One-size-fits-all vs. Niche Segmentation

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| WE CONNECT THAILAND

ONE DEVELOPMENT is the next generation, independent, Mobile Virtual Network Aggregator and Enabler

(MVNA/E) with hands-on experiences from both MVNO and Mobile Network Operations worldwide.

ONE DEVELOPMENT | WE CONNECT THAILAND

MVNO WHITEPAPER

ONE DEVELOPMENT WE CONNECT THAILAND

[email protected]

www.weconnectthailand.com

MVNO NICHE SEGMENTATION July 2015

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TABLE OF CONTENT

DEFINITIONS USED THROUGHOUT THIS DOCUMENT ............................................................................................2

MVNOS MUST FIND THEIR NICHE ...........................................................................................................................3

EXPLOIT BRANDS AND MARKET SEGMENTATION ..................................................................................................4

MICRO-SEGMENTATION IN THE MARKET VIA MVNE/MVNA ................................................................................5

SEGMENTED BRANDING STRATEGY ........................................................................................................................6

BRANDS, NICHE SEGMENT & OPPORTUNITIES IN THAILAND ................................................................................7

EXAMPLE: THE MVNO 168 OPERATOR LIGHT .....................................................................................................8

DIGITAL ECONOMY - IoT and M2M .........................................................................................................................9

DEFINITIONS USED THROUGHOUT THIS DOCUMENT

HNO - HOST NETWORK OPERATOR It is as a Mobile Network Operator that owns its network infrastructure and allocated spectrum.

MVNO - MOBILE VIRTUAL NETWORK OPERATOR It is an organization, which offers mobile services. The MVNO does not own spectrum, instead it enters into an agreement with either a HNO or MVNA to obtain bulk access to network services at wholesale rates, and then sets its retail prices independently. An MVNO may use its own customer service, billing support systems, marketing and sales personnel or it may employ the services of a MVNE

MVNE - MOBILE VIRTUAL NETWORK ENABLER It is an entity, which provides infrastructure and services to both HNO and MVNOs, which enables existing, and new MVNOs to offer their services on the HNO network, while leaving the back-end enablement to the MVNE. The MVNE provides services, such as billing, business workflow, product setup, service delivery, customer care, fraud management, web services, reporting, sale platforms, etc.

MVNA- MOBILE VIRTUAL NETWORK AGGREGATOR The MVNA is an entity, which purchases mobile airtime in bulk from the partner HNO, and then wholesales this airtime and service to multiple MVNOs, who each in turn sells the mobile service to end-users.

MVNE/MVNA - MOBILE VIRTUAL NETWORK ENABLER & AGGREGATOR (ONE DEVELOPMENT) is a combination of, Mobile Virtual Network Enabler and Aggregator. The MVNE/A is an entity, which purchases mobile airtime in bulk from the partner HNO, adds its service platform (MVNE) on top, and then wholesales this airtime and service as end-to-end to multiple MVNOs.

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MVNOS MUST FIND THEIR NICHE

With a market penetration above 149 % the telecom sector in Thailand has reached saturation point. Mobile

operators are finding it increasingly challenging to compete and grow organically. Mobile network operators

suffer from the limitations of the traditional, aggregate method of marketing services and products with the

"one-size-fits-all" strategy, where they approach the consumers, casting their net over large averaged groups,

or a few segments, resulting in under-served and un-reached segments.

Instead of the outdated view of customers as large, indistinct segments, Mobile Virtual Network Operators

(MVNOs) embrace a new level of targeting the market, by tailoring offers to specific customer segment needs.

They cater to the segments that are underserved or un-reached by the mobile operators.

MVNOs create a unique brand positioning and value

proposition to attract target niche clusters such as

specific groups or demographics. Deploying in this way ensures that customers needs are more accurately identified, and serviced. In return,

customers respond positively, with growth resulting from the niche segment approach. In highly penetrated

markets, like the Thai market, some segments are "under-served" in specific aspects of their mobile

experience.

