How MVNOs can take the path towards business success

Whitepaper Table of Contents

Introduction...... 3

Why is the mobile market such a hard-to-resist opportunity?...... 4

MVNO operational models ...... 5

Embracing the MVNE opportunity ………………………………………………………………………………………………………………………………………………………….. 7

MVNO business models and marketing approach...... 8

MVNO strategic planning ...... 13

Cannibalization. Reality or just a myth? ...... 14

Business strategy – the recipe for success...... 16

Adding innovation by embracing social media...... 17

Regulatory position...... 18

Next generation MVNO and online convergent charging...... 19

Conclusion ...... 20

R Systems in the MVNO landscape ...... 21 / How MVNOs can take the path towards Introduction business success

The MVNO market is now over a decade old choose to encourage the vertical separation of and numbers more than 800 operators in “production” and “distribution”; In a space Europe, America, many Asian countries and odyssey, this would ultimately lead to the the Middle East (including nearly 200 breakup of HNOs and to all mobile service operator-owned MVNOs). Yet their number is providers becoming virtual. expected to exceed the number of operators by mid 2013. As a sector, the MVNO model is In this paper we shall examine the current remarkably active with launches, buyouts and MVNO landscape, the MVNO operational and failures and many more projects in customer segmentation models, key preparation. MVNO market share passed 10% challenges MVNOs should address before and in several West European countries and, after launch in order to enhance their success. despite countless unsuccessful attempts, Furthermore, we will emphasize the role of forecasts are very promising. online charging capabilities to strengthen MVNOs market positions, enabling them to In a more avant-gardist approach, some see become serious competitors in a saturated MVNOs as the future model for the whole market by flexibly and rapidly launching industry. HNOs (Host Network Operators) innovative services and service bundles, increasingly outsource their RAN and core boosting their chances of serving untapped network operations, as they are no longer niches. perceived as main competitive differentiators. At the same time, more MVNOs invest in online billing and infrastructure, as they are more aware that not only competitive price, but also flexibility and fast time to market of new services could be the key to their business success and growth. In some respects the two business models seem to be converging. In the future, regulators too may

page 3 Why is the mobile market such a / How MVNOs can take the path towards hard-to-resist opportunity? business success

Global mobile connections have reached 5.3 sustainable margins with lower retail tariffs incumbents, which have complex, billion in 2010 and are expected to hit over 7.5 and far fewer customers than incumbents cumbersome legacy systems, costly to manage billion by 2015. In spite of the tough economic provided that they develop an auspicious and maintain, MVNOs start their business environment from 2008 and 2009 impacting business model and negotiate a favorable using uncluttered new systems which can give global mobile revenues, we are now facing a HNO agreement them a distinct advantage from the outset, slow recovery in terms of year-on-year growth enhancing their chances for differentiation worldwide with the exception of Europe. Integrated marketing increases customer’s and business optimization. Despite data services growth in importance, lifetime value. By focusing on specific niches, global revenue growth still depends on voice launching personalized campaigns and offering revenues and appears set to remain the appealing content-based services or greatest contributor to mobile operators’ fashionable or cost effective handsets, MVNOs revenues in the coming years. On the other can leverage their brand and enhance their hand, as mobile technology advances faster customer base and at the same time enjoy a than ever before, the demand for bandwidth lower than average customer churn rate and wireless usage is increasing exponentially, through service personalization. Customer therefore many opportunities are arising to lifetime value might increase as MVNOs can exploit these types of services. enhance their service offering with targeted bundles and cross-selling activities. By Low CAPEX – small steps towards success. addressing specific needs the quality of With an appealing service model, the entry service increases and the perceived value of threshold for MVNOs to start their business their product offering is maximized. In the and gradually adapt their business even with a case of incumbents, such promotions might small customer base is becoming a viable cannibalize existing profitable customer business segments.

