Extract from Pipeline Magazine, Volume 9 |Rising Stars: MVNOs Set to Shine
Who wouldn’t want to be a mobile operator? Fierce competition, saturated markets, eroding margins, and astronomical network management costs – what’s not to love? But for companies still longing to get in the mobile game, there may be a better way, and no better time than now.
Top-tier mobile network operators (MNOs) have been rolling out the red carpet with comprehensive wholesale offerings to ease the launch of MVNOs, or mobile virtual network operators. Sprint, which has been aggressively enabling MVNOs in the US market,announced its Single Source Enablement package last July, proclaiming it “lets anyone from entrepreneurs to enterprises deliver their own branded wireless service with as much or as little investment as they prefer.”
Three months later the company announced it had expanded its offering to include a pay-per-use data solution in an attempt to further spread the allure of becoming an MVNO to the retail, transportation and hospitality industries. Sprint’s press release stated, “This new turnkey product does not require the Mobile Virtual Network Operator (MVNO) to have previous wireless experience or wireless support systems to launch this service.”
AT&T, T-Mobile and Verizon all have MVNO offerings in the US with varying levels of complexity and benefits. But the appeal of needing little start-up capital, having no network to maintain, and requiring no experience or support systems, all while retaining up to 80 percent of monthly billing, has perked up more than just a few ears.
A report from Wireless Intelligence last May noted that there are over 800 MVNOs worldwide, not counting MNO sub-brands, and their numbers are growing. It indicated that nearly two-thirds of MVNOs are in Europe; the Asia-Pacific region is second, while North America is a distant third. The report also cited regulatory issues restricting growth in regions like the Middle East and Latin America, although in recent months there have been signs of progress.
In a web-based seminar given last November by telco consultants CSMG, vice president Mike Greening stated that the MVNO opportunity is beginning to open up in the Middle East, with headway being made most prominently by Oman, which had nearly 10 percent MVNO market penetration at the time of his presentation. Greening also pointed out that although the market is still in its relative infancy in Africa, he’s seen a great deal of movement there: the majority of activity is taking place in the south, but regulatory easing in northern Africa is potentially setting the stage for additional opportunities.
New, formerly closed markets burgeoning with potential MVNO opportunities are also coming online at an increased rate. In early January, China’s Ministry of Industry and Information Technology (MIIT) presented a draft proposal that would let MVNOs compete with state-owned mobile operators. Once finalized, this opportunity would single-handedly open the door for private companies to a market of over a billion potential customers.
As you might have guessed, MVNOs are popping up everywhere, serving unique customer segments and emerging markets around the world. For the MVNO that can find its niche, particularly as a global player in those emerging markets, the opportunity could be staggering. But while the allure of being a mobile provider without the wireless-network albatross may be enticing, narrow profit margins, aggressive competition and challenging regulatory issues are keeping the herd relatively thin for now.
Making an MVNO work
If you’re an MNO, chances are your network isn’t that different from the next guy’s. Many customers don’t understand network capabilities or why the number or type of towers you have impacts their experience. Even if you don’t have your own network, chances are you can now piggyback on any of the world’s biggest and best networks. The simple truth is the network is no longer a competitive differentiator.
Today’s customers are looking for more than the latest “G,” and they’re gravitating toward providers they can trust, ones that serve their unique segment and can add extra value and personalization to their service experience. This presents several unique opportunities for MVNOs:
But no matter whether you’re a major consumer brand, an MVNO focused on a specific customer segment or somewhere in between, you have to be extremely efficient to survive.
With the network all but off the table, MVNOs can focus their efforts on what may be the final remaining competitive differentiator: the customer experience. But the customer experience is extremely complex and affects many different touchpoints, from sales, marketing and fulfillment to device and service management, customer service, billing, and more. For MVNOs without a telco background, the task may be daunting and, ultimately, the reason for their ultimate demise.
According to Joe Mallahan, CEO of Step Up Mobile, “Launching a new MVNO to the market means that the top priorities for us are focused on delivering a high-quality customer experience and being nimble to market changes while maintaining a lean cost base. We believe that by having our billing and customer-care platform provided as a software-as-a-service [SaaS], cloud-based system will support our requirements today and in the future.”
