Effects of RLAH for an MVNO Michael Krammer Founder and CEO Ventocom GmbH Brussels, 22.11.2018 26.11.2018 © 2015, Ventocom 1
Effects of RLAH for an MVNO
Michael KrammerFounder and CEO Ventocom GmbH
Brussels, 22.11.2018
26.11.2018© 2015, Ventocom
1
Facts from the harsh MVNO REALITY
• DSM became reality with RLAH for customers. Usagepattern changes
• DSM implies a market-imperfection framework through wholesale regulation. Usage increase > Wholesale decrease undermined ULB (Uni Lateral Buyer = Market Participant without Network) competitiveness through „Margin Squeeze“
• Wholesale regulation needs urgent review
• Market challengers in form of MVNOs and/or ULBs need to be protected
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Introduction
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Ventocom Group – Key Facts
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Company Founding 08/2013
Market entry Austria 01/2015, Market Share 6,5%
Market entry Slovenia 05/2017, Market Share 2%
Brands (Reseller) 5
Group Revenue 2017 53,45 Mio. €
Employees ventocom group 40
Employees ventoservice 30
104
90
7783
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RTR Mobil funkindex
Gesamtindex Low-User Medium-User High-User Power-User
Mobile Market Pricing Index (RTR)
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Source: https://www.rtr.at/de/inf/odMFI
Merger AT
1. Orange AT Brand vanishes2. Less competitors and
increasing prices went handin hand
Ventocom launches HoT
Substantial and sustainabledecrease in marketwide prices
due to increased competition by„maverick“ entrant HoT.
Roaming Usage PatternProof of retail-market success due to RLAH
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Roaming Usage - Drivers
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Number of roaming users Usage pattern & utilization
1 2
2.3 x 2.3 x
2.6 x
2.0 x
2.3 x 1.9 x
1.9 x 2.0 x
2.1 x
0
0
0
0
0
0
0
0
0
0
0
Jän Feb Mär Apr Mai Jun Jul Aug Sep
Mill
ion
en
Pre RLA H Post RLAH
Roaming users before and after RLAH
Since the start of RLAH the number of roamingusers has constantly increasedby the factor 2x. (independent of any seasonality)
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8.4 x 7.3 x
6 .9 x6 .3 x
4 .3 x
4 .2 x
4 .3 x 4 .0 x
3.8 x
0
1
1
2
2
3
3
4
4
Jän Feb Mär Apr Mai Jun Jul Aug Sep
Mill
ion
en
Pre RLAH Post RLA H
Utilization of roaming servicesVoice Minutes
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Utilization of voice minutes increased by factor 4.7x on average after RLAH.
Utilization of roaming servicesData
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Data consumption literally exploded after RLAH.The use volume increased by the factor 43.8x on average.
98.3 x122.0 x
97.0 x71.0 x
39 .1 x
40 .4 x
42.9 x 36 .7 x
32.5 x
0
10
20
30
40
50
60
70
Jän Feb Mär Apr Mai Jun Jul Aug Sep
Mill
ion
en
Pre RLAH Post RLA H
Utilization of roaming services - overview2016 - 2018
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Especially data and voice services experienced dramatic increases in utilization. A proof of high consumer acceptance and retail market success of RLAH.
2.8 x1.6 x
16.1 x
4 .7 x
1.8 x
4 3.8 x
Minutes SMS MB
20 16 20 17 20 18
Unilateral Buyer (ULB)The hard life of MVNO under the Roaming Regulation
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Roaming Business (traffic trading and steering between MNO’s)
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MNO Austria MNO Germany
Roaming Traffic
Roaming Traffic
Balanced trafficcharged at levelof wholesalecaps
Imbalanced trafficcharged at marginalCosts
Uni Lateral Buyer – not able to sell capacity, no trading possible
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MVNO Austria MNO Germany
Roaming Traffic
Roaming trafficcharged atwholesale caplevel
3.20
2.06
1.00
0.380.60
0.27
-36%
-62%
-55%
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
Minute CAP EEA avg. Q1/18 SMS CAP EEA avg. Q1/18 MB CAP Q1/18 EEA avg. Q1/18
€-c
ents
Wholesale caps vs. EEA avg. wholesale prices paid
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The regualted caps are by far higher than the avg. wholesale price actually paid.
Source: International Roaming BEREC Benchmark Data Report October 2017 - March 2018
https://berec.europa.eu/eng/document_register/subject_matter/berec/reports/8251-international-roaming-berec-benchmark-data-report-october-2017-march-2018
Weighted average overpricing for ULBs
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This leaves ULBs with a overpricing-disadvantage of 48% in costs!
48%
Q1/18
EEA avg Cost Overpricing to CAP
EU roaming margin: Revenue and costs forventocom2016 to 2018
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After the start of RLAH the costs by far exceed revenues from EEA roaming.
The main reason is that utilization increase by far exceeds the decrease in wholesale capprices.
0
200
400
600
800
1.000
1.200
1.400
Q1-16 Q2-16 Q3-16 Q4-16 Q1-17 Q2-17 Q3-17 Q4-17 Q1-18 Q2-18 Q3-18
Th
ou
san
ds
Revenue Cost
Start of RLAH
- 685k
- 889k
ventocom‘s roaming revenue and costs5 quarters before and after RLAH introduction in mio. €
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The main reasons for negative margins are that(i) the utilization increase by far exceeds the decrease in wholesale cap prices
and (ii) used services are mainly „in bundle“ after RLAH.
1,42
0,900,87
3,42
0
0,5
1
1,5
2
2,5
3
3,5
4
pre RLAH Post RLAH
Mil
lio
ns
Revenue Cost
Summary
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Summary
1. RLAH is highly accepted and welcomed by consumers. It realizes the visionof the Digital Single Market!
2. MVNOs act as driving forces in local telco-markets, driving competition and innovation
• Both is at risk on midterm basis because:• Decrease in wholesale caps are by far exceeded by the increase in service utilization
leaving MVNOs with negative margins
• MVNOs are mainly excluded from the roaming wholesalemarket, leaving the field toMNOs resulting in low or no competition, and charging of caps to ULBs despite lowercost-realities.
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What needs to be done?
1. A drastic reduction of the wholesale price caps is required for both DataAND Minutes.
2. A new mechanism for setting the wholesale caps (not only relying on MNO inbound roaming costs) is required. Beside the MNO’s inbound roaming cost model domestic retail and wholesale prices should be a reference.
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domestic *)in 2013
EU15.6.2017
EU 1.1.2018
EU1.1.2019
EU 1.1.2020
EU 1.1.2021
EU 1.1.2022
costs per GB
1,7 € 7.7 € 6 € 4.5 € 3.5 € 3 € 2.5 €
costs per Min.
0,85 €cent 3,2 €cent 3,2 €cent 3,2 €cent 3,2 €cent 3,2 €cent 3,2 €cent
costs per SMS
0,34 €cent 1 €cent 1 €cent 1 €cent 1 €cent 1 €cent 1 €cent
*) Reference offer for H3A as a remedy for orange/ three merger
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