Low OPEX cost base. Lower CAPEX, reduced Maximized efficiency and gaining a volumes of operational activities and limited competitive advantage by using brand new employee numbers enable MVNOs to achieve operational systems. In comparison to

page 4 / How MVNOs can take the path towards MVNO operational models business success

To highlight the MVNOs’ position in the A broad range of operational models were MVNOs usually concentrate on a specific mobile environment we can say that they are tested, from the lightweight “reseller” MVNO market segment such as low-cost, youth, players who lack at least the radio network on that essentially re-sells airtime bought from an business or ethnic categories. which the virtual network is based. At a HNO, through to the “thick” or “full service” minimum this means they don’t control their MVNO that operates its own customer care, Thin MVNO (Reseller) own spectrum allocation or own their radio billing system and even parts of the core Service provider MVNO access network (RAN), paying HNOs for the network. actual network usage. Enhanced Service Provider We may also classify MVNOs according to their customer business model; Full Infrastructure MVNO

Radio Core Application & Customer Sales & Billing access network services care marketing

Reseller (Thin MNO MVNO)

MNO Service provider MVNO

MNO Enhanced service provider

MNO Full infrastructure MVNO (Thick MVNO)

page 5 / How MVNOs can take the path towards MVNO operational models business success

Most of the MVNOs today are simple In addition to their own billing and customer benefit all consumers and players in the resellers. They usually have a well known care processes, enhanced service providers market. Spectrum shortage has allowed only 3 brand and a retail infrastructure and focus on usually have their own IN or NGIN (Next to 5 mobile service providers to operate with a sales and on leveraging customer Generation IN) which allows them to have full infrastructure in a country via an expensive relationships, reselling services on margins, complete control over their business and and prolonged licensing process. the pricing being agreed with the HNO. They service offerings. The enhanced service have control over their sales processes and providers usually run their own value added Using such advanced MVNO business models, their marketing processes, but they usually services platforms such as SDP, voicemail, competition will develop a healthy climate for differentiate only on pricing, brand identity missed call notification, collect call, roaming everybody and advantages for all those and value. The main advantages of this model call back, vPBX, mVPN, prepaid. Having their involved: the newcomers, incumbents and, are its fast time to market, low startup costs own NGIN and SDP, MVNOs become serious most of all, the end customers. and HNO availability to embrace this model as competitors for HNO in terms of price and The Full MVNO model suits businesses that it is not perceived as a real threat to their service offerings. aim to totally embrace the telecom traditional business, enabling them to enjoy opportunity, to differentiate through complete control over most of the MVNO’s Full infrastructure MVNOs have complete innovative services, to enhance an existing business processes; furthermore, resellers use control over their service offering due to customer base and to create and grasp new HNO/MVNE-provided SIM cards and the HNO certain core network nodes such as the GMSC markets. maintains all customer details. and HLR. Such MVNOs operate in similar way to any HNO, but without their own radio Supplementary to the reseller, the service network. Full infrastructure MVNOs also have provider MVNOs manage all customer care their own SMSC, MMSC and GGSN allowing processes, including the CRM, customer full control over all the services they offer in support, self care and billing processes from the market and flexibility in designing and flexible account lifecycle, complex tariff deploying new services. Full service MVNOs bundles and packages, voice, data and SMS can have their own roaming and interconnect services. The Service provider model suits agreements. businesses with brands or service concepts that differentiate them from existing players. In the long term, this business model might

page 6 / How MVNOs can take the path towards Embracing the MVNE opportunity business success

Traditionally, MVNEs were perceived as MVNOs’ back-end infrastructure and complementary players that provide the operational needs, Baraka Telecom acquired “abstraction layer” from the HNO, hiding the network switch gateways, data core networks, complexity. Besides providing the prepaid billing systems, content management infrastructure, they support MVNOs with no systems and business support systems. To or limited telecom expertise or those which encourage new entrants they also provide do not wish to focus on having control over revenue sharing options instead of fee-based their network elements, reducing their burden subscriptions. by handling a broad range of services ranging from billing, network element provisioning, Embracing a partnership with an experienced administration, operations, thus enabling MVNE, an MVNO reduces its launch and MVNOs to focus on their core strengths of commercial risks and also the financial, human brand, customer loyalty and marketing by and time resources invested for developing leaving the backend enablement and specific know-how. On the other hand it limits operations to MVNEs. an MVNO’s flexibility and increases the complexity of its integration processes. Nowadays thick MVNOs can leverage their experience and commercial relationships in Besides existing MVNOs, HNOs might choose the space and generate to become MVNEs themselves to support new revenue streams by becoming the MVNE MVNOs directly from their network. partners for smaller MVNOs. Mobile Virtual Network Enabler (MVNE) Such was the case of Malaysian Baraka capabilities can expand over all MVNO Telecom, a former MVNO founded in 2008 processes, being able to offer end-to-end which changed its focus towards becoming an solutions, from BSS/OSS, customer care, MVNE in Asia, enabling MVNOs to go to marketing, broadband services and Business market quickly and to launch competitive Intelligence. Furthermore the MVNE can offerings cost efficiently. Keen to support provide set-up, regulatory and operational support to MVNOs.

