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Implementation Models of MVNOs Presentation to the Information Society and Media Directorate-General - Unit: Communication Technologies. AGENDA. A few facts/figures to frame MVNO in today’s context How do telecom groups react today towards MVNO: Opportunity or Threat

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slide1
Implementation Models of MVNOs

Presentation to the Information Society and Media Directorate-General - Unit: Communication Technologies

agenda
AGENDA
  • A few facts/figures to frame MVNO in today’s context
        • How do telecom groups react today towards MVNO: Opportunity or Threat
        • MVNO and Segmentation…Same Answer for the Same Issue
        • What a MVNO can bring to capture market shares
  • Back to Theory….
        • Definition of MVNO
        • Strategic Models of MVNO
        • Regulatory Aspects
        • How a MNO should organize its operations to host MVNOs
        • Economical Models
        • Case Study: why no corporate MVNO exist ?
        • State of MVNO market within EU
        • Conclusion
agenda3
AGENDA
  • A few facts/figures to frame MVNO in today’s context
        • How do telecom groups react today towards MVNO: Opportunity or Threat
        • MVNO and Segmentation…Same Answer for the Same Issue
        • What a MVNO can bring to capture market shares
  • Back to Theory….
        • Definition of MVNO
        • Strategic Models of MVNO
        • Regulatory Aspects
        • How a MNO should organize its operations ot host MVNOs
        • Economical Models
        • Case Study: why no corporate MVNO exist ?
        • State of MVNO market within EU
        • Conclusion
  • How MNO Should Respond to MVNO entry
what is the position of telecom groups towards mvno
What is the position of telecom groups towards MVNO ?
  • No common/structured position but a collection of local initiatives:
      • MVNO develop at a different speed within EU members
      • Big telecom (incumbent) groups have mobile assets in most EU countries:
        • MVNO is first seen as a threat
      • When local MVNOs initiatives becomes important in volume/scope, there is an attempt to harmonize/unify
        • Most of the time, local initiatives remain ahead of global program
  • MVNO or more precisely VNO will become the only means to expand footprint of telecom groups
      • The wave of privatization of former State owned telecom companies are finishing
        • All licenses are bought by Middle East countries that have a lot of cash
      • The mobile licenses are too expensive because less and less based on a beauty contest
        • All licenses are bought by Middle East countries that have a lot of cash
  • But no unified vision of MVNO theory and strategy to date within most telecom groups within EU
mvno and segmentation same answer for the same issue
MVNO and Segmentation…Same Answer for the Same Issue
  • Segmentation appears:
      • When MNO understand they all fought between each other for the same (national) market with no possibility to make their offers different from the competitor
      • When MNO segment the market to focus on niches, ethnical communities, loyalty programs via new brands to avoid cannibalisation
  • MVNO appears
      • When an operator decides to attract volumes and traffic to fill the network
      • When an operator wants to promote new usages or to launch new services
      • When an operator feels it can address new markets via 3rd parties without incurring the necessary (marketing) investment.
  • Limits between new brands and MVNO blur
      • MVNO are bought by the MNO
      • MNO start at the same time MVNO and new brands
      • More the new brand is independent from the MNO closer it is from a MVNO because it has its own life parallel to the usual commercial operations (see cases where the network is outsourced)
what can bring a mvno to capture market shares
What can bring a MVNO to capture market shares
  • Good Surprises:
      • MVNO as the first ones to launch web based offers but now copied by MNO
