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MVNOs in the Brazilian Mobile Market
Exploring the opportunity
This document has been created for the exclusive use of our clients. It is not complete unless supported by the underlying detailed analyses and oral presentation. It
must not be passed on to third parties except with the explicit prior consent of NEREO BUSINESS CONSULTANTS.
Sao Paulo, November , 2010
May you require further info, please contact:
Pedro Ruiz-Blanco(+34629369404,[email protected])
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MVNO Regulationin Brazil
INTRODUCTIONPurpose of the Document
NEREO presents the follow ing document to highlight the MVNO opportunity presentedby the current market and regulatory situation in Brazil
We are Strategy and Investment advisors in the TMT and Renewable Energy sector
We have assisted clients in launching over 20 MVNOs in more than 12 countries
Currently, in Latin America
We are developing the 1 st Full-MVNO in Central America
We are assisting one of the prestigious operators, with presence across the continent, indefining the strategy for w holesale business
Analyzing MVNO opportunities in more than 6 countries in Latin America
Biggest mobile market in Latin America and among the biggest in the world
4 major mobile operators with mature operations in the country Country broken up into regions ; each with its own license for mobile telephony
Rapidly approaching 100% penetration
ANATEL has recently launched a public consultation for MVNOs in Brazil
MVNO regulation is expected to be in force by the 3rd quarter of 2010
ANATEL has proposed 2 models, Credenciado de Red Virtual & Autorizado de Red Virtua l,
which will cover the following MVNO types: Reseller
Branded Reseller
Light MVNO
Full MVNO
NEREO intents to introduce the MVNO opportunity in Brazil through different conferences to be
held in Sao Paulo and Rio de Janeiro
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MVNO OPPORTUNITY - BRAZIL
NEREOs MVNO EXPERTISE
INDEX
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MVNO OPPORTUNITY - BRAZILMVNO
Agreement at price level
Quality management (SLAs/KPIs)
Mechanisms to garantee therelationships evolution (newservices, price updateprocedures,)
Value proposition (SAC, productsand services)
Efficient management of thecustomers retention (churn, SRC,customer care)
Essentially, MVN O business consists in managing tw o key relationships:
Mobile Netw ork Operator (MNO) and the end-user
MVNO
MNO END-CUSTOMERS
A Mobile Virtual Netw ork Operator (MVNO) provides mobile services without ow ningspectrum and usually relies on the Mobile Network Operators network infrastructure.
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Services &IT Platform
Ownershipand OperationOf the MobileNetwork
CustomerCare
Service
Marketing& Sales
Services &IT Platform
CustomerCare
Service
Marketing& Sales
Ownership ofMiblie Network
Distribut.
Distribut.Push
Leveraging on selected partners through outsourcingSpecific offers for each
market segment
Only one Market
Market Segments
Executed in-house Outsourced to an external partner (MVNO)
Befor
Currently
...by creating offersaligned to the needs ofeach of the existingsegments
...by dividing the valuechain and allowing theentrance of new playersthrough:
Radically reducing costs(increasing the EBITDA)
Reach new consumers in
market segments not yettapped into (newdistribution channels)
In saturated markets, competition becomes a market-share game, so this new challengeleads MNOs to seek for MVNO partnerships to sustain the overall market grow th
MVNO allow M NOs to address specific market niches which they have not yet tapped into, whileincurring low er Subscriber Acquisition Costs (SAC) adding efficiency to the value chain
Operation ofMobile Network
Pull
Distribut.
Distribut. Push
Pull
Pull
MVNO OPPORTUNITY - BRAZILHow MVNOs create value for MNOs
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Selecting an specific MVNO operational model depends mostly on the commercialstrategy that the new player w ishes to implement in order to tap into the market
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+Reseller Service Provider Full MVNO Network Operator
Alternative MVNO structures
Level of ownership ofthe mobile networkinfrastructure
MNOsTelecommunicationcompanies.
MultimediaCompanies
Utilities RetailersNiche Operators
SIM: not self owned
Prices: are based onnegotiations with an MNO undera retail-minusregime for the
MNO prices Brand: own brand or co-
brandingwith the MNO( powered by ).