page 7 MVNO business models and / How MVNOs can take the path towards marketing approach business success

Many flavors of MVNO are possible; however in time. It now offers also a broad range of each business must endeavor to come up with innovative value added services. its own unique recipe for success. Lifestyle/niche MVNOs - Such MVNOs focus Discount MVNOs – nearly a quarter of existing on specific niche markets, from very young MVNOs have chosen the discount base MVNO demographic categories all the way to senior model and their service offering usually citizens. Pricing plans and handsets offers are includes basic voice and SMS services at lower adjusted to the targeted segment’s needs. tariffs for both prepaid and postpaid customers, adding to it the flavor of cheaper Youth oriented: handset devices. In terms of long term was founded in 2002 in USA by sustainability this approach can prove to be offering two-way messaging, wireless web unyielding. including mobile social networking, Java An example is Virgin Mobile US which began enabled gaming capabilities and nationwide by targeting a largely untapped market instant communications. Harnessing their segment in an already saturated mobile compelling marketing strategy that included market, with six national carriers and a sponsorship of action sports events, television significant number of regional providers programs, festivals, concerts, and other youth- already operating at the end of 2001. centric activities, Boost Mobile™ aspired to attract and dominate today’s high spending They targeted the 15-29 year old age group youth market. And they succeeded. They now which untapped due to its poor or nonexistent have over 5 million subscribers. credit. Since its launch in 2001 Virgin Mobile US attracted more than 5 million subscribers, making it the fastest growing and the most successful MVNO in the world. Virgin Mobile was acquired by Sprint in November 2009 for nearly $500 million and continuously evolved

page 8 MVNO business models and / How MVNOs can take the path towards marketing approach business success

Family oriented: Disney is the no. 1 mobile entertainment brands and content companies are optimistic brand in Japan, with over 3 million paid about the future of this model. The latest Disney Mobile is the perfect example of how subscriptions and has expanded its mobile trend in mobile content is the use important business strategy and approach are business globally with main offices in Tokyo, of viral marketing. Through specially designed for MVNOs, despite existing brand and service Munich and and content available in programs users can send recommendations offering. Disney Mobile was launched as a more than 40 countries through deals with 80 for mobile content they like to their contact service in the US in 2006 and it carriers and distributors. lists. A good example for this is the Italian included parental control features, Passa Parola, which has reached a total of subscriptions to Disney content and games, Elderly oriented: 800.000 registered users, by the use of viral and regular marketing campaigns. The project marketing alone. had two main purposes: to expand Disney’s GreatCall has been targeting baby boomers consumer base to the mobile market and to and the elderly community in the US since Ad-based MVNO: provide families with a tool to manage their 2006 and operates on Networks. They children’s mobiles usage. The MVNO suddenly offer easy-to-use handsets, 24-hour Operator is a Finnish mobile virtual network ceased to exist in the US in 2007. Not a year assistance and simple price plans. operator launched in 2007 in the UK to target passed before Disney decided to undertake Furthermore, the Operator adapted to its the 16-24 age segment, offering its subscribers the telecom challenge again by directing its target customers’ needs and now offers several free texts and free voice minutes to attention towards Japan. This time they additional services such as check-in calls, any network. To benefit from the offer, thoroughly evaluated their go to market medication reminders, liveNurse, daily health subscribers agree to receive five to ten strategy and improved it considerably. Disney tips, wellness calls and many more services promotional texts a day and fill out an online teamed up with local service provider thus boosting their popularity. Their service is subscription form for profiling purposes. Softbank and became the country’s first now very successful in the USA. MVNO offering both voice and data services. Media/Entertainment MVNOs follow trends Disney strategically left back-end operations in the mobile industry, embracing content such as distribution, price planning, sales and advertising on mobile phones. Such MVNOs billing to their partner and focused on offer free or subsidized services enhancing their brand value and on bringing to subscribers willing to view a number of enthralling content into the partnership. Today targeted advertisements. Carriers, media

page 9 MVNO business models and / How MVNOs can take the path towards marketing approach business success

