Introduction to MVNO

Introduction to MVNO

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MVNO

Index

o Concept

o Definition

o Formation of MVNO

o MVNO and other Players in Market

o Types of MVNO

o Generic Model of MVNO

o Opportunities and Risks

o Case study : - ESPN mobile

- Virgin mobile India

Concept

• Mobile Virtual Network Operators: Introducing the business concept of

"One doesn’t need to own a cow to milk a cow”

An MVNO does not own spectrum, it

leases it from a network operator with

whom it has a relationship

What is an MVNO?

An MVNO supplies the SIM card and

has full control over its subscribers and

handles its own billing

An MVNO buys network capacity, usually

as close to the base level as possible, and

invests in a service infrastructure of its own

The MVNO thereby establishes a more

independent position and is able to

compete directly with other mobile

network operators in the market by

offering advanced services

Definition

US Federal Communications Commission Resellers offering service to consumers by purchasing airtime at wholesale rates from facilities-based

providers and reselling it at retail prices

European Commission

A mobile operator, which does not have a license to use radio spectrum, but has access to the radio infrastructure of one or more mobile operators and is able to offer services to customers using that infrastructure and its own network

Industry Analysts

An arrangement where a network operator acts as a wholesaler of airtime to another firm, which then markets itself to users just like an independent operator with its own network infrastructure

Study Definition: Companies that buy network capacity from at least one mobile network operator in order to offer their own branded mobile subscriptions and value-added services

Formation of MVNO

An MNO does not have the content and applications to succeed in a wide variety

of services.

Formation of MVNO contd…

MVNO and Other Players in Market

Y N

Service

Available

Service Not

Available

Service Provider

N

Y

Y

Y

N

N

Y

Service

License and Infrastructure

Customer Base

Customer Services

Customer Billing

Roaming Agreement

Routing Mechanism

Instrument/ Sim

MVNO

N

Y

Y

Y

Y

Y

Y

MNO

Y

Y

Y

Y

Y

Y

Y

Different Players:

– MNO

– MVNO

– Service Provider

– Reseller

Reseller

N

Y

N

N

N

N

N

Types of MVNO:

Various MVNOs network and operational components:

Access Network

Core Network

Service Platform

Pricing and Billing

Customer Care

Marketing Sales

Base stations and transceiver

equipment that provides access to

spectrum

All network elements apart from the

access network, including switching

and transmission, home location

registers (HLRs), intelligent network

platform, etc.

All activities and equipment aimed at

the design and provision of services.

All activities and equipment that are

required to design and implement the

pricing policy and billing options.

Activities relating to after-sale

customer care

Marketing, sales and customer

acquisition activities

Fu

ll M

VN

O

En

ha

nc

ed

MV

NO

Ba

sic

MV

NO

UK

AUS

Generic Model of MVNO

Opportunities

Participating in mobile boom

Differentiate and expand own services

Covering a niche which MNOs do not serve

Developing a sustained customer relationship

Distribution of own content

Cross selling to existing customer base

Leveraging own distribution network

Leveraging existing strong brand

Risks

MVNO introduces additional competition into the market.

Network quality level cannot be controlled

High customer acquisition cost if no brand and distribution available

Network operators will prioritize their own subscribers above those of an

MVNO if bandwidth is a limiting factor, this could lead to non-renewal of

an MVNO agreement in order to recoup the network capacity

ESPN Mobile

• Launched in February 2006,

• Parent company: Walt Disney Corporation

• MNO: Sprint

• Offer: Sports information services

• Brand value: high

• Telecom experience: none

• closed in September 2006

• Reasons for closure: insufficient subscriber growth

• Main contributors to failure:

– High prices of handsets

– Insufficient service differentiation

– Technical limitations of video download

• Re-launched by Verizon in May 2007

ss

• On 1st March 2008, Virgin Mobile has entered the Indian Market,

Virgin is primarily an MVNO company, and retail distribution is only

a part of the overall strategy.

MNO: Tata Teleservices.

• Brand value: high

• Telecom experience: 15 million customers over 4 continent.

• Virgin India Strategy : Target Segment - Urban Youth

- There are more than 215 million Indians aged between 14 - 25 years old. Over the next three years, this segment to be adding over 50 million new youth subscribers.

- Focus exclusively on a single segment and by continuing to deliver innovative services that cater to this segment's distinct needs.

• Sales Objectives : - Revenues of Rs. 35000 Crores by 2011

(including connections, handsets and accessories)

Strengths

– Strong Global Brand

– Limited overlap with Tata’s existing customers

– Very low fixed costs as it leases Network Time

–

– Not tied to a particular Technology

Threats

– Lack of number portability - switching barriers

– Unclear Government Policy on MVNO

– Limited 3G services

– Falling Handset prices - lower margins

– Non serious image may not go well with conservative Indian consumer.

– Limited understanding of India Market

MVNO

Abbreviations

MVNO- Mobile Virtual Network Operator

MNO- Mobile Network Operator

SP- Service Provider

SIM Cards- Subscriber Identity Module Card