      • MVNO as the first ones to focus on content (especially in the USA but some examples in Europe as Universal Mobile)
      • MVNO as the first ones to make more simple mobile offers and prices
      • MVNO as the first ones to propose pan European corporate services
        • Still in development: they exploit the lack of integration of mobile groups that are still an aggregation of local mobile operators with a local P&L
  • Remedy to Competition Problems in Mobile Markets
      • Access: MVNOs compensate the scarcity of spectrum (evident)
        • MVNO will also exist in any other network economy relying on not replicable assets still owned by a monopoly operator
      • Termination: if MVNOs can fix their termination rates themselves (less evident)
        • Attempt in Austria
      • Roaming: if MVNOs can become member of the GSM Association (less less evident)
        • (Missed) Attempt in Austria
        • Maybe remedy will come with yet-to-come substitution products like WiFi, Wimax
        • Notable exception and real substitution: multi numbers SIM
agenda7
AGENDA
  • A few facts/figures to frame MVNO in today’s context
        • How do telecom groups react today towards MVNO: Opportunity or Threat
        • MVNO and Segmentation…Same Answer for the Same Issue
        • What a MVNO can bring to capture market shares
  • Back to Theory….
        • Definition of MVNO
        • Strategic Models of MVNO
        • Regulatory Aspects
        • How a MNO should organize its operations ot host MVNOs
        • Economical Models
        • Case Study: why no corporate MVNO exist ?
        • State of MVNO market within EU
        • Conclusion
  • How MNO Should Respond to MVNO entry
introduction
INTRODUCTION
  • Definition
      • 3rd Party that operates on its own a piece of the mobile value chain with the exception of the radio access. It controls totally or partly the commercial ownership of the end user (or its representative)
      • As an evident consequence: it forces the MNO to break its vertical integration…that is a root cause of the lack of competition in the mobile market.
  • Oligopoly/Guaranteed Income within the mobile sector
      • Ricardo’s theory
        • The guaranteed income depends on the market shares (with the exception of UK)
        • The regulator is forced to maintain a minimum price to help the last entrant to survive (!)
        • The guaranteed income creates a monopoly effect that the 1st entrant could use to expel the last entrant
      • Impact of MVNO on the guaranteed income
        • breaks the guaranteed income effect as fix assets do not play any more in the game.
        • only the last entrant should host a MVNO otherwise it is another competitor for it !
      • Other Remedy to break the guaranteed income within the mobile sector
        • Asymmetric Wholesale Regulation: force the 1st entrant to decrease its wholesale rates
        • Asymmetric Retail Regulation: last entrant will suffer from an imposed decrease of rates
        • Taxation of profits: unfair and difficult to implement
  • Commoditization of mobile = open door for 1st generation MVNOs:
      • Marketing/Distribution
agenda9
AGENDA
  • A few facts/figures to frame MVNO in today’s context
        • How do telecom groups react today towards MVNO: Opportunity or Threat
        • MVNO and Segmentation…Same Answer for the Same Issue
        • What a MVNO can bring to capture market shares
  • Back to Theory….
        • Definition of MVNO
        • Strategic Models of MVNO
        • Regulatory Aspects
        • How a MNO should organize its operations ot host MVNOs
        • Economical Models
        • Case Study: why no corporate MVNO exist ?
        • State of MVNO market within EU
        • Conclusion
  • How MNO Should Respond to MVNO entry
strategic models 1
STRATEGIC MODELS (1)
  • Model of Participation (industrial/financial)
  • Segmentation = Zone 3
  • MVNO consolidation = Zone 1 and Zone 2
  • Spin off of MVNO (new brands, network separation,…)