Additionally, Blyk enables its subscribers to and corporate subscribers, providing advanced is able to reward customers in many top up their monthly allowance if they exceed services such as fax/data and group ways through branded club cards. Tesco their subscription allowance. Blyk has been administration. market share continues to grow quickly, both very successful in and the UK and is for prepaid and post paid customer base, with now targeting Indian young people partnering Abica was launched in 2008 in the UK and now over 2.6 million subscribers, by providing with Aircel. targets small to medium size businesses, Tesco shoppers with convenient access to offering a bespoke range of business services, phones, accessories, broadband Ethnic MVNOs target diverse ethnic groups in consumption monitoring and special tariffs for services, landlines, top ups and Tesco specific regions, looking to leverage landline, mobile and data services allowing international calling cards. Tesco’s Phone Shop international calls to their country of origin businesses to run their telecoms flexibly and network is continuously developing across and ethnic community specific content. With efficiently. Abica’s turnover increased by 50 Tesco’s regional footprint in Slovakia, the several successful players in the market and percent in 2009 - 2010 and they aim to reach Czech Republic, Poland, Hungary, Turkey and many more appearing, forecasts are very $5 million by 2013. South Korea. optimistic in regards to the future of ethnic MVNOs. Brand MVNOs leverage a strong existing Data MVNOs focus on the provision of data consumer brand, and often a point-of-sale services, games, videos and other attractive is a successful MVNO launched in distribution network. The numerous applications to their subscribers. Juniper 2006 in the Netherlands which is selling supermarket MVNOs are good examples. By Research had estimated that the data international prepaid SIM cards to people leveraging their brand value, their customer revenues of MVNOs would increase from $0.5 wanting to make calls abroad. It leased radio base and developed distribution channel, they billion in 2006 to $25.2 billion in 2012. frequency from mobile phone network are strong competitors for incumbents. operators and formed partnerships in Australia, Belgium, Denmark, Italy, Norway, Tesco Mobile was launched in 2003 by the the Netherlands, Spain, Sweden, Switzerland dominant grocery retailer Tesco on the O2 and the UK. LycaMobile now has over 6 million network and it has a favorable position on the customers and a new customer joins them UK mobile market, being supported by a every 5 seconds. developed distribution channel and customer base, having now over 200 in-store Tesco Business-centric MVNOs target high-usage phone shops.

page 10 MVNO business models and / How MVNOs can take the path towards marketing approach business success

Content providers are usually dependent on (machine-to-machine)/telemetry services, Cyprus to offer Quad-Play bundled services, is service providers for delivery and billing of enabling companies and consumers to enjoy the largest private their content. Also, flat data rates are still not new ways to manage and monitor their company in Cyprus that offers quad play available in many parts of the world, businesses, lives, and health. Clearly there is services. The company owns and operates a consequently content download might prove enormous potential considering also the hype truly regional network, spanning across to be quite expensive, therefore their content around MHealth. M2M communications offer Cyprus, Germany, Greece, Russia and the providers service consumption limited. On the a plethora of opportunities to all parties , providing city-to-city other hand, many operators do not charge for involved, from product manufacturers, to connectivity, data communications and IP- data download when content is being HNOs, MVNOs through to end users. based services between key European and downloaded. Supported by mobile payments, Middle East markets. PrimeTel is one of the an opportunity arose for content providers to Jasper Wireless was founded in 2004 in few telecommunications operators in the overcome these barriers by becoming data California and provides the platform, region that can provide a full spectrum of MVNOs. applications, and design services needed to connectivity and services and is proving to be profitably connect and manage devices very successful. Amazon Kindle’s Whispernet was so worldwide and today partners with prestigious successful because of Amazon’s innovative top HNOs such as AT&T, Telefónica, Roaming MVNOs provide advanced lower cost plug and play approach that enabled Vimpelcom, KPN, Rogers, Telcel and . roaming solutions, allowing subscribers to consumers to browse their shop, download have multiple “virtual” local numbers and and read books without the inconvenience of Quad play MVNOs provide services in the four identities in different networks, thereby getting another internet connection for the major communication areas - broadband, benefiting from local rates instead of roaming new device. The customer gets a book reader television, fixed and charges. device, content and internet connection for altogether. Quad play MVNOs seem to gain downloading content from Amazon. In May more and more ground in the telecom space 2011, Amazon announced that over the as subscribers tend to prefer such integrated previous year, they had sold more Kindle packages which usually prove to be more books than print books. attractive in terms of bundled price.

