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Are MVNOs the mobile operators saviours?

Across Europe, mobile operators have been horrified as the discount mobile wave has rolled across many countries, resulting in drastic price reductions on voice and SMS. This has resulted in mobile operators either already having adapted to these changes in the market or getting ready to change to the new market conditions that have resulted from the entrance of discount mobile telephony on the mobile market.

But discount mobile telephony should be perceived as a transition phase, moving from the phase where mobile operators had a "one size fits all" strategy, to a market that mostly consists of a great number of segmented mobile providers without their own networks and where discount mobile providers will then just be another segment targeting an individual segment - the price sensitive mobile consumers.
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Brand Extension opportunity for both Media Companies and Retailers

For media companies, brand extension is a natural and important element - and one of the main reasons - for launching a mobile provider. The customers’ knowledge and trust in the media companies brand can help the media company achieve success as a mobile provider.
For retail chains there are other methods that can help create success. Therefore one questioned quickly arises in connection with launching a mobile provider; which brand to use? Some retail chains choose a strategy where they use their Company Name + Mobile (e.g. Virgin Mobile), while others choose to create a new brand name for their mobile venture.
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Internationalisation of MVNO's paves the way for niche mobile handsets
Currently the MVNOs that are targeting small segments are still a relatively national phenomena. But as the use of segmentation matures, the market for segmented offers will internationalise, resulting in the different mobile market players leading to think globally and in global segments.
The internationalisation process is slowly starting for mobile providers without their own network, with an increasing number of brands operating across multiple countries. Examples of this are Ay Yildiz, easymobile and Simyo etc. The internationalisation of mobile providers without their own network will result in these customers becoming international customers for the handset manufacturers, in the same way that many mobile operators are international customers.
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Which mobile strategy should media companies choose?
The media companies’ presence on the mobile market will become more visible in the future, but the level of their financial engagement will greatly depend on their choice of mobile strategy.

A media company’s investment (CAPEX) in the mobile market increases successively with the above strategies. In other words the financial risk will increase as media companies further develop their mobile strategy.
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The financial impact of key mobile market phases
Strand Consult has identified five key phases in the evolution of the mobile market since the entry of new mobile providers without their own mobile networks. Although the transition from one phase to another is clear in the early phases, the transition between the last phases is less clear cut.

The five phases can usefully be viewed from the perspective of how they have impacted the mobile market financially
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The importance of the right distribution strategy
The right distribution strategy is a big factor in determining the success of any mobile provider.

Different types of mobile providers have, up to now, used different channels and strategies to attract customers and maintain low distribution costs. But growing competition has caused strategies to change.
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Small mobile players key to segmenting the market
It is critical for MNOs to develop product offerings for each customer segment. In the current competitive environment, this is the best way to achieve high market share. But in a market with many segmented mobile providers already, MNOs need to focus on addressing all customer segments.

In doing so, they should exploit the new possibilities that the growing segmentation of the market offers. This includes, among other things, ensuring that as many segments as possible are covered by the mobile providers on the MNO’s network. In doing so, they should exploit the new possibilities that the growing segmentation of the market offers.
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MVNEs will pave the way for more niche mobile players
There is a new important market development taking place involving a new breed of mobile player – micro-segmented mobile providers and branded resellers.
These companies will lead to a more interesting mobile experience for many consumers, as well as helping operators to reduce churn.
A key facilitator of this development is the emergence of MNEs (Mobile Network Enablers) and MVNEs (Mobile Virtual Network Enablers). An MVNE functions as a link between MNOs and mobile providers that do not have their own network.
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Mobile operators need to wake up – now!

we identify four phases of the MVNO market, all of which have had decisive impact on the mobile market as whole.

· Phase 1 – a market where MNOs do not offer wholesale mobile telephony
· Phase 2 – a market where at least one MNO offers wholesale mobile telephony
· Phase 3 – a market where multiple MNOs offer wholesale mobile telephony
· Phase 4 – a market where multiple MNOs offer both wholesale mobile telephony and develop their own sub-brands.

In most mobile markets, these market phases follow each other in a natural chronological order. This means they can usefully be used as a measure of how mature an individual mo-bile market is. The sooner a market reaches a particular MNO market phase, the more ma-ture it may be considered to be.


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Paradigm shift in the German Mobile industry

It started in Scandinavia, spread to Benelux and now is happening big-time in Germany - the mobile industry is facing its largest paradigm shift ever!

We never doubted that Scandinavia would be a role model for the other markets and have simply been waiting for one of the larger mobile markets to experience what we already have seen on the much smaller markets. During the past five months we have watched with excitement at what has been happening in Germany and how the different market players have reacted.