Market dissatisfaction comes from either poorly tailored products and services or intangibles, such as a

mismatch between their individual lifestyles, and what their operator's brands stand for. Different consumers

simply do not all have identical needs or identical use habits, which utilize the same operator value

components all the time.

As smartphone makers and OTT players have shown,

communications services are all about the experience - and

experience goes far beyond simply having network

connectivity perform as expected.

Companies can target a range of market segments by: offering connectivity options that can be differentiated

using next-generation network and system technologies - according to preference and context (for example,

differentiated data tariffs for various sites, apps, etc.); differentiated non-network services such as customer

care; and brand and product characteristics, which create a sense of belonging according to lifestyle.

This is where an MVNO can step in, achieve a competitive edge, and capturing market share, by capitalizing on

market differentiation and segmentation in the industry rather than merely competing on price.

Ericsson: Experience matters

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EXPLOIT BRANDS AND MARKET SEGMENTATION

Some of the more successful MVNOs (such as retailers, content providers, media brands) have made use of

their existing marketing assets including their existing customer base, brand affinity and distribution channels.

They use these assets to create a unique brand positioning and value proposition in order to attract their

MVNO target segment. These segments are often defined demographically (ethnicity, age, location) or by

affinity (brand identification, content, interest). This typically means identifying new or emerging niche markets

that lie beyond the reach of traditional MNO marketing approaches.

Fig 1: Mobile Network Operators (MNO) Marketing Strategy vs. MVNOs

Fig 2: Difference between Mobile Network Operators and MVNOs Marketing Strategy

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MICRO-SEGMENTATION IN THE MARKET VIA MVNE/MVNA

The proliferation of MVNOs has given rise to third-party vendors known as mobile virtual network enablers

(MVNEs), or, alternatively, as mobile virtual network aggregators (MVNAs).

These MVNA/MVNEs serve as a link between incumbent mobile operators and the MVNOs. The services that

MVNEs offer vary widely, but ONE DEVELOPMENT provide end-to-end services, from technical aspects to sales,

distribution support and consultation. This comprehensive offering is being driven by the presence of many

brands in the market with differentiated access to specific niche segments but little or no telecom knowledge.

ONE DEVELOMENT proactively seek such untapped brands and offer them one-stop, la carte services from

the telecom value chain, enabling an immediate go to market capability as an MVNO.

By working with multiple MVNOs, ONE DEVELOPMENT can establish economies of scale on their platforms.

This allows the MVNOs to significantly reduce their operating costs and up-front investment, thereby reducing

the subscriber base they need to break even. This in turn leads to further micro-segmentation in the market.

Fig 3: One Market Approach vs. Market Segments Approach

MVNOs play a key role in penetrating key under-served segments, such as youth, elderly, expatriates, SMEs,

travelers and migrant workers - segments that operators in Thailand struggle to adequately serve.

MNOs tend to approach such segments with generic offerings that do not resonate strongly with the target

audiences, because such segments are typically too small to justify tailored products and services. The lean and

agile business model of the MVNO, however, allows highly focused targeting. An example would be an MVNO

that specifically targets one sub-segment of expatriates by offering customer care in their own language or

providing remittance services and discounted international minutes to their home market.

MerchanTrade Inc., an MVNO in Malaysia that caters to the expatriate community, offers a good example of

this approach. Its mobile remittance service allows its 500,000 active subscribers to transfer money within its

partner bank network in less than five minutes, at a fraction of the cost of other services

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SEGMENTED BRANDING STRATEGY

One of the key competitive advantages of brand MVNOs is that they have a thorough knowledge of their

market segment, allowing them to cater to that segment in a far more personal, relevant way than MNOs can.

MVNO Virgin Mobile found a way to differentiate its service from other telecom services in India. Virgin Mobile

worked closely with its airline, travel, and music companies to conduct bundling sales and provide diversified

services with favorable prices to young customers. Customers could enjoy multiple services including shopping,

travelling, ticket and hotel booking services via their cellphone. Virgin Mobile's highly segmented branding

strategy and differentiated marketing strategy successfully attracted many young customers.