M2M/telemetry MVNOs provide M2M PrimeTel PLC, the first MVNO from Cyprus and the first telecommunications company in

page 11 MVNO business models and / How MVNOs can take the path towards marketing approach business success

Truphone is a global mobile communications Discount provider founded in 2006, being the industry's first mobile internet operator. focused on enhancing its subscribers’ capacity Lifestyle to easily and affordably keep in touch with friends, family and business contacts all over the world whilst roaming. Media Headquartered in London and with offices in the , Australia, Hong Kong, the Ethnic Philippines, Spain, the Netherlands and Portugal, Truphone offers a multi-country single-SIM-card service that combines local Business call plans, international local numbers and Truphone’s international VoIP network. Truphone is either partnering in various Brand countries with operators to offer its service and where not possible, forms a true MVNO relationship with local operators, in which MVNOs Data Truphone becomes the service provider of choice. M2M

Quad

Roaming

page 12 / How MVNOs can take the path towards MVNO strategic planning business success

Further to identifying the most suitable and a compelling business strategy and not suitable partners and commercial business and operational model, aspirants simply a low price offering strategy. arrangements. Also, they have to deal with must thoroughly analyze and find pragmatic unfavorable wholesale agreements and answers to countless business issues and Even with a strong brand and a targeted restrictions, network leasing terms, handset challenges, both before and after launch business model, success for the MVNO is not vendors relationships, high costs for network whilst the business and customer bases are automatic. As mentioned whilst discussing usage, uncontrollable QOS, difficulties in growing. about MVNO business models, Disney shut channel development and many more down the US MVNO after less than a year of difficulties. Up-front challenges operations, however its second attempt from Japan proved to be very successful. This From a process perspective, the MVNO starts Even though the regulatory environment is suggests that customers seek to see real with a network leasing agreement with one or increasingly favourable from the strategic value, not just brand recognition. more HNOs and then continues with point of view, MVNOs are quite vulnerable challenging back-office systems and because they are late entrants in an By correctly leveraging existing brand, integration selection process. The MVNO must oversaturated market and small niche players customer base and distribution infrastructure then design offers and service bundles, in comparison to incumbents. The list of failed and choosing the right partners the level of develop user interfaces, select handsets and MVNOs is long, demonstrating how success can be impressive as in the case of then pass to developing or enhancing their challenging and difficult it can be to create a Virgin Mobile UK, which already outperformed brand and distribution channel. These are only viable MVNO business model. its HNO. the main steps MVNOs follow on their path from concept to real life and each of these MVNOs must strive and be ingenious enough Despite the attractiveness of the mobile steps has potential obstacles or limiting to choose and exploit carefully chosen niches. industry, MVNOs are exposed to many risks partnership dependencies. On the other hand, if the chosen segments and challenges even before launching their prove to be profitable enough, the host HNO is services. Addressing these challenges For the operational part, MVNOs need to very well positioned to retaliate with its own discourages and can dissuade most outsiders partner with individual back office competitive offer and cannibalize the MVNO’s from entering the mobile arena. pilot market segment. This reinforces the statement that the most successful MVNO This includes managing a broad area of formulas are based on a strong existing brand relationships and alliances and evaluate most

page 13 / How MVNOs can take the path towards MVNO strategic planning business success

