MVNO Opportunities,

Challenges and Best

Practices
Contents

Overall MVNO market landscape

Strategic Opportunities and Challenges for MVNOs

Best Practices for MVNOs

Case Studies of successful MVNOs

1
Market Landscape
Market Landscape
Nearly 650 active MVNOs worldwide
120 MVNOs also offer mobile data services
150M subscribers on MVNOs
Examples of successful MVNOs Mature EU markets MVNO status:
Lycamobile: Operates in 16 countries; $1.1B in Anywhere between 10-30 MVNOs each
revenue MVNO aggregated market share of 10-15%
Virgin Mobile UK Typical single successful MVNO market share: 3-7%
Tesco Mobile Typical MVNO ARPU: 30% of MNO ARPU
Typical MVNO margins: 10-20%
3
MENA Status

Oman Jordan Saudi Arabia UAE and Kuwait Egypt Bahrain

5 MVNO licenses issued 2 MVNO licenses issued; 3 MVNO licenses Only branded resellers 1 MVNO license awarded None
and 2 currently operate 1 launched awarded allowed to Telecom Egypt

4
MVNO Opportunities
and Challenges
MVNO Opportunities

Segmentation: Addressing a niche segment that has been overlooked

New distribution channels; new care channels; new pricing strategy

Developing new business models Advertising supported business model

Offering different pricing and tariffs structures

Pricing Innovation Retail minus vs cost plus pricing

New digital services; attractive content

Service Innovation Cross sell with existing products and services

Address lack of choice from MNOs

Using MVNE for economies of scale and faster Tine to Market (TTM)

Investing in optimization technology to improve relative QoS

6
MENA Opportunities

Youth
Expats
Decent sized niche segments SMBs
Ethnic communities

Population growth in MENA: 2.5% YoY

Youth 61% of people under 30

Digital content - Arabic and Western Music

Large and diverse communities

Customer care in own language
Expats (overseas workers) Remittance services (e.g MerchanTrade in Malaysia)
Cheap minutes to home country

7
MVNO Challenges

Competitive market Competition at Limited Cost of marketing No economies of Regulation

environment distribution level opportunities to and distribution scale
differentiate
Price pressure squeezing Retailers push brands that Offering unique Acquiring customers while
margins give them the highest propositions controlling marketing
Uncompetitive wholesales commission on SIM sale Creating sustainable value spend
prices and top-up beyond price

8
Challenges Specific to MENA Region

High Interconnect
Regulatory Issues Low ARPU
Rates

Lack of National Resistance by Lack of Mobile

Consumer Brands MNOs Number Portability

9
MVNO Key Success
Factors
MVNO Prerequisites for Success

SAC four times lower Simple but sharp Existing customer base
Strong brand name
than market average product and marketing (upsell, cross-sell)

Good distribution Time to market in

Innovation champions High tech and low cost
network terms of weeks

Needs to meet an
identified customer
Masters of Do all the above on a
need
differentiation shoestring budget
• Save money; better
experience; new service

11
MVNO Differentiation Ideas

Innovative Digital Services • Innovative set of content and services

(Value Added Services)

• Fast and responsive care

Customer support and • Local language care
customer centricity • Self-service and assisted

• Addressing pain points of customers with MNOs

Simplicity of Proposition • Addressing unmet needs

• Value for money

Value Based Pricing • Bundling of services with price tiers

12
Case Studies

13
Case Study – Carrefour Mobile
• Carrefour Mobile (Supermarket Brand)
• Leading supermarket brand in France, Belgium, Italy, Spain etc
• MVNO Countries: Belgium (BASE), Italy, Poland, Taiwan
• Launched in 2006 (Belgium)
• Target segment: families doing their weekly shopping
• 1M subscribers; 40 employees
• ARPU = €15
• Initially positioned as price leader
• Eventual focus on Innovation and loyalty
• Loyalty: Spend $50 instore, receive 5 free minutes
• Innovation: “Mon Panier” mobile app
• Allows customer to shop and pay using their smartphone and collect by
identifying themselves using NFC or QR codes
• Planning to introduce “virtual aisles” in metro stations

