Presentation Outline

• What is a Mobile Virtual Network Operator?• Key driving factors enabling the MVNO opportunity• The MVNO opportunity• Different MVNO types• MVNO backgrounds• MNOs and MVNOs in Finland• MVNOs business on modeling point of view• Conclusions

− about the business opportunity− a few selected suggestions to the MOB business game

What is a Mobile Virtual Network Operator?

Content provider

Content aggregator

Mobile virtual

networkenabler

Networkoperator

Serviceoperator

Customers

Content

• News• Travel info• Games• Smart phone apps.• Sports

Mobile portal

• Mobile operator’swap site, e.g.wap.sonera.net

Network

• GPRS, PDC,CDMA, UMTS

Supp. infrastr.

• Provides networkaccess services to manyservice operators

• Technical infrastructurefor billing etc.

Services

• Voice, data and VAS services

• Own technical infrastructure to certain extent

• M-commerce

Terminal

• Operator branded phones

• Non-operator branded phones

Mobile Virtual Network Operator- doesn’t own a network nor have a radio spectrum license- buys wholesale network capacity from a network operator- makes, however, significant investments to network infrastructure to obtain better control on services offered

Mobile Network Operator- owns and runs a network- own radio spectrum license- acts both network and service operator

Key driving factors enabling the MVNO opportunity

Deregulation opens the mobile markets to competition−No need for own spectrum licenses or radio networks−Regulator-controlled interconnection prices

The focus in revenues is expected to shift from basic services to more content-based value-added services

−Convergence, evolution towards IP over everything−New entrants may have excellence in content-creation−Also increasing shift from voice to data services

Western Europe mobile market reaching saturation−Nordic countries already saturated at 90%−Introduction of pre-paid subscriptions has had a large impact

The MVNO opportunity

Virgin Mobile, Key Figures− 269,681 net connections in Q3 2003

− Total customer base 3,183,347 (30th Sept. 2003)

− Customer growth up 56% since Q3 2002 (2,013,382)

− Record Q3 2003 turnover of £112,6m

− Nine month EBITDA of £67m

− Nine month operating profit of £59m

− Nine month turnover of £309m

− >1500 emplyees

− >6000 distribution outlets

Different MVNO Types

Networkoperator

ServiceProvider

EnhancedService Provider

MobileVirtual

NetworkOperatorMarketing

Distribution

Customer Care

Tariffing / Billing

Network Services

Switching / Routing capabilities

Radio Access Network

• ITU: MVNO = an operator that offers mobile services but does not own its own radio frequency

• Different categorizations exist, mostly technology-based

MVNO backgrounds

MVNOs

Media companiesFixed network

operators

ConsumerElectronics

AutomotiveFinancial

institutions

Retailers

• MNOs have their roots in the fixed line business− leverage on the existing network and ownership of spectrum licenses

• MVNOs can emerge from a plethora of industries− leverage on strong brands and extensive distribution networks

MNOs and MVNOs in Finland

• Three GSM licenses, four UMTS licenses >> four MNOs• Currently ten MVNOs, with very heterogenous backgrounds

Sonera Mobile Networks

RadiolinjaOrigo

Suomen 2G

Tel

iaSo

nera

Fin

land

Saun

alah

ti

Glo

bete

l

CD

F M

obil

e

Rad

ioli

nja

Suom

i

Cub

io

Tel

e2

DN

A F

inla

nd

Wir

eles

sM

aing

ate

Fuji

tsu

Serv

ices

PGO

ne

Finn

etco

m

Ter

rafl

exE

urop

e

Åla

nds

Mob

ilte

lefo

n

Modeling MVNOs: The Big Picture

Conclusions: the business opportunity

• it’s as real as life, which we can see from the figures put on the table by Virgin Mobile

• we don’t have lots of financial information about the success of MVNOs in Finland

− Saunalahti has quickly acquired some amount of new customers, but the profit level has been far from Virgin figures so far

• end-users have already experienced the deregulation activities in declining prices and simplified pricing schemes

• many MVNOs have entered the market to learn the business and prepare themselves for the emerging, more content and data-based 3G market

Conclusions: some remarks on the current MOB business game

• Current version does not recognize the division between service operator and network operator

• MVNOs could be modelled in many ways

− Computer-controlled vs. Player-controlled

− Relationship with MNO players: No interface vs. full negotiations

− Types: Service provider, Enhanced service provider, Full MVNO

− Different strategic alternatives: cost or service leader

• Simplifications required for feasible implementations

Conclusions: three improvement suggestions

1. Implement MVNOs with fixed interconnection cost and the network capacity bought virtually from nowhere

− MVNOS implement the cost leader strategy

− significantly lower capital (approx. 20% of MNOs costs) and operational expenditures

− fixed interconnection prices determined by the game operator

− restricted set of services a MVNO can offer

2. Introduce means for negotiation, the network capacity is bought from actual players

− network capacity is bought for a certain period of time

− switching costs for a MVNO due to investments to the network infrastructure (e.g. VAS servers, billing and charging systems, integration costs)

− wholesale pricing options for MNOs who decide to sell excess capacity

3. Give the players a possibility to act as MVNOs with different strategies

− service leaders must select a service mix they intend to offer

− requires for modeling financial flows based on service demands per customer group and actual costs to produce a certain service

Thank you!

It’s time for questions and answers.

virtualservice

operator

virtualservice

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virtualservice

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networkoperator

capacity

services

031112 mobile virtual network operators mjm-ts

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