systems/process providers, MVNEs, mobile coordinate, keep track of and monitor the about embracing MVNO opportunities, their data platform providers, content providers and progress and risks of hundreds of competitors will surely welcome them and handset manufacturers to profitably deliver a interdependent milestones across each level their churners will end up in their competitors’ differentiated value proposition to their target of the wireless service delivery chain. MVNOs customer bases as new acquisitions. segments. that fail to do this in the launch phase could end up suffering from long delays or On the other hand, as previously mentioned, In terms of entry barriers, the lack of wireless developing a value proposition that is not enhanced service providers and full MVNOs skills and expertise is key to success. New differentiated enough to attract customers in can become serious competitors for HNOs, as entrants lack the experience needed to guide their target segments. they have complete control over their them through the different steps of the business and easily adapt and address their wireless service delivery chain. MVNOs must Cannibalization. Reality or just a myth? targeted niches’ specific needs. The HNO is focus on combining internal resources, skills still in a favourable position in terms of market and business strengths with those of best-of- There is a lot of hype around the MVNO threat penetration and expansion, network breed partners to overcome all known and for incumbents. There are plenty of reasons utilization, lower operation costs due to higher unknown challenges and risks. why HNOs should not consider themselves economies of scale and generation of attacked by newcomers and all MVNOs additional revenues through wholesale Challenges whilst growing negotiating with their chosen HNO should be volumes. aware of these aspects. Economies of scale characteristic to wireless Due to HNOs having expensive license, business models represent another great In fact, MVNOs do provide various economic network construction and high marketing challenge for all MVNOs. Put simply, this benefits to HNOs as they increase their market costs they are keen on filling their network means that the business becomes competitive share by addressing untargeted or poorly with traffic. MVNOs are a good opportunity to in terms of costs after it expands by targeted market segments. However hard broaden their customer base with segments decreasing the total cost per unit. Even after their marketing department tries, HNOs still that are very hard to target by the HNO at zero the MVNO becomes a success, however, struggle to cover all market segments and acquisition cost. further challenges appear due to high peak cannot experiment as they might like with funding as the investments needed after myriads of campaigns without cannibalizing turning cash flow positive remain high. After other profitable packages or customer MVNO launch, employees have to execute, segments. Basically, if an operator is reluctant

page 14 / How MVNOs can take the path towards MVNO strategic planning business success

If the MVNO has a strong business case it MVNOs need to have a worthy story, a source > Build a pragmatic and competitive business shouldn’t be difficult to prove the real of differentiation and they must strive to plan and choose the revenue stream sources opportunity that can emerge from their secure a network deal at an attractive (call charges, data usage, applications, partnership to the HNO. Based on a wholesale rate by presenting a compelling advertising, bundling or other service) straightforward business case the HNO and business plan to the HNO, mutually beneficial MVNO together can create new revenue for both of them. Furthermore, they should > Build an attractive business case for the HNO streams, address new customer segments carefully select their vendors and think of a of choice whilst reducing their marketing costs, increase flexible business model that would enable > Evaluate the current value of the brand (in customer retention by augmented customer them to keep pace with the rapidly changing case of existing brands) and focus on satisfaction in the targeted segments and mobile industry. Additionally, they need to enhancing it and on finding means to enhance their product offering by creating have a clear technology roadmap and be transpose it into new markets valuable partnerships with content or VAS prepared for the transition from 2G through providers. 3G to and focus on following current > Choose business executives with strong skills trends, keeping pace with technology and deep insight into wireless economics, Business strategy – the recipe for success developments and anticipating future trends. technology and competitors Before launching, MVNOs must consider that Most analysts agree that key success factors they will have to be in the business for at least for MVNOs to keep debt and costs low are to one year before they break even . MVNO have staff that understand the whole end-to- launch is usually preceded by six months to end process of mobile service delivery or work one year of start-up costs. Furthermore, they closely with highly experienced partners. Only have to consider the post-launch subscriber the larger and stronger MVNO models are acquisition costs which vary from country to robust enough to justify the significant country, from €65 for a low-end pre-paid offer infrastructure investment of the MVNO. to over €360 for a high-end post-paid service. These costs can delay an MVNO’s EBITDA Key success factors breakeven and require considerable investment (counted in millions) in funding. There are several steps to follow that might increase MVNOs’ chances of success:

page 15 Business strategy – the recipe for / How MVNOs can take the path towards success business success