14
 Omani TRA issued 5 licenses 4 MVNOs were eventually launched

Case Study: 2 each with Omantel and Nawras

All MVNOs initially targeted low-income expats in

Oman Oman
Only 2 relevant currently - Friendi Mobile & Renna
Mobile on Omantel Network
11% total MVNO market share; Helped Omantel
recoup market share lost to Nawras
Friendi is market leader (7.6%); targets expats
from India subcontinent
Renna (3.6%) targets Arabic expats and cost
sensitive Omanis

15
Interesting Value Propositions

Turkcell Europe, Freem, Poland FM Mobile, Poland Lycamobile, UK and EU Virgin Mobile UK
Germany
Host network: Watch 1 ad on your phone, get Referral model Cheaper roaming rates in 16 Target youth segment
DeutscheTelekom’s network 1MB to surf Facebok Subscribers get a revenue share countries Innovative marketing
Value proposition: Distribution channel: Facebook for each direct or indirect (competition)
•cheaper international calling referral Digital content
rates and roaming prices
•Turkish content Turkish-
speaking call centers

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Conclusions
Best Practices

Differentiated and
focused proposition
Select a niche and develop clear
value proposition for it
Develop a loyalty based offering
Create a lean
organisation with low
cost structure
Scrutinize every element of
value chain
Determine the optimal strategy
for delivering these elements –
outsourcing, partnerships, or
procuring from host.
Develop effective sales
and distribution
channels
Products and services should be
highly visible and immediately
accessible to target segment
Set up a viable Simplicity of tariffs and
wholesale agreement Pricing and Best In Class
with the MNO Customer Experience
Please see next slide

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MNO Wholesale Agreement – Key Parameters

Scope of services to be offered
by host:
Transmission and signalling
Activation and billing
Sales and distribution
Customer care etc
Cooperation process
Points of contact
Decision-making bodies
Escalation procedures
Change management
Emergency Plans
Pricing Strategy SLAs and KPIs
Retail-minus (MVNO preference) Network performance
Cost-plus Fraud management
Wholesale (host preference) Training

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Additional Slides

20
MVNO Recipe for success

Min Subscribers: Min Airtime

Min ARPU: Min $4
500K Margin: 45%

Max SAC
(subscriber
Max employees:15 Margin: 15%
acquisition cost):
$8

21
Failed MVNOs
ESPN mobile

• Unclear distribution strategy

• No partnerships with retailers
• Tried to build own distribution network
• Long and costly process

Virgin Mobile South Africa

• Lack of government support

• Too few outlets
• Poor branding
• Insufficient advertising
• Rates too high
• Average customer service

22
Saudi Arabia Market Situation

3 MVNO license

• Axiom Telecom (Zain’s network)

• Jawraa (Lebara) on Mobily
• Virgin Mobile (STC)

Total Active Mobile users: 38.8M

Market share

• Zain (18%)
• Mobily (27%)
• STC (45%)

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MVNO
Operating Branded Service Full
Model Reseller Provider MVNO
Subscriber Subs belongs Subs belongs Subs
ownership to MNO to MVNO belongs to
MVNO

EBITDA 10-15% 15-20% 20-25%

Margin

Project Peak $4-6M $7-10M $10-15

Funding

CAPEX $1M $2-4M $10-12

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NEEDS OF
DIFFERENT
PLAYERS IN MNO MVNO MVNE
THE VALUE Protect the core retail Fast setup Network connectivity
business
CHAIN
Enter underserved markets Low costs Multi-tenancy

Compete more effectively Operational Flexibility

independence

Achieve high Branded experience, Expertise

profitability

Flexibility Low ongoing costs

Innovation, Technical
know-how

25
Who Does What

MNOs (ORANGE) MVNO + MVNE (SKY+eServe)

Provides MVNO with IMSI range and activates Provides technical Interface into
IMSIs operator’s network
Routes incoming/outgoing calls & SMS from Handles the marketing, billing, e-front and
MVNO’s subscribers CRM functions
Provides MVNO with Call Data Records for Manages the relationship between
calls generated by MVNO subs partners
Communication, promotion and
distribution of the offer

26
Characteristics of TYPICAL MVNOs

Most MVNOs are start-ups and lack cash

Most are less than 5 years in age and resources

Most have non-telecom genes Retailers, airlines, banks, churches

Most are very nimble Move faster and smarter than large telcos

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