 MobiLux (agent)

JV between MNO and 3rd party

 VIRGIN/T-Mobile (till 2004)

Zone 2

Zone 2

Zone 2

Zone 2

Zone 3

Zone 3

Zone 3

Zone 3

 TMF

  • Financial Cross-Participation between the MNO and the MVNO

 Ay- Yildiz

 Carrefour

  • Commercial Agreement for the supply of connectivity and network capacity
  • Simple financial participation

 TELE2

 Telmore

Cobranding

 TRANSATE

 Tele2

Zone 1

Zone 1

Zone 1

Zone 1

Zone 4

Zone 4

Zone 4

Zone 4

 TELENET

  • Intensity of the connectivity/hosting (supplier) relationship between the MNO and the MVNO
strategic models 2
STRATEGIC MODELS (2)
  • Modèle Fonctionnel n°1: Switchless Mode
      • No Mobile Switching Assers managed by the Airtime Reseller
      • Focus on the service/integration layers
      • Intermediary Stage

International

International

National

National

Interconnect

Interconnect

Interconnect

Interconnect

Core

Core

AR/SP

AR/SP

CDRs

CDRs

Network

Network

Reporting

Reporting

CRM

CRM

Bill

Bill

Radio

Radio

M&S

M&S

Access

Access

On Net

On Net

Network

Network

MVNO

MNO

strategic models 3
STRATEGIC MODELS (3)
  • Modèle Fonctionnel n°2: Enhanced Service Provide Mode
    • Integration of VAS services coming from the enhanced service provider with an mobile access
    • Stimulation of the usage of both mobile and VAS usage

National

National

International

International

VAS/IN

VAS/IN

Interconnect

Interconnect

Interconnect

Interconnect

CDR

CDR

Core

Core

Backbone

Backbone

Network

Network

Interco

Interco

CRM

CRM

Bill

Bill

Radio

Radio

M&S

M&S

Access

Access

Network

Network

On Net

On Net

Management

Management

Network

Network

MVNO

MNO

strategic models 4
STRATEGIC MODELS (4)
  • Modèle Fonctionnel n°3: Full MVNO
      • Full Mobile Switching infrastructure owned and brought by the mobile operator
      • Focus on just renting the radio access to the mobile operator
      • Ultimate stage of a MVNO

National

National

International

International

VAS/IN

VAS/IN

Interconnect

Interconnect

Interconnect

Interconnect

HLR

HLR

Core

Core

Backbone

Backbone

Network

Network

Everything except

Everything except

Radio Access

Radio Access

Radio

Radio

Access

Access

Network

Network

On Net

On Net

MVNO

MNO

strategic models 5
STRATEGIC MODELS (5)
  • Functional Model nr 4: Brand Actor
    • Crucial Role of MVNE
    • Comparable to new brands created by existing mobile operators

International

International

National

National

Interconnect

Interconnect

Interconnect

Interconnect

Brand

Brand

Core

Core

Network

Network

Actor

Actor

Reporting

Reporting

CRM

CRM

CDRs

CDRs

Bill

Bill

Radio

Radio

M&S

M&S

MVNE

MVNE

On Net

On Net

Access

Access

Network

Network

MVNO

MNO

slide15

Marketing

X

X

X

X

X

Contact Center

X

X

X

X

X

(Customer Care)

CRM

X

X

X

X

Billing/Invoicing

X

X

X

X

Radio Access

X

(trafic on net)

Transpo

rt (trafic off net)

X

X

X

STRATEGIC MODELS (6)

  • Operational Model
      • Each possible should make sure the MVNO has a direct/partial control of the end user or its representative.
      • The agent or agency model should be excluded: no commercial ownership/no recognition of revenues according to national/local regulation/commercial laws.

Agent

Airtime

Service

MVNO

MVNE

Brand

MNO

Reseller

Provider

Actor

Sales

X

X

X

X

X

X

X

Operating Support System

X

X

(HLR)

role of a mvne good for the mno and the mvno
Role of a MVNE: good for the MNO and the MVNO

MVNE

MVNE

MVNE

MVNE

MVNE

MVNE

Wholesale

Co

-

Marketing

ASP

Wholesale

Co

-

Marketing

ASP

End

End

-

-

User

User

End

End

-

-

User

User

End

End

-

-

User

User

End

End

-

-

User

User

End

End

-

-

User

User

End

End

-

-

User

User

MVNE

MVNE

MVNO

MVNO

MVNO

MVNO

MVNE

MVNE

MVNO

MVNO

MVNO

MVNO

MVNO

MVNO

MVNO

MVNO

MVNE

MVNE

MVNE

MVNE

MVNE

MVNE

Marketing

Marketing

MVNE

MVNE

Marketing

Marketing

Partner

Partner

Partner

Partner

MNO

MNO

MNO

MNO

MNO

MNO

MNO

MNO

MNO

MNO

MNO

MNO

  • Use of a MVNE
      • MVNE = Mobile Virtual Network Enabler = Integrator for MVNO candidates
      • Allows an ‘EBIT=EBITDA’ business model
      • Divert complexity of one-to-many hosting technical aspects with MVNO to MVNE that leverage their expertise or even already existing connections
        • A MVNE is a kind of hosting/connectivity provider to GSM operators