Approximately 70% of young people gave up services by

other operators and shifted to Virgin Mobile. From Deloitte Insight Series Report: Analysis of MVNO Competition Strategy 2013

E-Plus Inc., a German MNO, was facing the perils of a mature telecom market. Although the number of

subscribers in the overall German market grew 11% between 2002 and 2005, the market share for E-Plus grew

just 4%. Over the same period, the companys EBITDA margin declined from 32% to 24%.

The market was near saturation and offered little traditional growth potential. In response, E-Plus transformed

itself in 2005 from a single one-size-fits-all service provider into adding a collection of brand MVNOs, each

targeting a specific microsegment in the German market.

These brands included:

Base, the first flat-rate mobile brand on the German market, aimed at customers seeking a simple plan

Simyo, a prepaid-services MVNO for cost-conscious consumers

Ay Yildiz, the first mobile brand tailored to Germanys Turkish community

vybemobile, a brand for German youth, which combined low costs with free music downloads

The company actively sought partners with various brands and resellers in the market. By 2009, it had

partnered with and launched 34 different MVNOs in the German market. The results of this transformation

have been striking. E-Pluss subscriber base grew by 18% between 2005 and 2008, even as its EBITDA margin

grew from 24% to 39%. For the past six years, E-Plus has been the only MNO in Germany with increasing

market share.

The bottom line? In a highly competitive German telecom market, E-Plus adopted an MVNO strategy to put

itself back on track.

A quick look at the MVNOs that launched in the Netherlands in the first 9 months in 2011 highlights the move

towards a greater degree of specialization. Among the new players are: UPC and Ziggo (cable operators)

extending mobile data services to their existing customer base; ethnic MVNO Lycamobiles third brand, Toggle

Mobile; three new MVNOs in the business segment; another new ethnic player; one MVNO in the no-frills

segment; and Youfones acquisition of a charity-focused MVNO, Call4Care.

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Henry Ford statement, regarding the Ford model T in 1908

The evolution to a multi-segment, multi-brand approach is not unique to the mobile industry but similar to the

evolution experienced in other industries such as the automotive industry. Today, the automotive market is

heavily segmented and most car manufacturers actually own multiple automotive bands, each focused on a

specific market segment with the product tailored for the unique needs of the segment.

Fig 4: Automotive Paradigm Shift from Single Brand to Multi-Brand Multi-Segmentation Strategy

Volkswagen owns brands ranging from Skoda, at the low-end, to Bugatti, Bentley and Lamborghini at the high-end, and hence, is

following a multi-segmentation strategy of addressing distinct market segments with a product tailored to their unique needs

BRANDS, NICHE SEGMENT & OPPORTUNITIES IN THAILAND

36 companies have obtained an MVNO license in Thailand. Given this strong interest from both Thai and

International brands, there is a scope for greater competition and service innovation in the Thai market.

Fig 5: Example of Multi-Brand, Multi-Segmentation MVNO Opportunities in Thailand

The customer can have a car painted any color that he wants as long as it is black

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Some of these brands have, or are actively considering entering as MVNOs on the Thai market. Most of them

have large existing customer bases and distribution in place, some have loyalty programs, which would suit

perfectly with prepaid mobile offers - and others, have tailored services, which cater to a unique specified

target.

One thing they all have in common is that none of them has launched an MVNO in Thailand yet. We speculate

that they may be prevented from launching their MVNOs by a combination of host networks inability or

unwillingness to assist, or a lack of telecom/MVNO experience.

This is where ONE DEVLEOPMENT comes in, as a new generation of MVNA/MVNE. We not only provide a

technical platform with billing, real-time CDR, Custom Relation Management etc. but, perhaps more

importantly, we provide telecom and MVNO experience in defining, launching and operating successful

MVNOs, combined with retail and distribution experience in the Thai market, and with the right tools to meet

and analyze the targets.

If it were only a question of having a technical platform, these aspiring MVNOs could have launched 5 years

ago. However, running a successful MVNO requires far more than simply buying/renting a technical platform,

and wait for the customers to come.