• Assess the value of your existing customer • Create an innovative and attractive mix of base and choose the targeted niches products and services or embrace a multi- carefully based on the segments you brand concept-tailored offer supported by already cover and strive to get further an adequate infrastructure in affordable insight into these segments in order to be price ranges able to differentiate with tailor-made services • Carefully design your business infrastructure: • Reduce the costs that put too much pressure on margins such as expensive - HNO of choice based on careful and buildings, excessive headcounts, acquisition empirical evaluation of systems not really required by the - Distribution channel enhancement strategy present business model to support logistics, enabling faster time-to- • Build a compelling go-to-market strategy, market assess the value of your existing - Technical infrastructure, from core network distribution channel for the go-to-market systems, SDP through to best-of-breed strategy and find the means to diversify and solutions for BSS/OSS from messaging, voice, widen it, adapting it to your target data session control, voucher management, customers real time rating and charging, provisioning, • Prepare for convergence and the Triple Play order management, CRM and analytics o Market / Best-of-breed partners for content, • Prepare a roadmap for the innovative distribution, devices, applications and prepare services you would like to bring to the a mutual beneficial use cases before starting market in the coming years and to negotiate with each of them continuously follow and evaluate the latest industry’s trends

page 16 Adding innovation by embracing / How MVNOs can take the path towards social media business success

The phenomenal success of social media has changed the way people communicate forever and forced service providers to reconsider their place and position in the new, transformed market.

Besides being a tool for social interaction, the social networks can offer MVNOs amazing opportunities to exploit social communication by empowering dynamic viral marketing.

At the loosest end of integration, social media can become another distinct, highly valuable marketing channel, promoting the telecom brand in the same way as any other non- telecom product.

A deeper level of integration between social networks and the mobile network can link the all-pervasive social network with the all- pervasive mobile network to create a mobile network that is socially connected.

page 17 Adding innovation by embracing / How MVNOs can take the path towards social media business success

The benefits of converging communication activities within a friendly interface even if with very permissive legislation, if the number services with social networks by integrating in they did not use the service recently of incumbents is limited, HNOs tend to hold real time with OSS/BSS elements like Billing, back MVNOs, forcing them to start their Customer Care or Business Intelligence are Regulatory position business with a complex operation model, multifarious. The MVNO can: which might prove to be too expensive to hold Different countries have different legislation them back. For example, in some countries related to MVNOs. Several countries force > Enjoy a user-friendly, non-technical and cost new entrants might be forced by HNOs to start HNOs to share their network with MVNOs, efficient tool that enables marketing as full infrastructure MVNOs, making the total such as Hong Kong where 40% of operators’ professionals to unleash their creativity and start-up cost high enough to dissuade them. experiment as many campaigns as one can network capacity has to be dedicated to think of MVNOs and the pricing model has to be In an effort to limit MVNO access, HNOs might uniform regardless of MVNO. Other countries, choose to cover only the radio spectrum, the > Enhance up-selling opportunities - by especially in Western Europe and Australia, GMSC and the GGSN. These are only isolated leveraging the great wealth of profiling facilitate the launch of MVNOs and the cases as HNOs seem to be increasingly aware resources made available by the social legislation makes it mandatory to HNOs with of MVNOs’ beneficial effect upon their networks. MVNOs can provide customer with significant market share to share their growth. personalized services or products available in network with MVNOs. There are countries its friendly Facebook interface, but chargeable indifferent to MVNOs, such as Japan, Canada on their mobile account (e.g. ring back tone, and Austria where there are no requirements ring tones, data bundles, etc.) to open networks to MVNOs. Some discourage the launch of MVNOs, mostly in South > Allow subscribers to enjoy enhanced America, with many HNOs’ licenses granted customer care functionalities which are and stringent obligations to HNOs. Finally, usually available only in the mobile some countries prohibit MVNOs. environment, through a new, real-time and efficient channel Operators which are forced to share their network with MVNOs tend to delay > Reactivate dormant customers by keeping newcomers, making entry barriers high them informed of recent promotional enough to intimidate them. Even in countries

page 18 Next generation MVNO and online / How MVNOs can take the path towards convergent charging business success

