 | Issue: | India 2012 |
| Article no.: | 8 | |
| Topic: | MVNO – Find your niche and make it count! | |
| Author: | Vikas Bansal | |
| Title: | Director, Carrier Sales – South Asia and Middle East | |
| Organisation: | Cable&Wireless Worldwide | |
| PDF size: | 291KB |
About author
Vikas Bansal is the Director for Carrier Sales (South Asia and Middle East) at Cable&Wireless Worldwide. In this role, he is responsible for strengthening Cable&Wireless Worldwide’s wholesale business and managing relationships with leading carriers across South Asia and Middle East. Cable&Wireless Worldwide has operated in India since 1995, providing enterprise and carrier telecommunication solutions including dedicated services, high quality managed security services, and hosting to the largest users of telecoms services across the globe. In India alone, the company operates with more than 150 customers in the BPO, IT, BFSI and other key verticals.
Vikas Bansal has been with C&W Worldwide for more than ten years. He played a lead role in setting up the Indian entity of C&W and securing the international long distance (ILD) and national long distance (NLD) licenses and the associated funding. Vikas Bansal has been certified “Corporate Director” by World Council for Corporate Governance, UK. An accomplished speaker, he has delivered keynote addresses at many seminars and conferences. Prior to taking the current sales role, he headed the presales team to provide solutions to Enterprise and Carrier Customers in India and South Asia. He has also worked as a commercial partner manager and as a solutions consultant in previous roles. Amongst his many achievements, he was responsible for growing the business in India and expanding to other emerging markets including Srilanka, Pakistan and Bangladesh. He was awarded “Outstanding Sales Manager” for 2009-10 and was named as the “Best Employee of the Year” for 2006-07. Before joining Cable&Wireless, Mr Bansal worked with HCL Comnet, Global E-Commerce Services and Punjab Communications in various roles.
Article abstract
Since MVNOs (Mobile Virtual Network Operators) do not focus on building their own infrastructure, they can explore innovative services in special niche markets. Originally a Scandinavian idea, it now has more than 1000 MVNOs in operation worldwide, but emerging economies are lagging behind. India is still waiting for the DoT final verdict, while it considers the merits of the MVNO model particularly for rural areas. Regardless of the geography, the secret for MVNO sustainable success is, no doubt, in finding the right niche market and addressing it with the right solutions. Such lasting solutions are often based on collaboration, such as the Future Group and Tata Teleservices who launched Talk24 in India,
Full Article
MVNO – Find your niche and make it count!
By Vikas Bansal – Director, Carrier Sales – South Asia and Middle East at Cable&Wireless Worldwide
In 2008, just when it looked like nothing could go wrong with the Telecommunications industry, the ‘R’ phenomenon reared its ugly head. While Denmark was the first to sniff Recession, the world soon caught a terrible cold. World markets trembled, investments ceased, transformational projects were thrown into the back burner. While chaos reigned, one industry looked at this cyclic phase as an opportunity – to lie low and strike back when the upswing invariably comes. This is the story of the Mobile Virtual Network Operators (MVNOs).
So who are the usual suspects?
Simply put, an MVNO is a mobile operator that does not own anything except bright ideas. While the Mobile Network Operator (MNO) considers a robust network infrastructure and a spectrum licence as crucial assets, MVNOs scoff at the idea of building a network. Instead, they approach these companies and ask to buy Minutes Of Use (MOU) to sell to their customers. The idea takes care of the one thing that every company fears during a recession – Capital Expenditure. This business model also dispenses with the time-consuming task of rolling out extensive radio infrastructure.
MVNOs identify a specific market segment and build a brand which appeals to this niche market e.g. fun loving young population, Bengali speaking population in the UK, People from a certain ethnic background etc. Some MVNOs deploy their own mobile IN (Intelligent network) infrastructure in order to facilitate the means to offer value-added services. In this way, MNVOs can treat incumbent infrastructure such as radio network as a commodity, while they offer their own advanced services, based on exploitation of their own intelligent network infrastructure. It is important to ensure that customers do not distinguish any significant differences in network performance, yet offer some special differentiation to their customers.
So who took the plunge?
Companies across diverse industries saw the opportunity in the MVNO space. Why else would a British multinational grocery retailer as Tesco, or Mr Branson’s Virgin play on this pitch? While Virgin Atlantic Airlines used its market recognition and brand positioning for selling directly to its airline customers and others, Tesco Mobile focused on value for money deals. Owing to the stupendous success of their service, Tesco Mobile launched services in Hungary this February.
Closer to home in India, the Future Group and Tata Teleservices Limited launched Talk24 that encouraged users to talk more on the TTSL network, and shop more at the Future Group extensive retail footprint across the country.