The MVNE ASP plays the role of the MVNO’s integrator for setting up a MVNO business/operating model. It has not other role

A MVNE wholesale will also sell mobile connectivity and airtime to the MVNO besides its integrator role. So the MVNO will benefit from the MVNE existing wholesale agreements without having to negotiate with local mobile operators

MVNE

MVNE

MVNE

MVNE

MVNE

MVNE

Wholesale

Co

-

Marketing

ASP

Wholesale

Co

-

Marketing

ASP

strategic models 8
STRATEGIC MODELS (8)

3rd party networks (PSTN, PLMN,….)

HOsting operator

MVNO

HLR

HLR

Billing&

Services

Location

CRM

Content

Voice Mail

Invoicing

GMSC

GGSN

GMSC

GGSN

Control

Authen

-

Rating&

Call Setup

QoS

MSC

tication

Billing

SGSN

VLR

IP on

Transport

ATM

TDM

Broadcast

Fibre Optique

RNC

Switching Access Netowrks

Packet Access Networks

Node

Node

Access

(PSTN, ISDN, GSM)

(UTRAN, ADSL, Ethernet, WLAN)

B

B

  • VNO is future proof versus 3G and NGN
    • 6 possible layers to share the infrastructure
agenda18
AGENDA
  • A few facts/figures to frame MVNO in today’s context
        • How do telecom groups react today towards MVNO: Opportunity or Threat
        • MVNO and Segmentation…Same Answer for the Same Issue
        • What a MVNO can bring to capture market shares
  • Back to Theory….
        • Definition of MVNO
        • Strategic Models of MVNO
        • Regulatory Aspects
        • How a MNO should organize its operations to host MVNOs
        • Economical Models
        • Case Study: why no corporate MVNO exist ?
        • State of MVNO market within EU
        • Conclusion
  • How MNO Should Respond to MVNO entry
economical financial model 1
ECONOMICAL/FINANCIAL MODEL (1)
  • Aim: define cost and access price to the network: 3 methods/2 approaches
      • Cost Plus - Retail Minus – Benchmark
      • Top Down – Bottom Up (closely linked to Cost Plus)
  • Retail Minus
      • Pa= Pr-CrPr = Retail price Cr = Cost of Sales (Cr is the ‘retail minus’ part)
      • Avoid squeeze out (predatory pricing eg: TELE2 - ORANGE) but not adapted if cross subsidiation exists
        • MVNO is forced to address the same market as the hosting operator
        • Allows the MVNO to be more efficient if it has a smaller Cr for a specific market
      • Not adapted if the objective is to bring more competition via ex ante regulation (not pressure on costs)
  • Cost Plus
      • LRIC ou FDC/FACLRIC= Long Run Incremental Cost including fix costs (and sometimes joint cost, which is not orthodox)
      • Adapted in case of strongly integrated operator
        • MVNO is forced to address markets not yet addressed by MNO
        • Financial risk is on the MVNO not on the MNO (all minutes are sold with a gross margin)
  • Benchmark
mno should favour cost plus models to host one s mvnos with payback of interco revenues
MNO should favour « Cost Plus » models to host one’s MVNOs with payback of interco revenues
  • « Cost Plus » Avoid Price Wars:
      • MNO takes no financial risks as any subsidization is avoided
      • MVNO can not copy its MNO’s retail prices as its cost to address the same market is higher (no economy of scale)
      • MVNO is forced to focus on its own markets (where its own subsidisation policy will be the most efficient)
      • MVNO is forced to be innovative
      • See What happened to the first Service Providers of the early days of GSM
  • But takes more time to take off
      • Not easy for new MVNO entrant to understand the subtle subsidization mechanisms
        • So also the reason why MVNO simplified their offers
      • Limited risks for MNO to be accused of earning too much money with termination revenues
        • As wholesale prices can be higher than corporate offers
        • As « Cost Plus » is normally based on a accurate cost model of the network
economical financial model 3
ECONOMICAL/FINANCIAL MODEL(3)
  • Step 1: Definition of wholesale services to be proposed to MVNO
      • Acess/Origination of Calls, Termination and Roaming
      • Cost Driver Concept (Subscriber/Coverage/Traffic)
        • Helps to determine the network parts and elements that are really used by each wholesale service (MNO is too much vertically integrated towards an end-to-end approach)
        • ‘Traffic’ Cost Driver: is the only relevant one for a MVNO hosted by a MNO in European Union (roll out of GSM network completed for a long time, saturating market).
        • ‘Subscriber’ Cost Driver: is relevant on some very specific services (HLR capacity, voice mail capacity,…).
      • Average/Marginal/Incremental Cost Concept
        • Joint cost is linked to the coverage: not relevant for a MVNO hosted by a mobile operator in the European Union.
        • Marginal Cost should be avoided otherwise MVNO will always be considered as an opportunity business and not as a sustainable business.
  • Step 2: How to determine pricing to be proposed to MVNO ?
      • Average Cost should be preferred to Marginal/Incremental Cost
        • Avoid to treat MVNOs as opportunity business without long term plans
        • How can we anticipate the contribution of MVNO within 2 years and let’s use it….
        • Comparison EPMU/RAMSEY
economical financial model 4
ECONOMICAL/FINANCIAL MODEL(4)
  • Link Cost Driver – Network Component
  • Link Wholesale Service – Cost Driver
economical financial model 5
ECONOMICAL/FINANCIAL MODEL(5)
  • MODELLING OF WHOLESALE SERVICES AND COSTS TO BE CONSIDERED