Communications technologies such as operational and business support systems (OSS/BSS) have been around for a long time, honed in the high-tech workshops of some of the world’s largest operators. But the cold reality of much fewer resources, longer return-on-investment (ROI) cycles, a lack of telco expertise, and limited funding and IT resources can spell disaster for a fledgling MVNO.
The opportunity to increase retail and content engagements may offset the cost for some of the big consumer brands, but it still doesn’t address the complexity of managing the customer experience. Even though some of the wholesale models provide support and systems, MVNOs still have to figure out how to efficiently and accurately sell to, bill and manage their customers.
The MVNO enablers
One of the first places MVNOs can look to ease their entrance into the market is their host MNO. Many incumbents offer comprehensive systems and support offerings as part of their MVNO package. In the press release announcing its Single Source Enablement offering, Sprint stated:
“Single Source Enablement can cover all systems, processes, customer care, online Web enablement, and the warehousing and distribution of devices so an MVNO can focus almost solely on acquiring customers. The model can be customized to meet each MVNO’s unique business needs. Specialized customer loyalty programs and other value-added products can be supported under this model.”
While offerings like these may look attractive, they tend to come at a higher cost, potentially making already thin margins even thinner. However, the intent to enable MVNOs to focus on the acquisition of customers is essential. In January the Besen Group, an international consulting company that specializes in MVNO enablement, circulated its list of nine key success factors for 4G MVNOs, almost half of which related to the acquisition of customers.
Independent software vendors (ISVs) and platform providers, many of which possess an invaluable legacy within the traditional telecom market, have also jumped into the MVNO game. Coupled with the momentum of cloud services, a number of them have begun to offer cloud-based SaaS and hosted or managed software models that enable MVNOs and mobile virtual network enablers (MVNEs) to leverage their solutions at a fraction of the cost of traditional implementation, allowing for lower risk and faster time-to-market.
“The MVNO market is the natural evolution of the competitive nature of the mobile marketplace, and we see the opportunity as quite large,” says Lucas Skoczkowski, CEO of Redknee Solutions, a communications technology provider that’s had a tremendous amount of recent success enabling MVNOs in markets around the world.
“We have tailored our solutions to ensure our customers can leverage the best of our technology in whatever model makes the most sense for them, providing the efficiency they need and enable them to mine the critical data so that they can tailor their offerings quickly and easily to their customers. MVNOs need both to effectively thrive, and legacy solutions don’t work well within the delicate MVNO environment.”
By using communications technology solutions like Redknee’s, MVNOs can leverage their expertise and that of their partner ecosystem to generate a suite of best-of-breed solutions that are pre-integrated and have years of telco experience already baked in.
“We selected Redknee’s billing and customer-care solution because it provides a rich, out-of-the-box offering, which supports our entire business operation for customer acquisition, care and retention and ensures that we will deliver a high-quality customer experience,” said Step Up Mobile’s Joe Mallahan in a Redknee press release last fall. “In addition, the business model that Redknee’s cloud-based, end-to-end managed solution offers will enable us to launch to the market quickly with minimal risk.”
Platform providers like Microsoft Corporation are also getting behind vendors such as Redknee to provide the foundation for their solutions and integration into complementary products like Microsoft Dynamics CRM.
“What’s important to Microsoft is that we provide the platform on which our partner ecosystem can innovate,” says Bonnie Jeanne Maher, the company’s industry managing director for telecommunications. “Solutions built on Microsoft’s carrier-grade platform give MVNOs the reliability they need and provide a comprehensive suite of products that allows providers to take advantage of the rich, industry-specific technology. We bring ease of use, experience and efficiency to the communications industry and tailor our platform to the specific market so our partners can better focus on acquiring and serving their customers.”
The new MVNO frontier
Like any new frontier, there are challenges and pitfalls that need to be navigated. With MVNOs, spectrum, device availability, regulatory restrictions, and lack of funding and expertise are just a few to consider. However, with new markets coming online all the time, and offerings that elevate complications but reduce time-to-market, the opportunity may simply be too great to ignore.
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