Advisors estimates, GSMA Wireless Intelligence
10%-19% SHARE
6%-9% SHARE
20% SHARE
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Overview of MVNO models [1]
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MVNO MODELS DESCRIPTION EXAMPLES
Ethnic Targets international communities providing
cheap calls to home countries
Discount No frills simple and cheap mobile services
targeting price sensitive customers
Retail Offered by retailers with strong distribution
network targeting the mass market
Telecom Mobile services offered to landiline customers
in addition to existing services
Media/Youth Value added music and video content
targeting young people
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Overview of MVNO models [2]
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MVNO MODELS DESCRIPTION EXAMPLES
Banking Targets existing customers providing
additional services such as mobile banking
Data MVNOs that provide only mobile data and
broadband access (no voice)
Business Targets corporate customers with tailored
voice and data solutions
Web Offers innovative services e.g. call filtering,
personalised voicemail and online inbox
Advertising Free calls and SMS subsidized by targeted
advertising to subscribers
C d i h i i l O k
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Current trends in the international MVNO market
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In mature MVNO markets (e.g. Northern Europe) mass market
generic MVNOs are losing ground to niche MVNOs targeting specific
segments or offering innovative services and solutions
Several MNOs are becoming increasingly active in the MVNO market
Buying MVNOs hosted in their network (e.g. Sprint-Virgin Mobile)
Launching sub-brands
As mobile markets approach maturity and regulation promotes
competition, MVNOs are expected to appear in many new countries The market characteristics, the business initiative and the strategy
of MNOs will drive the process in each country
C t t
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Contents
1. About SVP Advisors
2. The MVNO model
3. The international experience
4. Successfully launching an MVNO
19
Th diff t h f MVNO l h
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The different phases of an MVNO launch
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Regulation
Market &competitionreview
Gap analysis
Positioning
Negotiationswith MNOs
Agreementwith host MNO
Selection ofthe enabling
platform
Preparation ofbusiness plan
Branding
Valueproposition
Sales &distribution
strategy
Marketing
1. Selecting theMVNO model
2. Setting-up thebusiness
3. Preparing forlaunch
The selection of the model is driven by the market opportunity and
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y pp ythe positioning of the MVNO
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Competitive market
(some) underserved segments
MARKET/GAP ANALYSIS
Limited competition on price
Significant retail-wholesale gap
Simple, cheapmobile services
MVNO MODELPOSITIONING
Competitive offertailored to target
segment
DISCOUNTRETAIL
ILLUSTRATIVE
ETHNICBUSINESS
YOUTH
Poorly differentiated offer
Limited availability of VAS/data
Innovativeservice &
applications
MEDIAWEB
BANKING
Mature telecoms sector
Fixed-mobile convergence
Extend fixedservice offering
to mobile
TELECOMDATA
The selection of the MNO and the consequent agreement is a
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q gfundamental step in the MVNO launch
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Identify MNO which fits better with the selected MVNO model
Overall market positioning
Target segment penetration
Put first on the list candidate MNOs:
With clear wholesale/MVNO strategy
Seeing MVNO as a partner (not a competitor)
Useregulatorythreat in case of:
Hostile approach by all/most MNOs
Excessive wholesale rates
The pricing model is the single most important element of the
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g gwholesale agreement
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Commercial
Cost PlusRetail Minus
Works well incase of MNO
and MVNOworking well as
partners
Max flexibilityfor the MVNOto compete on
cost anddifferentiation
-
Margin risk forthe MVNO as itis dependent onMNOs moves
Retail Minus and Cost Plus are often imposed by Regulators
Selection of the Enabling Platform: the role of MVNEs
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Selection of the Enabling Platform: the role of MVNEs
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MVNOs owning the elements in the mobile value chain relating to
infrastructure and operations can either
Develop these in-house
Outsource them to a Mobile Virtual Network Enabler (MVNE)
An MVNE is a company whose mission is to facilitate MVNOs markettheir services, acting as:
A One-stop-shop, providing the whole back-end enablement
(including the airtime)
A provider of specific applications/services required by the MVNO(e.g. service platform, billing, customer care, VAS, etc)
Preparing for launch
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Preparing for launch
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Brand should reflect MVNOs mission and positioning
Use existing strong brand (if available)
Consider partnership with existing brand
Branding
Should be tailored to target customers needs
Differentiated from other mobile players
Commercial implications should be taken into account
Value proposition
Coverage very important especially for prepaid
Consider partnership with host MNO (or other retailers)
Local regulations should be taken into account
Sales &distribution
strategy
Define strategy for launch (brand awareness)
Define ATL and BTL mix based on budget
Consider innovative low-cost mechanismsMarketing
Focus not only on acquisition but also on retention
Exploit synergies with existing operations (if applicable)
Maximize efficiency in all operations
Other
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2009 SVP Advisors STRICTLY CONFIDENTIAL
Any questions? Please contact:
Dimitri Kallinis
Partner
Company Address (main offices):
C/ Almagro 15, 5th floor
28010, Madrid
Spain
Telephone number:
+34 91 310 2895
Fax number:
+34 91 141 28 11
THANK YOU