3rd party Network

(Fix Mobile or International)

MNO

MNO

3rd party Network

(Fix Mobile or International)

MVNO end user

MNO

Other end user

MVNO end user

MVNO end user

ACCESS/ORIGINATION

OF ON NET CALLS

ACCESS/ORIGINATION OF

ON NET CALLS + TERMINATION

economical financial model 6
ECONOMICAL/FINANCIAL MODEL (6)
  • MODELLING OF WHOLESALE SERVICES AND COSTS TO BE CONSIDERED

Visited Network

MNO

Reporting to MVNO

MVNO end user

Roaming

  • LINK NETWORK ELEMENT – WHOLESALE SERVICE (via COST DRIVER)
economical financial model 7
ECONOMICAL/FINANCIAL MODEL (7)
  • RESULTS: Off Net Calls Origination/Termination without GPRS
  • Cost to be removed from Interco Revenue for the off net Termination

Average/Marginal Cost for the Origination & Termination of Off Net Calls

Origination/Termination - Average Cost

Origination/Termination - Marginal (Theoretical)

Origination/Termination - Marginal (Realistic)

Cost €cent/min

Network Capacity (billion min/year)

economical financial model 8
ECONOMICAL/FINANCIAL MODEL (8)
  • GPRS Costs
  • GPRS = Incremental Cost in a GSM Network (software upgrade)
        • 1 channel reserved permanently for GPRS in the model  channel reserved permanently for GPRS connectivity voice overcapacity decreases, incl. marginal costs as they are not constant….

Average/Marginal Cost for the GPRS at 10 kbps

  • GPRS alone
  • Empty network dedicated to GPRS
  • Marginal Cost is flat (evident)

Cost €cent/min

Network Capacity (billion min/year)

economical financial model 9
ECONOMICAL/FINANCIAL MODEL (9)
  • HOW TO DETERMINE PRICING (your own pricing and competition pricing)
  • What cost should be considered ? Average Cost ? Forward Looking Cost (in order not to penalize the last entrant who host a MVNO) ?
  • Direct sales enjoy this too as the network costs decrease too.
  • Add interconnection costs/revenues in case of incoming traffic.

