ITS 15th Biennial Conference, Berlin

1. ITS 15th Biennial Conference, Berlin MOBILE VIRTUAL NETWORK OPERATORS: CASE FINLANDAnnukka KiiskiHelsinki University of Technologyannukka.kiiski@hut.fi6.9.2004

2. Outline • MVNO definition • Regulation • MVNO business strategy scenarios • Case study: Finnish market • overview • effect of the deregulation • MVNO strategies • Conclusions

3. MVNO definition • provides mobile voice and data services without owning the spectrum license • network capacity is gained through commercial, bilateral agreements • delivers its own SIM cards • takes care of • branding of the services • marketing of the services • billing of the services • customer care • can be divided into subcategories (light – true) based on • network components owned by MVNO (a technology-based definition) • services provided by MVNO itself (a service-based definition)

4. Regulation • Communication directives issued by EU have enabled the business opportunity for MVNOs • main focus is to obligate network operators to lease out network capacity at a fair price • Regulatory acts • mobile number portability • regulation of interconnection, call termination and call origination fees • Not all EU members have incorporated the European Union Directives into national law

5. MVNO business strategy scenarios (1) • low price • narrow focus • service differentiation • service reselling • international clustering • defined by analyzing the business environment, MVNO’s strategic position on the market and its internal resources

6. MVNO business strategy scenarios (2)

7. Case study: Finnish market • Advanced and exciting mobile market, because • the first GSM call was made in Finland • until the year 2000 Finland had the highest mobile subscription in the world • competition has long roots because of the numerous local telephone operators • a large number of diverse MVNOs • Despite that, Finland has fallen behind in international rankings and mobile data usage during the last two years

8. Finnish market: overview • 3 GSM licenses, market shares • TeliaSonera 49% • Elisa Mobile 28% • dna (Finnet Group) 15% • MVNOs and MSOs 8% • EU regulation has been incorporated in the Finnish law • TeliaSonera the only SMP in call origination market • all incumbents SMPs in call termination market • mobile number portability 7/2003 • Market is really active

9. Effect of the deregulation on the Finnish market • incumbents have had to lower their prices and subsidize subscriptions with free air time and goods • decrease in the GSM call prices 6,9% during 2003 • churn roughly doubled after the MNP and invasion of MVNOs, resulting 23% yearly churn • usage of new data services hasn’t increased as expected • subscriptions with ’one rate for all calls’ have become popular

10. Finnish MVNO strategies (1)

11. Finnish MVNO strategies (2) • Applying the strategy scenario model to the Finnish market shows that Finnish MVNOs are deploying multiple strategies (instead of just one) • Only one of the MVNOs (Saunalahti) is making profitable business • Only one of the MVNOs (MTV3) is using service innovation to attract new customers

12. Conclusions • The defined model is applicable • it helps to explain the strategic options MVNOs have • Regulatory encouragement for creating a MVNO opportunity is likely to increase competition and to lower tariff levels • The service innovation in Finland did not increase despite the increased competition • For MNOs, MVNO is an opportunity in addition to a regulatory imperative