Business Model:
Revenues:based onrevenue sharing with theMNO
Costs: marketing, sales,distribution
Branded Reseller
SIM: self owned Prices: own and independent
from the MNO Brand: own brand or co-
brandingwith the MNO( powered by ). Clientownership possible
Business Model:
Revenues:from traffic ofits own customers
Costs: wholesale accesstariffs, marketing, sales,distribution. OPEX andCAPEX associated to ITplatforms
No network infrastructure Can potentially have a VS
platform No capability to set prices No ownership of the client
Radio Access Network Complete networkinfrastructure
No network infrastructure Own VAS platform Own billing platform
Own Customer Care Ownership of the client
With network infrastructure(no radio) Own VAS platform
Own billing platform Own Customer Care Ownership of the client
SIM: self owned Prices: own and independent
from the MNO
Brand: own brand. Completeownership of the client
Business Model:Revenues:from traffic of
its own customers
Costs: wholesale access
tariffs, marketing, sales,
distribution. OPEX and
CAPEX associated to IT
platforms
SIM: self owned Prices: own and independent
from the MNO Brand: own brand. Complete
ownership of the client Business Model:
Revenues:from traffic of
its own customers
Costs: wholesale access
tariffs, marketing, sales,
distribution. OPEX and
CAPEX associated to IT
platforms and network
elements
MVNO OPPORTUNITY - BRAZILFunctional model Characterisation
No network infrastructure Can potentially have a VSplatform
Capability to set prices Possible ownership of theclient
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MVNO OPPORTUNITY - BRAZILMVNOs in Europe
Number of MVNOs and their market share in Europe (end of 2009)
MVNOs have been quite successful in garnering market share in most European countries
Source: Nereo Analysis with company data
15%
MVNOsMarket share
Spain: 22(Simyo, Lebara)
Portugal: 5(UZO, Tele2)
France: 11(Carrefour, Tele2, Virgin)
Luxembourg:2(KISS, Transatel)
Belgium: 35(Simyo, Transatel)
Netherlands: 39(Simyo, Tele2)
Norway: 16(Mobyson, Sense Talkmore)
U.K.: 25
(Virgin, Tesco)
Finland: 9(Saunalahti, Oyj)
Sweden: 18
(ACN, Sense)
Germany: 29(Ay yildiz, Simyo)
Austria: 5(Yesss!, Tele2)
Denmark: 16(CBB Mobil, Telmore)
Italy: 14(COOPVoce)
Switzerland: 5(COOP Mobile, Tele2)
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Brazil is among the leading countries in terms of mobile penetration in Latin America
Mobile Penetrat ion Brazil v/ s LATAM
BRAZILIAN MOBILE MARKETKey Indicators
Communicat ions Market Situat ion - Brazil
Market Leader
(Q3 2010; market share in terms of subscriptions in %)(Penetration in %; GDP per capita in 000s USD; 2009 E)
Brazil has a favorable mobile penetration-GDP ratio in comparision w ith other countries in LATAM
Source: TRAs, CIA Factbook, NEREO Analysis
Mobile Fixed Broadband
Telefonica/Vivo
Embratel/Claro/Net
Oi/Brasil Telecom
TIM
30.1 %
25.5 %
19.5 %
24.5 %
27.1 %
15.4 %
50.0 %
0.0 %
24.2 %
25.3 %
35.1 %
0.0 %
Each of the Fixed Line players is a leader in their license region
Region 1- OiRegion 2 Brasil TelecomRegion 3 - Telefonica
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CATEGORIES
ARPU
PricingCapabilities
Interconnection
MVNO OPPORTUNITY - BRAZILMVNO Models Comparison
CustomerOwnerships
N/ A
CREDENCIADO DE RED VIRTUAL
BRANDED RESELLERRESELLER
% revenuesharing over basicservices ARPU
Outbound ARPU
N/ A
N/ A
N/ A
N / A
AUTORIZADO DE RED VIRTUAL
FULL MVNOSERVICE PROVIDER
Outbound +Inbound (rev.Sharing) ARPU
Outbound +Inbound ARPU
Does not rely onMNO infra. forpricedifferentiation
YES
Own rating &bil l ing capabilities
Advertising& Marketing