“Show me the money”
Though low capital costs would probably be an important reason to plunge into MVNO business, the inherent benefits makes you stay in it for the long run. This is a clear win-win-win situation for MVNOs, MNOs and end customers. While MNOs get to sweat their Telecom assets further and broaden their customer base at near zero cost of acquisition, MVNOs benefit from low capital expenses and sustainable medium profit margins. Customers gain from a host of value-added services that come with no distinguishable change in network performance.
Often the margin realised from MVNO customers is actually higher than the margin gained from the average MNO customer. There is also the benefit of making the market more efficient on the cost side and expediting the adoption of services on the revenue side. Most regulatory bodies across the globe are in favour of MVNOs as a means of encouraging competition, which would ultimately lead to greater choice and lower prices. A virtual operator, as reasoned by the authorities, could set up quickly and cheaply, and provide an additional revenue stream for its licensed host. With increasing acceptance, many incumbent mobile operators evaluate the opportunity to offer supplementary MVNO services of their own. Existing mobile operators can use their established branding, service knowledge and supplier relationships to complete against independent MVNOs.
A close analogy to the MVNO across a different industry could be co-branded credit cards e.g. American Express Kingfisher credit card in India. The financial transaction infrastructure is managed by American Express while Kingfisher uses its brand to get additional customers to American Express. This generates revenues for Kingfisher and gives additional value to customers via free air miles that can be used by customers to get free Air tickets on Kingfisher Airlines, or a host of other benefits. One could probably call it the CCVNO (Credit Card Virtual Network Operator). The card squarely focuses on a niche segment of frequent travellers, who are usually the high spending individuals.
Origin of MVNO – Facts and figures
The ever-innovative Scandinavians gave us the first MVNO in the 1990s. Today, there are almost 1,000 MVNO operations worldwide. According to last year’s report from Informa Telecoms and Media, the global MVNO market will reach 186 million subscriptions by the end of 2015 with North America and Western Europe still accounting for the vast majority. These two regions will remain the largest MVNO markets in terms of the number of subscriptions and players and will also continue to top the ranks in terms of MVNO penetration.
Fig. 1: Global, number of MVNO launches, by region, 1991-2010
Source: Informa Telecom and Media June 2011
The number of MVNO launches peaked in 2005-2007 and the recession saw the industry in a state of limbo with minimal launches across the world. However, Industry watchers predict a spike in launches in the next couple of years.
MVNO in emerging markets
While established MVNO markets will drive growth in this sector, emerging markets are also warming up to the idea of MVNOs. Let’s examine two key markets in our part of the world, Saudi Arabia and India. Saudi Arabia’s telecommunications sector is set to get a major stir this year, with up to three new operators entering the mobile phone segment via the MVNO route. According to the Saudi Communications and Information Technology Commission (CITC) – which serves as the kingdom’s telecommunications regulator – three mobile virtual network operator licences would be issued in 2012. The move heralds a different approach for the Saudi telecoms industry, one that is seen as marking a new era in competitiveness and maturity instead of focusing on rolling out infrastructure. Currently, Oman is the only Gulf state that has licensed MVNOs in operation.
In India, the Telecom Regulatory Authority of India (TRAI) has asked the Department of Telecommunications (DoT) to allow rollout of mobile virtual network operators in the national telecom policy, which is expected to be finalised in April this year. The DoT is also considering the introduction of the MVNO model to set up a shared wireless broadband network in rural areas that can be used by multiple operators. While the Indian market awaits the final verdict from the government on regulations governing MVNOs, companies vying to get the first-mover advantage are finding innovative ways of addressing the MVNO needs of the market.
What’s the success formula?
With better regulation, increased competition and lower costs, the key to a sustainable business is to find a niche market. While ethnic MVNOs have found great success in the UK (MVNOs account for 17 per cent of the mobile market in the UK), the key to unlock diverse markets such as India might be in offering unique value-added services. MVNOs are well positioned to serve niche markets and sub-segments more effectively than larger operators do. While this positioning is an advantage, to be successful MVNOs must excel across several other important factors, including:
• Generating incremental revenue
• Extending brands to a niche market in a timely manner
• Differentiating from the competition via value added services
• Establishing operational capabilities.
Concluding remarks
While the basic MVNO model has now evolved into many variants and spread well beyond its European roots, the key to success is to find a special niche market. There are MVNOs for non-consumer markets and those that specialise in M2M data traffic. Many have a highly specific ethnic or cultural specialism. There are nearly fifty MVNOs that get most of their business from mobile broadband services, not voice… so find your own niche!
With mobile density already quite high in emerging markets such as India, the next phase of growth in the mobile industry will come through innovative services. Due to their niche play, MVNOs have a great opportunity to succeed in this new world order. The convergence of media, entertainment and telecommunications, along with increased network performance triggered by 3G and LTE technologies, will open many new dimensions and will create new business opportunities for MVNOs.
The opportunity is present. The future is ready. The only question is whether you want to grab your share of the pie.
