expert analysis | strategies for prospering in the new mvno hype cycle

Informa Telecoms and Media

Strategies for Prospering in the New MVNO Hype Cycle

Dario Talmesio

Principal Analyst, Informa Telecoms & Media


State of the MVNO market today and tomorrow

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MVNO is and will remain “the

market of small and large

niches”.

But it is set to almost double in

size in the next 5 years.


Strong growth in most regions is expected

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• Most existing MVNO markets are still growing, moderately

• New MVNO markets coming along: China, Mexico, Kenya, Colombia, Czech

Republic, Russia…and more.


History of MVNO growth and decline

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MVNO markets have a record of hype cycles followed by disillusion, a pattern

that is set to repeat.

Historically, MVNO

markets have witnessed

two strong hype cycles:

2004-5: Europe and US

2012-2013: Globally


A market populated by many casualties

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• Why do MVNO fail?

• Will MVNMO continue to fail?

• Is there a “perfect” MVNO model?


…many successful players

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• 3m subscribers

• ARPU: GBP 15

• Quad-play customers: 16.2%

• 25.5 million subscribers

• ARPU: USD 19

• Churn 3.8%


..many successful players

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• 2.8m customers

• EUR 336m Revenues

• 45% penetration of financial services

• Transfer of positive brand attribute to

mobile segment

• Long customer life cycle (low churn

rate)

• 120,000 customers

• Loyalty scheme: pints redeemable for

telecom services.


All with something in common: operating in a low-margin, fast-moving

environment

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• MVNO margins are at best half of MNO margin levels

• No “margins” for errors


Strategies to monetize your customers better

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• Ethnic players

• Post offices & Banks

• Fixed line, Broadband and TV operators

• Retailers


Ethnic Players

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Airtime Transfer

Bundles International Promotions

Cross-Selling


Postal Services providers and retail banks

International Money Transfer

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App-based

postal services

Hardware bundling


Fixed line and Media companies

Fixed-Line, Broadband, TV – Bundles

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Single-Play 16.10%

Double-Play 18.10%

Triple-Play 65.80%

Quad-Play 16.20%


Retailers

Accessories, bundles and cross-selling

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Techniques to upsell and cross-sell within MVNO segments

Monetize customer base with the right offers

The most immediate opportunity for MVNOs is to sell existing customers

telecoms, digital-entertainment and, eventually, cloud services: In-depth

customer knowledge will reveal which segments are better targets for higher-

level or different data plans, handset upgrades or, in the case of triple- and

quad-play MVNOs, which customers could be sold fixed-line or TV services in

a bundle with their mobile services.

Stimulate revenue with the right timing

Equally, MVNOs should be in a position to understand not only what

customers might need, but when they might need it. Timing is everything:

MVNOs must offer the right products at the moment the subscriber needs

them. In cases where customers might not be aware that they need a service

or add-on bundle, the MVNO should be able to entice them to try it out,

ultimately boosting ARPU.

Tackle adjacent markets

MVNOs tend to generate the vast majority – if not all – of their revenues from telephony

services, but some of the smartest MVNOs have started looking at how to generate

revenues from adjacent services, addressing much of their customers’ budgets, not just

the share that is spent on telephony. For instance, some have started selling cloud

services, travel products, insurance and other non-telecomsrelated services. Only a

deep understanding of their customers will enable MVNOs to grow into areas outside of

telephony.

Anticipate churn

In addition to protecting and stimulating revenues, MVNOs need to engage in perpetual

real-time scrutiny of each customer’s “mood,” in order to be able to anticipate and

prevent customer losses. Once customers start churning, it is often too late for the

operator to start trying to hold on to them. This is even more critical for MVNOs, given

that they operate low-margin business and on a smaller scale.

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Conclusions

• MVNO market(s) have witnessed a steady growth in recent years

in will continue to do so in the forecast period

• MVNOs operate in low-margin environment

• Mortality rate of MVNOs is extremely high and is set to remain

high

• MVNO need to be able to cost-effectively retain their customer as

well as smoothly stimulate spending

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expert analysis | strategies for prospering in the new mvno hype cycle

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