Average/Marginal Cost for the Origination & Termination of Off Net Local Calls

Origination/Termination - Average Cost

Origination/Termination - Marginal (Theoretical)

Origination/Termination - Marginal (Realistic)

Cost €cent/min

Capacity filled with supplementary traffic

Network Capacity (billion min/year)

economical financial model 10
ECONOMICAL/FINANCIAL MODEL (10)
  • HOW TO DETERMINE PRICING
  • Special Case of Roaming: Cost plus = Retail minus via IOT
  • Cost of Special Services: according to the provision of service:
      • SIM manufacturing
      • Use of Storage Capacity for Voice mail/HLR
      • Use of processing power of prepaid platform
      • Legal Tapping
      • Fraud Monitoring
economical financial model 11
ECONOMICAL/FINANCIAL MODEL (11)
  • Comparison with a Generic Cost Model From a Typical Regulator How a regulator will audit you if it imposes MVNO with cost orient.
agenda30
AGENDA
  • A few facts/figures to frame MVNO in today’s context
        • How do telecom groups react today towards MVNO: Opportunity or Threat
        • MVNO and Segmentation…Same Answer for the Same Issue
        • What a MVNO can bring to capture market shares
  • Back to Theory….
        • Definition of MVNO
        • Strategic Models of MVNO
        • Regulatory Aspects
        • How a MNO should organize its operations ot host MVNOs
        • Economical Models
        • Case Study: why no corporate MVNO exist ?
        • State of MVNO market within EU
        • Conclusion
  • How MNO Should Respond to MVNO entry
regulatory aspects
REGULATORY ASPECTS
  • Impact of the NRF (New Regulatory Framework)
      • Authorization Directive replaces the licensing regime by a notification regime unless scarce resources are concerned. This makes MVNO entry easier
  • Impact of MVNOs on market definitions and dominance
      • Access Market (Market 15) Marché de l’Accès Mobile
        • MVNO provokes an uncoupling between access and origination
        • MVNOs decrease simple dominance ( a little) but especially joint dominance (players  so tacit collusion )
      • Termination Market (Market 16)
        • Simple Dominance for fix to mobile calls and Joint Dominance for mobile to mobile calls.
        • MVNO provokes more substitution if it can resell mobile termination.
        • MVNO Modifies the perimeter of the market (especially if he is a fix operator) and can make it more convergent.
        • Simple Dominance decreased if MVNO can resell mobile termination
        • BUT: simple dominance will transform in joint dominance if only a few MVNOs (so we should not a policy of big MVNOs)
        • Opportunity to introduce RPP ? As it makes the externality more symmetric for fix to mobile.
        • Other Remedies: (1) Clearing House for mobile termination (2) bill and keep (back to back of externality)
      • Roaming Market (Market 17)
        • MVNO will have no imapct due to cartel game between mobile operators.
        • Remedy: Create a secondary market outside the GSM Association
        • Some models are able to decrease the dominance on this market (TRANSATEL).
agenda32
AGENDA
  • A few facts/figures to frame MVNO in today’s context
        • How do telecom groups react today towards MVNO: Opportunity or Threat
        • MVNO and Segmentation…Same Answer for the Same Issue
        • What a MVNO can bring to capture market shares
  • Back to Theory….
        • Definition of MVNO
        • Strategic Models of MVNO
        • Regulatory Aspects
        • How a MNO should organize its operations to host MVNOs
        • Economical Models
        • Case Study: why no corporate MVNO exist ?
        • State of MVNO market within EU
        • Conclusion
  • How MNO Should Respond to MVNO entry
models of organization 1
MODELS OF ORGANIZATION (1)
  • EVOLUTION OF INTERCONNECTION BETWEEN OPERATORS
      • First strong link with the Regulatory/Legal
      • ONP Obligation has provoked the shift of interconnection to a P&L driven entity upstream from retail in order to make no discrimination between new entrants and one’s own retail operations.
      • This constitutes the basis to host MVNO: MVNO are a form of extension of interconnection/access to operators with no or with partial infrastructure.
  • OBJECTIVES OF A MVNO-minded ORGANIZATION
      • Avoid the usually protectionist behavior
        • Delay Provisioning of MVNOs (eg: MNP et i-mode)
        • Retain information or discriminate their release to MVNOs (so one must set up of wholesale at network side)
        • Unbundling not granular enough (Threat of cannibalization will determine the right level of unbundling)
        • Demand unuseful guarantee in regard to the service delivered
        • Not the same quality of service is delivered to MNO and one’s own retail operations.
        • Utilize the information collected with MVNO for competition purposes (Chinese Wall) (so one must set up of wholesale at network side)
        • Pricing Policy not transparent enough (e.g.T-Mobile and VIRGIN Mobile)
models of organization 2
MODELS OF ORGANIZATION (2)
  • 3 TYPES OF ORGANIZATION
      • MNO (Mobile Network Operator) with most of its objectives based on MVNOs: especially for 3rd and 4th entrants  Strong Organization that must be autonomous versus the retail operations.
      • MNO (Mobile Network Operator) with MVNO business driven by marketing pin order to enjoy the MVNO opportunity: MVNO is seen as another distribution channel; marketing arbitrates unavoidable conflicts retail operations and MVNOs; this applies for 2nd entrants with comfortable penetration.
      • MNO (Mobile Network Operator) has the legal obligation to host MVNO but is strategically reluctant to the model: MVNO will be driven by legal and regulatory considerations.
  • EXCELLENT CASE STUDY:CARREFOUR/BASE (!!)
models of organization 3
MODELS OF ORGANIZATION (3)