Five months ago, E-Plus changed their strategy with the launch of their no-frill discount concept Simyo and with an aggressive service provider/MVNOs strategy, E-Plus have moved focus away from selling expensive phones at cheap prices, to instead selling traffic in their network and they have moved focus away from customers who want cheap mobile phones to customers who want cheap mobile telephony - two different customer segments; the price sensitive and the heavy users.

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MVNO, CBB Mobil is now going straight for the Gay community

– Micro Segmentation is a must.

Denmark today launched most probably the first ever service provider/MVNO that is directly targeted towards homosexual mobile users.

Even though the new mobile company "Gaymobile" is unique in its choice of primary mobile users, the basic idea in the actual business concept has a long track record in South Korea. The launch of "Gaymobile" is again proof that the mobile companies - using micro segmentation - are trying to create customer loyalty through targeted offerings to narrow segments.

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Facts and Fiction about the MVNO market

The fast moving MVNO market is one of the hottest subjects in the mobile sector right now. This is no surprise for Strand Consult – we were the first to recognise and describe what was happing when the first discount MVNO’s emerged in Denmark. But what does surprise us a great deal is how much is being written about this market that is either based on rumours, guesses or gossip and is simply not true!

For example there are already a good number of myths in circulation and also wild guesses at the expectations for the future MVNO market that would be rather interesting to take a closer look at – or we could examine some of the figures that some analysts have put forward as to the current and future size of the market – either way the amount of erroneous information is simply staggering!

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The size of the future discount MVNO market
- in 16 European countries
On March 10th. easyMobile launched their discount MVNO concept in the UK - one of Europe's largest mobile markets. Before easyMobile launched, UK mobile customers were paying between 15p and 40p pr. voice minute and between 5p and 12p to send an SMS. Weeks later the prices have fallen to only 5 to 6p for a voice minute and between 1.7 and 2p for an SMS. Many in the mobile business are calling this the mobile operators' nightmare - we call it mobile evolution. We have seen exactly this scenario already happen in many other countries and it will continue to happen in more countries after the UK - it is only a question of time.

At the end of 2004 the Western European mobile market had a total of 357 million customers that spent 130 billion Euro pr. year. A big business area with many big players - but also a business area that is looking at a paradigm shift that is best compared to the enormous changes that the airline industry has seen in the past 5 years.!

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easyMobile Launch
10th March 2005
Today easyMobile launched in the UK. easyMobile is a joint venture between 4 companies. The first two are TDC and Telmore, TDC being the incumbent operator from the Danish mobile market that bought up the very successful MVNO Telmore from Frank Rasmussen just over 1 year ago.

We believe that the launch of easyMobile in the UK will be a repeat of exactly what we have experienced in e.g. Denmark over the past 4 years.

Indeed, Orange has already created press for easyMobile by suing for them using the colour orange in the mobile world even before easyMobile launched!

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John Strand's MVNO Presentation
at GSM World Congress 2005
Every year most of the mobile industry meets at the GSM World Congress and once again this year, John Strand was one of the speakers at the conference. John Strand's topic was "Evaluating the impact of MVNO & Discount Providers on Price and Value Strategies" and his presentation was based on the second edition of his companies report  "The Moment of Truth - a portrait of the Discount MVNO/Mobile Operators' success"- a report that has today been sold to over 80 mobile operators world wide and most of the worlds largest MVNO's.

FUll Presentation

The Mobile Battle of Britain
TDC, easyGroup and T-Mobile join forces.

November 29th 2004

A new partnership, that many people have been talking about the last months have seen the light of Day.

The Question is not, if this will have influence on the UK mobile market, the question is which influence? Many people have said that easyMobile be the cause of destruction of the price-level in the English market. We at Strand Consult, believe it is not easyMobile alone that will influence the prices, because the prices in the UK mobile market compared to other countries are high, and these prices only have one way to go, DOWN!.

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Mobile Service Provider targets cannabis users in Holland
-A new Discount Mobile Service Provider has emerged in Holland that has a rather unusual logo - the hemp plant!

And just to be sure there is no mistaking who they are targeting as their customers - check out their name: "PePtalk - Pep your Addiction"! Maybe it sounds like a bad practical joke - but then again - it's not April Fools day today - and there are an estimated 675.000 cannabis smokers in Holland!

We have already seen Service Providers; start to spring up around Europe, which are targeting certain customer segments, sometimes using the success that a brand name already has built up. Examples of these are the joint venture between Tesco and O2 in the UK - Tesco Mobile that launched in September 2003 and Easyjet's planned mobile venture EasyMobile. Virgin Mobile has been around for while, but not yet achieved the financial success they had hoped for.

