The Future of MVNOs - Prepaid MVNO

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Understanding the global picture A new phase of MVNO expansion is beginning MVNO markets have gone through various stages of development in recent years. Since the first introduction of MVNOs in the 1990s and the second wave of proliferation in the mid-2000s, the number of players has increased and contracted in cycles. The attitude of mobile operators has gone through some radical changes: Initially, the mobile operators fought against MVNO legislation and the MVNOs themselves; then they accepted the existence of MVNO players; and then they started eagerly seeking new MVNO partners and developing aggressive wholesale strategies. Informa believes that a rejuvenated phase of expansion is beginning. In markets where MVNOs have traditionally played a role, typically Europe, Asia Pacific and North America, MVNO players are consolidating and internationalizing but, despite this, they are continuing to grow in many segments. There are still many market segments untapped by the mobile network operators that are being addressed by MVNOs – these include the ethnic markets, data-only connectivity, and community-led and retailer-owned MVNOs – and there is also a strong push from mobile operators wanting to increase their share of mobile wholesale revenues. Informa believes that virtually every mobile market has the potential to benefit from MVNOs, and every mobile operator can derive an advantage from MVNOs. The global MVNO market will reach 186 million subscriptions by the end of 2015. Although North Fig. 1: Global, number of MVNO launches, by region, 1991-2010 Western Europe 46% Source: Informa Telecoms & Media Asia Pacific 12% Eastern Europe 14% Africa 2% Middle East 2% North America 21% Latin America 3% America and Western Europe will still account for the vast majority (see fig. 1), new markets are developing – Latin America, Africa, Middle East and Asia are all experiencing great MVNO interest. When their offering is appropriately designed, MVNOs can be a win-win-win market: host operators can reach additional – actual or potential – customers in a way that is more efficient compared with what their own retail networks can do; wholesale partners can enrich their existing nontelecoms services with mobile connectivity, or extend their brands into the telecoms sector; and customers can benefit from a more accurately-segmented offering. However, the reality is that, in the vast majority of mobile markets, MVNOs do not exist at all, while in some markets, MVNO activity is still in an embryonic phase. In developed MVNO markets, the MVNOs can account for approximately 15-20% of the customer base, a level that is generally considered physiologically sustainable. The outlook for MVNOs in Latin America The market is still embryonic, but there is significant potential for growth Typically, Latin American MVNOs have been the domain of existing telecoms companies keen to offer converged fixed/ mobile bundles. The most notable examples include the ISP Maxcom and the cable player Megacable in Mexico, ISPs UNE and ETB in Colombia, and Telsur/GTD in Chile. The first nontelecoms MVNOs appeared only in the second half of 2010. Initially, Colombian TV group RCN launched Uff, an MVNO offering cheap longdistance calls to fixed and mobile numbers in the main countries where the Colombian expats live. Then, in mid-2011, the region saw the first retailer launch, when Costa Rican electronics and furniture retailers Grupo Monge and Casa Blanca introduced Fullmovil. The mobile network operators (MNOs) have finally started to look with interest at the wholesale model – and the initial figures are encouraging. For example, Uff in Colombia is already a sizable MVNO, with close to 250,000 subscribers at the end of 2011 (see fig. 2). In Brazil, where formal MVNO regulation was passed in September 2010, the regulator Anatel granted MVNO 4 © 2012 Informa UK Ltd. All rights reserved. www.informatandm.com
licenses to the insurance company Porto Seguro and the VoIP provider Sermatel Comercio. Both companies have teamed up with second-placed operator TIM, which provides the network infrastructure, and Datora, a mobile-virtual-network enabler (MVNE). More recently, Anatel granted the first pure MVNO license to the MVNE Sisteer. Besides TIM, other network operators are looking with interest at the MVNO model, for example, the market leader Vivo. In March, Vivo announced plans to have at least two MVNO partners by the end of 2012. In order to achieve its objective, the operator created a board for wholesale and MVNO operations and is currently analyzing proposals from around 30 potential partners. The Latin American MVNO market started picking up in the second half of 2011, and the strongest activity was in Colombia and Chile. In February this year, Chilean regulator Subtel received 26 license applications from companies interested in launching MVNO operations. In April, Virgin Mobile Latin America (VMLA) inaugurated its first MVNO in the Andean country, targeting the youth and “youthful” segments with a simple portfolio of prepaid data packages and a small but attractive range of smartphones. So far, VMLA is the only international group with plans to launch MVNO operations across the region. In addition to Chile, it plans to launch in Brazil, Colombia, Mexico, Argentina, Peru, Uruguay and Bolivia. Interestingly, Colombia is likely to have eight MVNOs and three MNOs in operation by the end of 2012: In addition to the MVNOs already in operation, retailers Exito and Falabella, and fixed operator Emcali, have also started discussions to find an MNO partner. Opportunity for MVNO-led pricing arbitration is low MVNOs must find ways to offer attractive data offers – to the right niche and at the right price In traditional MVNO markets, such as Europe, North America and Asia, MVNOs have historically targeted the prepaid market with a low-cost proposition and then tried to attract the more affluent customers. International experience shows that the wholesale business can bring MNOs significantly higher EBITDA margins than retail, by reducing subscriber-acquisition cost (SAC) while only slightly lowering ARPU. Typically, a market with comparatively high or very high prices is more likely to have room for MVNO-led price arbitration. Markets with higher levels of churn also might offer better opportunities for MVNOs because users are more inclined to switch providers (see fig. 3). Churn (%) Fig. 3: Selected countries, blended churn, 3Q10-3Q11 4.0 3.5 3.0 2.5 2.0 1.5 Argentina Brazil Colombia Mexico France UK US 3Q10 4Q10 1Q11 2Q11 3Q11 Fig. 2: Latin America, selected MVNOs' subscriptions, 4Q10-4Q11 Source: Informa Telecoms & Media Uff 250 Maxcom UNE EPM Telecsa Given their pricing environments and churn trends, Brazil, Mexico and Colombia, and to a lesser extent Argentina, would appear well-suited for additional Subscriptions (000s) 200 150 100 50 0 4Q10 1Q11 2Q11 3Q11 4Q11 price competition. In all the markets, the lack of regulation in mobile termination rates (MTRs) and the fact that operators have mostly been left to negotiate MTRs among themselves have resulted in the higher cost of off-net calls. Brazilian rates are also affected by high telecoms-services taxation and, as a result, the country has the highest SMS prices in the region. Promotional activity, primarily the offering of cheap on-net calls, is strong across the region, contributing Source: Informa Telecoms & Media to sustained high levels of multiple-SIM ownership and churn. © 2012 Informa UK Ltd. All rights reserved. www.informatandm.com 5
Page 1 and 2: Your global research partner The Fu
Page 3: Contents Understanding the global p
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Page 9 and 10: The challenger MNO E-Plus, Germany
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