BASE

BASE

3rd Party

3rd Party

3rd Party

Retail

Retail

Retail

Retail

Retail

Retail

Mass

Mass

Mass

Carrier

Carrier

Carrier

Business

Business

Business

Wholesale

Wholesale

Wholesale

Market

Market

Market

Market

Market

Market

Market

Market

Market

(roaming/Interco)

(roaming/Interco)

(roaming/Interco)

Market

Market

Market

Intercon

Intercon

Intercon

-

-

-

Roaming

Roaming

Roaming

Sales &

Sales &

Sales &

nect

nect

nect

MKT

MKT

MKT

ICT

ICT

ICT

Technical Product Management

Technical Product Management

Technical Product Management

ICT Production

ICT Production

ICT Production

  • OBJECTIVE OF A WHOLESALE ORGANIZATION THAT IS MVNO-minded

Set up of the organization:

        • Outside and upstream of retail operations, inside the technical department.
    • Give the organization a P&L responsibility

In order for it not to discriminate between MVNO and retail operations

  • WHOLESALE SERVICES
      • Product Lines:RoamingInterconnectionConnectivity/Access
agenda36
AGENDA
  • A few facts/figures to frame MVNO in today’s context
        • How do telecom groups react today towards MVNO: Opportunity or Threat
        • MVNO and Segmentation…Same Answer for the Same Issue
        • What a MVNO can bring to capture market shares
  • Back to Theory….
        • Definition of MVNO
        • Strategic Models of MVNO
        • Regulatory Aspects
        • How a MNO should organize its operations ot host MVNOs
        • Economical Models
        • Case Study: why no corporate MVNO exist and other cases
        • State of MVNO market within EU
        • Conclusion
  • How MNO Should Respond to MVNO entry
case study corporate mvno 1
Case Study: Corporate MVNO (1)
  • Case Study 1: Why no Corporate MVNO exists ?
  • Global Needs of Corporate Customers versus local MNO
  • Sales to Corporate MVNO heavily cross subsidized
        • Risk of Squeeze Out in case of Cost Plus
        • Impossible to design good offers with Retail Minus (no economies of scale for MVNO)
  • But MVNO in a better position to propose cross borders/international services
        • No multiple network to manage
        • Rework wholesale agreements/local operations into a global retail services
        • Emerging outsourcing is an appeal for more MVNO in this sector
  • Value Proposition for a corporate MVNO
        • Global
        • FMC
        • Cost
case study corporate mvno 2
Case Study: Corporate MVNO (2)
  • MOBILE OPERATORS or GROUPS ARE COUNTRY-minded
      • Recent History of Mobile Operators – licenses are national
      • P&L of ORANGE & VODAFONE are local, not global
      • FreeMove et STARMAP = presales master agreement ou brand agreement
      • SYMPAC: is KPN credible with only 3 real networks and an image of competitor when it asks for a MVNO agreement → Risk for SYMPAC to become a new FreeMove…
      • TELE2 is the only multi country MVNO but its residential positioning prevent it to leverage this….
case study corporate mvno 2 business plan
Case Study: Corporate MVNO (2): Business Plan
  • CAPEX Assumptions
      • Interconnection to 5 mobile operators : 100 000 €
      • Take on its own the billing chain till mediation rating: 20000 €
      • Interconnection as an enhanced service provider + use of MVNE OSS (economies of scope of MVNE towards MNO) : 30 000 €
  • OPEX Assumptions
      • Set up cost of 10 000 € for the first 5000 end users
      • 2 €/SIM/month beyond 5000 users
      • Activation Cost of 5 € per new user
      • CRM outsourced to the MVNE.