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Robin Hood is alive and well
- and has taken the form of a discount mobile service provider, but this new Robin Hood comes with a twist. He is open to mergers and acquisitions. At the end of the day, the mobile operators have to pay - to get their customers back...!

The discount mobile service providers are a modern-day Robin Hood - but with a twist. The discount mobile service providers have earned the "Robin Hood"-synonym because they have ensured that mobile users can save a huge bundle on their mobile bill. Because of this the discount mobile service providers in Denmark have - within just a few years - been able to build up substantial customer bases. And many of their customers have come from the established mobile operators. And the twist..? At the end of the day these "Robin Hood"-companies can and will sell the customers they "stole" from the mobile operators back to the mobile operators - at a huge profit! This exact scenario has already happened twice in Denmark.

For a mobile operator it is essential to enter into service provision agreements with those discount mobile service providers that after a while will become successful - as it is those "Robin Hood" companies that, over time, will be most interesting to purchase.

A mobile operator can simply have no choice but to take over a successful discount mobile service provider that the operator already has a service provision agreement with. When TDC Mobil purchased Telmore, TDC Mobil had themselves 1.562.000 mobile customers, while Telmore had a substantial 454.000 customers. In other words, Telmore generated a substantial part of the mobile traffic on TDC's network. Also it was Telmore that clocked in the highest growth rate of the two companies - adding new customers into TDC Mobil's total customer base.

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EasyMobile - The inside story
A new partnership in the mobile sector has seen the light of day
- EasyGroup and TDC/Telmore have together created the newest player on the British mobile market.

Shortly after Virgin Mobile completed their IPO and in a time where many are talking about MVNO's and what has been happening on the Danish mobile market, the founder of Easy Jet Stelios Haji-Ioannou has entered into an agreement with the Danish Telecommunications Company TDC to form a British copy of the very successful Danish discount mobile service provider Telmore.

And the name of this new company is EasyMobile.

It is not a coincidence that the founder of Telmore - Frank Rasmussen is right at the top - helping getting EasyMobile underway. His experience from Telmore in Denmark - combined with the very strong Easy brand and the financial backing of TDC - is an excellent combination to help establish and launch EasyMobile. .

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Are you prepared to loose many of your prepaid customers?
European mobile operators must take precautions - especially if a large part of their subscriber base consists of prepaid customers. Competition from Discount Mobile Service Providers will without a doubt result in a significant decline in Prepaid-ARPU. Are you ready for this - it's just around the corner!
The worst kept secret in the European mobile sector is that the discount mobile telephony will carve a big chunk out of the mobile operators' revenue - a big chunk! The mobile operators will simply loose a large part of the revenue they have been getting from their customers payment of the monthly mobile subscription (line rental). On top of this the prices for voice minutes and SMS will dive to unheard of lows. Our new report shows how mobile operators not only have to adjust to all the above, but will also see a significant decrease in revenue from their whole prepaid segment.

Just 5-6 years ago the European mobile market was flooded by the prepaid wave.

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It is happening now Europe, could it happen in South America too?
-Judge for yourself!
Cross Europe, customers are experiencing the price of voice and SMS is falling drastically. In the Nordic countries the price for voice and SMS has fallen between 30 and 60% during the last 12 months. In a country like Denmark the number of prepaid customers has been reduced by 30% in 3 years, and ARPU for a prepaid customer has fallen 50% in the last year.

What makes Denmark & Europe different from South America?

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MVNO's will turn the UK mobile market upside down

Web based MVNO's have great success in Denmark, Norway and Finland and the rest of Europe is soon to follow.

The question is, who is going launch these discount companies. Media companies who have free advertising in their own media or others players.

It's now been confirmed that Stelios Haji-Ioannou and EasyGroup are launching a Discount MVNO, using the Danish discount MVNO concept as model for his newest venture.

Discount MVNO's, are web-based virtual networks that have few cost due to the fact that they do not have any physical stores, but utilize the Internet as sales and distribution channel, and hence offer significantly reduced voice and text prices.

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Strand Consult's view on EasyMobile's entry onto the scene as Discount MVNO
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It's now been confirmed that Stelios Haji-Ioannou and EasyGroup are launching a Discount MVNO, using the Danish concept as model for his newest venture.

However Richard Branson of Virgin/Virgin Mobile quickly replied that he doesn't believe in EasyMobile's concept, a concept which has been proven over the last two years in Denmark, and now is taking it's toll on the Mobile Operators in Norway and Finland.

Mr. Branson himself is planning a EURO 1.5bn IPO of Virgin Mobile.

