Future of MVNO Is Bright Driven By Growth In Emerging Markets!

28 09 2009

Recently Telegeography, ran an interesting study to investigate the trends in MVNO (Mobile Virtual Network Operator) industry. Though current outlook is grim, the future of MVNO industry looks bright, strongly driven by growth in emerging markets.

MVNO Share in Wireless Market

At present, MVNO operate in N.America, W.Europe & some other countries. In emerging markets like India, China, Brazil etc, where substantial growth in wireless subscriber numbers is reported, have either prohibited MVNO operation or in very nascent stage of development.

The highlights of study can be summarized as:

  • In W.Europe & N. America, MVNO accounted 7% of wireless subscribers in 2003, which now grew over to 9% by the end of June-09. During this time, the wireless subscriber base grew by 60% in these two regions.
  • In contrast, from 2003 to June 2009, the number of wireless subscribers grew over 3.5 billion in emerging markets, but MVNO  account only 0.5% of total subscriber base.
  • Globally, MVNO share of wireless subscribers dropped from 3% in 2003 to little over 2%, but reality is that MVNO have managed to gain the share of subscribers in well developed markets and got some foot hold in emerging markets too, which itself is positive sign.
  • MVNO will gain momentum in all around world in next five years, as few markets will approach near maturity and to serve better as well to thrive competition, the regulatory regime will allow MVNO to roll out services in new countries, which will drive the growth momentum.

Whatever may be the case, MVNO are surely going to seize opportunities in emerging markets as far as services loopholes & market segmentation is concerned. In any case, the benefit will be of consumers’, who could get to see the drop in service charges along with launch of varied new services, which mayn’t be possible to deliver in only Mobile Operator (MNO) playing field.

MVNO-A Challenge or Opportunity?

26 04 2009

Recently, both Nokia & Ericssion were in news on advising DoT over MVNO guidelines in India. Later both denied such thing, one thing one would hardly deny these days-Gaining importance of MVNOs. Let’s discover some aspects of MVNO business models which could be beneficial for Indian MNOs.

There are some websites discussing the fundamentals of MVNOs. If you aren’t aware of it, please go through the links http://www.telecomspace.com/latesttrends-mvno.html or if you looking for deep discussions about the topic please refer to http://www.telcordia.co.in/collateral/issues_briefs/mvno_issues-brief.pdf. Then for basic understanding you could also check WiKi at http://en.wikipedia.org/wiki/MVNO.  Here we will proceed further with the very idea of MVNO in context with Indian Telecom Market.

With around 40 Cr subscribers in belly & monthly additions of 10 million subscribers Indian telecom market is one of the fastest growing telecom market in the world. Still there are some other facts which need to be addressed before we understand the need of an MVNO in Indian Telecom Market. At the time of writing, the mobile penetration rate in India is just above 30% & there are only 6.2 million Broad-Band subscribers in India. So India comes under the category of one of the least mobile penetrated countries with good opportunity, in terms of increasing the subscriber base, expanding the coverage & along with increasing Broad Band footprint across country.

In India, with launch of franchise of its own, Virgin Mobile (The First MVNO in world launched in 1999, in UK) came close to the term of MVNO in India, but because of no clear guidelines on MVNO business model from DoT, Indian MNOs are losing revenues garnered by MVNOs with their successful business models in other advanced countries like US,UK & Australia. Currently there are 60 MVNOs operational in US, highest anywhere in the world followed by Netherlands & Germany.

What typical business model will be the most viable model from Indian Telecom Operator’s perspective is the real question, we are trying to answer. In spite of the fact that, there is tremendous potential available in market, MNOs here are reluctant in adapting & pushing the MVNO guidelines. The reason, there is no single business case worth adapting in Indian Context. What makes a real difference? According to some, Indian telecom sector is not mature enough to accommodate MVNOs in present scenario. We might have to wait 2-3 years for successful implementation of MVNO model in India. But according to others, with Indian Tier A cities reaching out to 100% mobile penetration e.g New Delhi, there is lots of room for coverage expansion & mobile penetration in rural segment which is still untapped by majority of Indian MNOs. MVNOs can do a lot in filling up this gap, if proper guidelines are given in setting up an MNVO in India.

Like Virgin Mobile, who buys bulk minutes from Tata and resell them to customers directly, we need few more successful business cases to demonstrate the case of MVNOs in India. Though, as mentioned earlier Virgin isn’t a full fledge MVNO, it has setup the case for setting up a MVNO in India successfully. From MNOs point of view, the real concern comes from revenue sharing model with MVNOs. Along with revenue sharing concerns, MNOs also have to look into expanding coverage & subscriber base continually, which need to be addressed on priority. So the real question from MNOs is straightforward,” How setting up an MVNO would really help me in expanding coverage & subscriber base continually, with maximum RoIs & proper revenue sharing model?”

Selling up Bulk Minutes could be starting point and Virgin has successfully demonstrated the same in past 2 years. Actually, if you look deep down Virgin has targeted a niche market “Youth Population” across metros, while keeping prices highly competitive. This is what a need of time! We need to target niche segments which wouldn’t be possible for an MNO to do due to heavy network infrastructure cost needed for the same. So if there is some room for MVNOs in India, we should agree upon targeting niche market from MNOs point of view which wouldn’t be possible to target otherwise.

Targeting rural subscribers is just one more aspect. Can we really setup an Rural MVNO in India, expanding coverage & adding more subscribers? It is interesting to see. Rural market is a niche segment which is yet to be tapped fully. With growing cost of infrastructure rollouts, one viable option for MNOs is to go for Infrastructure sharing. But if you look beyond, expanding the coverage & targeting rural subscribers could be possible if we allow room for setting up MVNOs. This will in-turn maximize the RoIs for MNOs. How? With virtually no need of buying radio spectrum & no telecom infra setup MVNOs can value add to rural segment on existing infrastructure. So from providing VAS to farmers about crop costs, weather, health etc you could virtually take out MNOs from picture. Yes, it is right that you can add VAS very easily these days, but still targeting a niche segment like farmers, is possible economically with MVNOs only.  This will also value add to existing portfolios of VAS of MNOs with less of burden of innovation.

Another aspect of MVNOs which one might need to take in account is introduction of Data services to urban & rural segment. Setting up infrastructure for expanding the broadband subscriber base is a challenging aspect. Many MNOs are pushing deep into BB segment with aggressive tariff plans, but still there is huge potential for competitive pricing & subscribers in BB space in India. An MVNO could really target the niche subscriber base of potential BB users, which would in turn help MNOs in expanding the BB base with less of burden in maintaining the good relations with subscribers. This responsibility would be own by an MNVO who setups its operation with enough funds to maintain a CRM center along with billing & IN support.

At the end, we are looking forward for release of guidelines of MVNOs setup in India. With sheer pace of growth of Indian Telecom sector, we can’t afford to lose the opportunity of targeting some of old pending issues like rural mobile penetration & low broadbnd usage to restrict the growth. An MVNO would really be an opportunity, if we think they can really Value Add to existing Indian Telecom Market.