Break even vs Active SIM cards

  • ARPU & Cost Per User
    • 70 €
    • OPEX: 2.5 €/month (Life cycle of 12 months)
    • CAPEX: 5 € (base de 30 000 utilisateurs)
    • SG&A de 17 %
    • wholesale fee paid to the mobile operator:60 €
    • CAPEX amortized immediately

Cost/Profit per SIM card

# SIM cards

case study belgium
CASE STUDY: Belgium
  • Case Study 3: Belgium
  • Mix between Option 2 and Option 4 with recently Option 1
  • BASE (3rd entrant) has started a MVNO program in 2001
        • Ethnic/Niche MVNO
        • Use of MVNE to aggregate small MVNOs
        • CARREFOUR bypasses BASE to engage with an MVNE
        • War price CARREFOUR/BASE on prepaid cards
  • MOBISTAR (2nd entrant)
        • Has decided to not to miss this opportunity even if it does not need it
        • Use of MVNE as ASP (same MVNE present within BASE and MOBISTAR)
        • Co-branding with CARREFOUR Competitor (DELHAIZE – Loyalty program)
        • MVNO with 3 play CATV operator TELENET
  • PROXIMUS (incumbent)
        • What will they do ?
agenda41
AGENDA
  • A few facts/figures to frame MVNO in today’s context
        • How do telecom groups react today towards MVNO: Opportunity or Threat
        • MVNO and Segmentation…Same Answer for the Same Issue
        • What a MVNO can bring to capture market shares
  • Back to Theory….
        • Definition of MVNO
        • Strategic Models of MVNO
        • Regulatory Aspects
        • How a MNO should organize its operations ot host MVNOs
        • Economical Models
        • Case Study: why no corporate MVNO exist ?
        • State of MVNO market within EU
        • Conclusion
  • How MNO Should Respond to MVNO entry
brief overview of eu markets 1
BRIEF OVERVIEW OF EU MARKETS (1)
  • Types of MVNO
  • Key Success Factors of 1st Generation MVNOs
      • Efficient Distribution Channels
      • Good Marketing
      • Brand or Niche
      • New Content or Content/Service Making the Difference
  • France as an exception….
      • Cobranding only - no new brand creaetd by MNO
      • MNO plays the role of MVNE
      • Retail Minus
      • Incumbent very active
conclusions
CONCLUSIONS
  • Mobile Market is not competitive enough
      • Oligolopy revenues
      • Too much integrated vertically
        • No more price competition/No more innovation
      • Root cause: ownership of scarce resources, assets not replicable,….
  • Impact of MVNO
      • MVNO remedy for access/origination and termination
      • MVNO breaks the vertical integration but must be hosted by the last entrant
      • MVNO today: a lost generation (see USA…) with a focus on price war….
  • Case Study
      • MVNO will appear in all network economies that get deregulated