Our research shows emergence of new and more innovative MVNO models across the globe, however MEA region is still behind these developments and even the traditional models could generate further market share.
MEA Regulators have chance of shaping the telecom policies toward enabling more of MVNO presence in their host countries
Regulatory guidance, policy and terms play one of the most critical roles in any telecoms business success but it matters even more so for MVNOs. In the case of MVNOs, the role of the regulator varies across the spectrum from ‘no intervention role’ to ‘mandated wholesale access’. The regulators are keen to open up an established market at a lower cost of entry and increase competition while encouraging the introduction of value added services. The balancing act here is to establish a policy where the host MNO’s are encouraged instead of being threatened and the MVNO’s are enabled into wholesale contracts with MNO’s. Mobile number portability (MNP) and mandated access are among a few key tactics that go in favour of MVNOs from a regulatory standpoint.
Salience has developed a unique approach for development of successful MVNO business model that combines traditional discount approach with service innovation and focuses on four critical success factors
MVNO strategies are evolving with the changes in the industry, the models and the regulatory evolution. The major shift in strategy is seen in the movement from a discount based approach to an innovation based approach. The research at Salience shows that the balance between price and the differentiation brought in through innovation will determine the winning MVNO strategies of the future.
Salience’s MVNO practice has established four critical success factors that are vital within an MVNO lifecycle. Informed decision making and planning across these factors has proven to help MVNOs along the challenging journey. These are: Partnering for strengths, Customer centric propositions, Efficient / lean technology solutions and Products innovation.
The business case of an MVNO is considered to be a manifestation of a retail business more than a service provider business. We start with taking a look at the MVNO business model options that generally appear in every market. These models vary from a reseller, sub-brand, lite MVNO and full MVNO. The investments, cost profile and revenue profiles of each differ significantly and therefore impact the company business case. In the case of a full MVNO 50% - 60% of the costs are accounted into the interconnection and wholesale contracts, 15-20% on sales and marketing while 10-15% on customer care. Our research found that peak funding on a typical full MVNO project is observed to fall between US$ 10M - US$ 15M.
Most common reason for MVNO failure is lack of planning and investment at the beginning
Failure of an MVNO business is not unfounded in the industry. Year 2004-2006 experienced the rise of MVNO markets in North America and Europe. This was followed with a dip in 2009 and a re-birth in 2012. Germany where MVNOs form 20% of the total mobile market is considered to be one of the success stories. But why do MVNOs fail and what brings them to a closure? Salience research reveals a set of common patterns that exist across most of these cases. The common aspect being lack of planning and investment in the early stages of start-up.
The reasons for failure revolve around brand, product, market and operations. By adequate investing in initial stages these mistakes can be avoided through analysis and business planning. Disney Mobile in 2007 brought its operations to a closure since the demographic content appeal was found to be insufficient to hold the subscriber base loyal to the brand.
Salience four phased approach leads MVNO investors from idea to successful launch
Mastering success is critical to the profitable evolution of an MVNO operation. Salience Consulting helps its clients in a wide variety of ways to achieve this success. Having developed methodologies and frameworks to guide the operation from investment stage to start up stage we are positioned to advice operators, regulators and investors in this area. At Salience we practice a four-phased approach to cover the entire spectrum of an MVNO launch.
The methodology and practice in the exhibit guides the lifecycle of the MVNO investment. Salience’s specialist resources on strategy, technology, commercial and finance are utilized across this advisory spectrum to achieve the desired outcomes in the MVNO business plan.
The mobile industry is poised to be heading into a direction where business model transformation could be led by innovative MVNO propositions. The MEA market certainly is one of those that are well positioned to benefit from this opportunity. Learning from MVNO failures, creating OTT products and getting the initial investment strategy right is the way forward. Regulatory policy making to be an enabler of an MNO – MVNO relationship creates the much needed foundation. Salience Consulting’s MVNO frameworks position the stakeholders to cover the most critical aspects of this transformation journey.
Selecting the right partner to fit the developed model
Situation & Challenges
A regional emerging market recently regulated the MVNO policy and invited investors and operators to participate in the bidding process. The client was looking to enter this MVNO market and wanted to have the right strategy and partnerships in place for this opportunity.
Emerging markets come with the challenge of lower ARPU’s and high penetration rates on one hand but with the opportunity to innovate and grow on the other hand.
Salience Consulting advised the client through the initial journey of feasibility, market entry strategy and striking the right partnerships. Salience’s team helped the client to undertake the regulatory steps by benchmarking the policy terms and conditions.
Our experts then established initial business case to work out the best available MVNO model from the license options. Eventually Salience played the advisory role to form a working consortium that will synergize and add value to ensure a profitable MVNO operation.