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Mobile virtual networks: Piecing it together(Total Telecom Via Thomson Dialog NewsEdge)A resurgence in MVNO activity has brought the role of mobile virtual network enablers (MVNEs) into the limelight, as niche mobile service providers attempt to build profitable businesses. That could provide new revenue streams for mobile network operators (MNOs), although they have been slow to seize the opportunity. They will anyway have stiff competition from big IT players who are also eyeing the market. "The big network equipment vendors are trying to get into the MVNE space," says Atte Miettinen, managing director, VAS at mobile data outsourcing firm End2End. In February, LogicaCMG announced the deployment of its Mobile Virtual Network Operator-Enabler (MVNO-E) platform at Swisscom Mobile, which in the same month launched a low-cost prepaid mobile offering, M-Budget-Mobile, in its home market. The solution, designed to enable Swisscom to launch other MVNO services with partners, is managed and supported by LogicaCMG. These service providers say MVNE services - although not necessarily independent MVNE players - help to reduce complexity and lower startup capital costs. "Of the two, without doubt, complexity is the most important blocking factor these days," says Han Weegink, director of marketing and communications at LogicaCMG. "Most potential MVNOs know very little if anything at all about telecoms," he claims. "You need something between the mobile network operator and a focused MVNO," says Stian Aldrin, management consultant at Fornebu Consulting. "This could be the mobile network operator, if they decided to embrace the opportunity; however, they don't." Some say network operators are in danger of missing out altogether on the opportunity to provide value-added services - such as outsourcing network, operational support systems, customer care and billing - to niche sectors. "An operator will never reach a gay segment," for example, says Jakob Algreen-Ussing, chief of corporate development at customer selfcare solutions provider Agillic in Denmark, speaking at the MVNO Strategies & Markets Europe conference in London in April. But by offering enabling services to an MVNO, they "still get a huge amount of revenue from it" and keep the traffic on their network. Agillic is the technology partner for MVNO GAYmobile (Total Telecom, April 2006, p.30). Some operators have taken steps to provide MVNE services. "In the Danish market Telenor runs an MVNE service," says Algreen-Ussing, through subsidiary Sonofon and low-cost provider CBB. As bigger operators come under huge pressure on prices for network access "they have to start doing something more," says Miettinen at End2End, and some are looking into MVNE models. "At the moment T-Mobile does not offer any MVNE-type services to wholesale partners," says Peter Opdemom, vice president, business development, wholesale marketing, at T-Mobile International. "But we offer it to branded resellers. For example Mox Telecom in Germany, where we hold the customer relationship under a different product brand of a partner." Analysts predict good revenue opportunities from MVNE services. Pyramid Research estimates the Western European market at $300 million in 2005, with the potential to rise to $550 million, although it points out that this is a deliberately conservative estimate and does not include MVNE revenue generated in the pre-launch phase or by one-off sales of platforms or expertise. Virtual operators use MVNE services so they don't have to rely solely on the host network, says End2End's Miettinen. They could get a better deal on a short message service centre (SMSC), for example, through an MVNE deal, he says. "The other part of the reason is that they want to differentiate," says Miettinen. And in order to differentiate, MVNOs need "some level of control over the component, even if it's outsourced." MVNEs claim network operators don't have the resources to customise MVNO offerings. "Mobile network operators are tempted to provide MVNE services, but they do it by doing very " little customising says Jacques Bonifay, chief executive of MVNE Transatel, which leads to little differentiation in the market. "This is because its technical team is mostly busy (with) the services of its own brand." "I am tied to the capabilities BASE provides," says Tolga Kutlu, head of Ay Yildiz, a branded service of Belgian operator BASE. Ay Yildiz, an MVNO geared towards the Turkish community, runs on the networks of BASE and E-Plus in Belgium and Germany respectively. BASE, for example, does not yet have MMS capabilities. "We have i-mode capability, but it has not been a huge success in Belgium," says Kutlu. Consider the options But not everyone is convinced that MVNEs always offer the best option. "You've got to be very careful about using (MVNEs)," says Arun Dehiri, managing director of Redbox Consulting. "MVNOs can also get support services from operators and need to make sure their margin is not eroded by an enabler. MVNEs have their place but use them with care," he says. Pure MVNEs "need to find their segments", adds Algreen-Ussing at Agillic. They need to go deeper and offer more differentiated services, he says. Niche players are the most difficult for network operators, says Transatel's Bonifay, because they can have just a few thousand subscribers. "There is no way mobile operators can deal with them." Transatel's strategy is to develop an MVNE platform connected to multiple MNOs and serving multiple MVNOs (see box 'Scaling the Service'). According to Transatel, the technical set-up cost for an MVNO for a non-telecoms player would be EUR1 million-EUR10 million and take six to 12 months. By outsourcing to Transatel, the cost falls to EUR20,000-EUR400,000 and the time to between two and five months, he claims. Similarly, the minimum monthly fixed cost for operations falls from EUR50,000-EUR200,000 to EUR4,000-EUR12,000. "The figures (for a non-Transatel MVNO) make sense," says Fornebu Consulting's Aldrin. "(Transatel's) business model, and that of an MVNE in general, is to take this investment and distribute it on several MVNOs." "In one sense this makes the break-even point even higher in total as running Transatel has an extra cost, but lower per-MVNO and subscriber (costs)," he adds. "So they can offer a lower price with their 'car pooling model' than what an MVNO would have had doing it all themselves. The price depends on how many (MVNOs) Transatel think they can get." Other operators should, if they want to host MVNOs, create the ability to 'white label' its services, says Dehiri at Redbox. "But for the operator to develop these services, they need to have a strategy of pushing a large volume of minutes via MVNOs, to ensure payback of the set-up cost of white label/enabler services." SCALING THE SERVICE MVNEs claim they are better able to provide services to small-scale virtual operators. Crucially, for niche players, Transatel says an MVNO can break even at just 2,000-10,000 subscribers, rather than 50,000-200,000. Fornebu Consulting's Aldrin says every football club in England could be an MVNO on the basis of Transatel's figures. "That's an interesting business model," he says. Transatel's MVNE platform already powers RCSC Mobile, an MVNO for supporters of Belgian football club Royal Charleroi Sporting Club. "We don't need a lot of subscribers to be profitable," says Philippe Vigneau, business development director at RCSC Mobile. He says the operation makes a profit. "Our target is to reach 50% of season tickets ... and we will reach it by the end of this year," says Vigneau."You have ... to bring costs quite low," he says, which means the club could not negotiate directly with mobile network operators. "You have to go through an MVNE." Leveraging the strengths of the club also helps to keep costs down. "The distribution costs are close to zero," says Vigneau, because the mobile service is being sold in tandem with season tickets at the stadium and through the club website. "(Subscriber) acquisition cost is very, very low," he says. "It's around EUR20-EUR30." Transatel is behind other niche MVNOs, including Euroketai and LeFrenchMobile, products for Japanese and British ex-pats living in France, both of which offer services in the target user group's native language. "The number of subscribers (to LeFrenchMobile) is very small," says Transatel's Bonifay. It has just a few thousand subscribers, "but it's profitable." What's more, the niche MVNO model is not restricted to consumer offers. "There are very few targeted offerings that deliver to corporate customers," says Samvit Raina, VP global delivery at Patni Telecom Solutions. But offering company-branded handsets for an organisation of 10,000 employees is a possibility. Microsoft is in discussion about "doing a Microsoft-branded MVNO" for its employees, he says. |