EXAMPLE: THE MVNO 168 OPERATOR LIGHT

The Thai MVNO 168 (Formerly known as 365 Communication) recently announced it would launch as a MVNO

on CAT Telecom in Thailand. The team behind 168 announced it would spend THB 3.5 billion on marketing the

MVNO the first year, targeting 2 million subscribers in the first year, and 10 million within 4-5 years.

CAT Telecom announced it had signed an agreement with a MVNE technology platform to cater such MVNOs.

The MVNO announced they would introduce a 24-carat gold plated iPhone to their customers. At the same

time, they would offer low priced handsets to its customers, through one of its investors, which are selling low-

end, no-name Chinese handsets. What is clear from the above is that, sadly, 168s approach is all over the

place. If they have a marketing plan, it is based on a normal mobile operator = one-size-fits-all, casting the net,

hoping to catch anything. On one side they aim for high-end segments with a gold plated iPhone, while at the

same time they aim for low-income segments by offering no-name Chinese handsets.

The numbers do not add up, e.g., 2 million net additions in year 1, compared to DTACs net additions of

1,624,000 in 2013 and 66,000 in 2014. The target of 10 million subscribers within 5 years means that 168

would achieve a market share, more than 10 times bigger than its host network operator currently has.

This has nothing to do with an MVNO plan but appears to be a dream of being an Operator Light. Unless

drastic changes are made to their plans, it will leave the host operator with nothing but a paid up deposit and

few additional subscribers. If CAT Telecom, or indeed 168 itself, had been able to get guidance from an

MVNA/MVNE with experience in MVNO launches these deficiencies in their plans would have been pointed out

from the start.

Luckily, for the time being, the National Broadcasting Telecommunications Commission (NBTC) rejected 168

Communication's request reasoning that the company had no clear strategy to secure targeted users.

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ONE DEVELOPMENT is the next generation, independent, Mobile Virtual Network Aggregator and Enabler

(MVNA/MVNE) with hands-on experiences from both MVNO and Mobile Network Operations worldwide.

DIGITAL ECONOMY - IoT and M2M

With Thai consumers increasing reliance on mobile broadband, the governments policy on Digital Economy,

and the technology and service evolutions in the industry (e.g., the emergence of Internet of Things (IoT) and

M2M communications), there are attractive and viable business opportunities and market segments for new

players to enter as MVNO in Thailand.

The introduction of new MVNOs and innovative service offerings, will inject greater vibrancy into the Thai

mobile landscape, in line with the vision of building Thailands Digital Economy.

Research firm, Frost & Sullivan, expect the IoT market will be one of the fastest-growing technology segments

in Asia-Pacific. Overall spending on IoT in the region reached U$9.96 billion in 2014.

The market is expected to continue growing at a compound annual rate of 34.1% to U$58 billion by 2020 and

Thailand, India, Malaysia and Indonesia will be among the fastest-growing IoT markets in Asia-Pacific during

2014-17.

MVNEs and MVNOs have played a pivotal role in the early development of the M2M market and will continue to play an important role.

Some of the M2M MVNOs today include Panasonic, Aeris Communications, Numerex, Wireless Maingate, Wyless, MobiquiThings and KORE where the latter provides connectivity to 3.2 million devices and manages another 500,000 under its agreement with car manufacture Audi.

Fundamentally, MVNOs - as with normal mobile services - are likely to find the most success focusing on the

more specialized, niche segment of the M2M application market and utilizing their expertise and capabilities

to bring more complex applications to market. In addition, forming a tighter collaboration with MNVEs to help

with quicker on ramping of devices onto the MNO networks is also likely to prove successful for the MVNOs.

The current MVNOs in Thailand have been less than successful, and the key question is whether the Thai

market can support MVNOs and grow despite the opportunities identified.

It ultimately, comes back to the fundamentals of what makes for a successful MVNO: a proposition that

resonates with the customer, a cost effective channel to market, brand awareness, service and simplicity.

ONE DEVELOPMENT

WE CONNECT THAILAND www.weconnectthailand.com

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One-size-fits-all vs. Niche Segmentation

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