If ten years ago MVNOs offered simple The benefits of convergence Prepaid only - Could this work? discounted prepaid voice and SMS services acting only as resellers, next generation > Integrated marketing approach and reduced There are many reasons why MVNOs would MVNOs have control over all business churn as a convergent billing system enable chose to adopt a prepaid only tariff plan. The functions and processes except radio access, MVNOs to address each customer with the HNO find this model attractive as the MVNO being able to offer sophisticated voice and appropriate loyalty promotion in accordance will not be able to transform into a serious data services and differentiate on services, to personal usage patterns competitor and cannibalize his customers, the innovations, data offerings and customer care. time to market is faster, the cash flow is much > Increased customer satisfaction and better, but the ARPU is lower, there are no Service providers and enhanced service business transparency by having one single bill credit collection burdens, no billing costs and provider MVNOs operate their own billing and financial balance per customer for all low transactions costs. systems, an important differentiation tool services: voice, data and VAS in case of family which allow them to structure their products or business plans. This will enable subscribers On the other hand the downsides of this and tariffs independently of the host to control the costs for the services they use business model are not negligible: the overall operator’s technical capability and launch new, and give the operator an overview of their customer database value is lower, the churn innovative offers with a very fast time to subscriber and the distribution channel costs are high, it market. Even if a given MVNO currently only is almost impossible to stay ahead of the targets prepaid subscribers, he should > Reduced operational costs due to the competition by preemptive launch of nevertheless consider implementing the implementation of a single platform provided innovative services such as content, data and online convergent charging system if the by a single supplier other VASs. additional cost of ownership of the post paid feature is low. > Opportunity to embrace FMC (fixed-mobile Therefore, triple play and convergence are convergence), which is very appealing to options all MVNOs should take into Viewed another way, a business-centric MVNO business customers consideration as a main ingredient for the with a postpaid-only strategy could benefit of success in the future. the convergence by service functionalities – > Increased customer acquisition based on the the prepaid account for private calls, or for flexibility of a convergent billing platform that data services in order to impose simple cost enable MVNOs to easily add attractive control and spending caps. features or to launch fashionable services with a very fast time to market, remaining ahead of the competition

page 19 / How MVNOs can take the path towards Conclusion business success

The world of communication is evolving faster MVNO market, the full infrastructure MVNO than ever before and the MVNO environment has the highest chances for long term business is still very active. But traditional services such sustainability, as it is in control of all its as voice and messaging remain stubbornly business processes and owns its customer unchanged compared with a decade ago. base. MVNOs based on low-cost prepaid voice While incumbents usually focus on covering might disappear, or struggle to survive, as mass segments, there is a great opportunity triple play, 3G, data services, instant for MVNOs to offer differentiated, compelling messaging and VoIP enter the mainstream. To services to untapped niches. The market is be successful, MVNOs must strive to more mature and new comers can benefit of differentiate and in order to do so they must the great wealth of information, following the select the most appropriate partners for their “survivors” business models and learning from business model and arm themselves with the mistakes of the defeated ones. In spite of flexible service creation and online charging; all the challenges, the MVNO is still an they must seek to create the perfect mix of attractive business model as the revenue products and services for their target audience potential is high, churn rates are increasing, and have an appropriate infrastructure for broadband service and application demand is success. growing fast and demand for value added services is also on the rise. As the number of MVNOs increases, concerns are growing too. Some fear that excess competition can lead to price commoditization and low revenue potential in years to come. Of course, not everybody will survive this struggle and individual performance will vary, but this is the path towards a healthier telecommunications industry. Even if the Reseller MVNO and Service provider MVNO still dominate the

page 20 / How MVNOs can take the path towards R Systems in the MVNO landscape business success

Based on two decades of expertise in the enabling them to differentiate by easily telecommunications industry with top launching new services with a fast time to BSS/OSS products, R Systems built a flexible market and a low total cost of ownership. MVNO in a White Box Solution that incorporates best-of-breed components for For more information, please visit messaging, voice and data session control, www.eu.rsystems.com voucher management, real time rating and charging smoothly integrated with proven open source business logics such as provisioning, order management, analytics Got any questions? Contact us: and CRM.

R Systems’ solution is tailored to suit all E-mail: [email protected] MVNO’s business expectations. It encompasses all services and functionalities required for achieving business goals, making MVNOs accessible to a much broader group of companies and brands and attractive to Mobile Network Operators (MNOs).

R Systems’ modular and extendable solution gives MVNOs complete control over their business and service offering, enabling them to define innovative pricing models plans and complex tariff models, to rapidly and cost efficiently create unique offers to target underserved niches, to easily orchestrate loyalty campaigns and manage churners,

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