expenses
MNO bears all theoperational andmarkeriting cost
The MNO partiallycontribute to theSAC expenditure
MVNO bears allthe operationaland markerintgcost
MVNO bears allthe operationaland marketngcost
NO NO YES YES
Traffic Costs
Ow nNumberingResources
N/ A Wholesale cost
(diff. Cost perdestination)
N / A N/ A
Wholesale cost
(diff. Cost perdestination)
Wholesale cost(airtime) +
Interconnectioncost
Shortcodes/premiumnumbers forCustomer Care
Own IMSI range,NRN, SPC
ANATEL has proposed the follow ing two models which wil l serve to categorize thetypes and characteristics of permitted MVNOs
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MVNO OPPORTUNITY BRAZILProjected Evolution of the Brazilian Mobile Market
Mobile Revenue Project ions Brazi l
(2010-2015; USD millions)
Project ions Brazil ian Mobile Subscript ions
MNOs MVNOs
(2010-2015; millions of SIMs; % of SIMs)
MVNOs Business in Brazil wil l account for more than $1 Bil l ion in 2015
Source: www.eMarketer.com, IBGE, NEREO Analysis
MVNO Market Share
Brazil w il l continue to maintain a CAGR of 2.7% to reach 229 mil l ion subscriptions byend-2015
2010 2013 2015
28,146 29,376 30,440
Mobile Revenues MVNO Revenues
MVNO
Revenues
0 798 1,109
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MVNO OPPORTUNITY - BRAZIL
NEREOs MVNO EXPERTISE
INDEX
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NEREO has an extensive experience in the mobile telecoms space worldwide.
CREDENTIALSTelecom Practice
Assistance in thevaluation of a local GSMoperator
Assisting a MNO indefining its MVNOstrategy in the country
Assessing the feasibility ofMVNO business for a Saudibased company
Valuation of afixed and mobiletelecom player
Negotiating a MVNOagreement in Oman for aBahraini Telecom Firm
Assistance in thedevelopment of a PrivatePlacement Memorandumfor a Kuwaiti Firm
Entry strategy within theSpanish market for one ofthe leading pan-European
mobile operators
Providing support to oneof the Spanish MNOs inconnection with regulatoryissues
Carrying out Due
Diligence processes onEuropean MVNOs for aMiddle-Eastern client withaims of acquiring saidoperators
MVNO strategy in Spainfor a well known
American Media andMovie Company
Assistance in theacquistion of a TVBroadcast Infrastructure
Provider in Spain
Developing the entry strategywithin several European marketfor one of the leading pan-European mobile operators
Developing the entrystrategy into theSpanish market for aGerman MVNO
Consultancy formultinational IT firm forSMS Premium serviceswithin the Spanish market
Assistance to amultinational IT firm intopics related to Mobile
Number Portability
MVNO strategy andnegotiations for an ethnicMVNO
Defining the MVNOstrategy and Negotiationswith Host MNO for an
Islamic MVNO in Malaysia
MVNO strategy andlaunch activities in CostaRica
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NEREO has gained a unique experience in developing projects of all business models indifferent countries of the world
COUNTRY MNO MODEL
FULLMVNO
FULLMVNO
FULLMVNO
FULLMVNO
FULLMVNO
ON GOING
FULL
MVNO
FULLMVNO
FULLMVNO
FULLMVNO
FULLMVNO
COUNTRY MNO MODEL
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CREDENTIALSOur MVNO Expertise (II)
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BRANDEDRESELLER
SERVICEPROVIDER
SERVICEPROVIDER
SERVICEPROVIDER
BRANDEDRESELLER
BRANDEDRESELLER
n/ d
COUNTRY MNO MODEL COUNTRY MVNO MODEL
FULLMVNO
FULLMVNO
FULLMVNO
FULLMVNO
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CREDENTIALSOur MVNO Expertise (III)
SERVICEPROVIDER
n/ d
FULL
MVNO
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www.nereoconsulting.com