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Sales and distribution strategy and channels, of Discount Mobile Service Providers/MVNO's
Discount mobile service providers are invisible in the physical world and they sell immaterial services. How are the discount mobile service providers utilising the web as their powerful central lifeline?
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The mobile discount mobile service providers have revolutionized the Danish mobile market and attracted the attention and business from a great number of customers, simply by offering mobile solutions without any subscription and with prices for "voice minutes" and SMS messages that the traditional mobile operators have had great difficulty in matching. This huge flow of new customers to the discount mobile service providers has all happened without most of the customers having ever been near a mobile discount shop - the discount solutions are actually rarely sold through physical shops!
The discount mobile service providers whole success in business depends a great deal on the quality of their websites, more often than not these websites are the sole channel of sales and distribution and their window to the world.

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No String´s Attached !
The Danish mobile market is full of "Pinocchio" customers that are cutting their strings to their "dormant" operator subscriptions that they were tied to - a trend that is now costing the Danish mobile operators 48 - 64 million Euro a year.

Just like Pinocchio suddenly gains his freedom - the Danish mobile customers are also gaining more and more freedom at the moment, enabling them to freely move between the mobile operators and discount service providers that have the cheapest and best mobile offerings.

The discount mobile customers lust for adventure has become a nightmare for the mobile operators - their customers are simply not loyal to the mobile operator during their mandatory subscription period - the period that is meant to ensure both a close relationship and stable earnings for the mobile operators.
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Buy your own "off-the-shelf" discount mobile service provider package - even if you have no knowledge of the mobile industry at all!
Now the "One-Stop-Shop" concept is on its way to the mobile sector!

Just imagine - if you are thinking of starting your own discount mobile service provide - a complete, ready to go discount mobile service provider operation, packaged and put in a carrier bag all ready to take home and set up. All you need to do is to add a strong brand name and off you go! In the future mobile operators will offer the sales and support of "off-the-shelf" discount mobile service provider packages that can be sold to companies that have little or no understanding of the telecommunications market.

Few people will dispute that the discount mobile service providers are here to stay.
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Discount mobile service providers will be a great threat to mobile operators and traditional service providers
- but what can threaten the discount mobile service providers themselves?

Two years ago they literally didn't exist - today they are the "talk of the town". From being completely unknown and uninteresting in the minds of the mobile operators, they have progressed in this short space of time to having so much influence on the mobile market that they are directly influencing the mobile operators' business strategies. Who has come so far and achieved so much in just two years? We are talking about the so-called discount mobile service providers.

But despite the really impressive success that the discount mobile services providers have had - especially those that started earliest - these discount mobile service providers are not completely invincible when looking forward. Mobile operators will actively be able to use in their efforts to compete with their fast growing discount counterparts.

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The smaller mobile operators need to reorganize
if they are to stand a chance of surviving the increasing competition - which paradoxically could result in a market consolidation and thereby the end of the road - for the small operators.

The small mobile operators in Western Europe will have to start rethinking their businesses. The demand for new innovative thinking is the simple consequence of these smaller mobile operators already having difficulty in achieving a satisfactory financial return that can either ensure or justify their future existence. If the smaller mobile operators choose to just sit back and conduct their business as usual - they will soon be out of business.

Especially the smaller mobile operators have been in the line of fire as competition amongst the mobile operators and other mobile providers has heated up during the past few years in Western Europe.

This exposed position can be explained by the fact that the smaller mobile operators' investments in licenses and infrastructure is usually the same size as the large operators - but in contrast to the large operators, the small operators simply do not have critical mass in the size of their customer bases. Without enough customers, the small operators will never be able to achieve any reasonable return on their investments, as they will simply not be able to generate enough mobile traffic in their network.
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Number portability is a huge success - Discount mobile service providers are great with numbers and figures
New customers can pick a new mobile number or they can bring along their old phone number - and thousands of customers are choosing the latter.

Figures do not lie - in under two years the providers of discount mobile telephony in Denmark have attracted so many customers that discount mobile telephony has now become a very serious threat for the large traditional mobile telephony operators that primarily base their business on monthly mobile subscriptions.

That discount mobile telephony has become such a huge success is very much due to that customers are not billed a monthly invoice and on top of that the prices for a "voice" minute and SMS message are much lower than the tariffs the traditional mobile providers have offered so far with a subscription based package.

And the Danish customers have been registering by the thousands with the discount providers. It is very interesting to see that the customers these new discount providers are getting are both customers churning from one of the established operators, but also very much first time customers getting their first mobile phone ever.
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Lessons learned from the airline industry
"Mobile Operators and service providers find themselves in rough turbulence and must prepare themselves for a hard landing"

The established European mobile operators and service providers will soon be part of a major aerial dogfight for customers as the discount mobile service providers are ready to take off. They will impact the European Mobile Operators in the same way that the low-cost airlines have crippled the National Airlines.

The competition between airlines has for some time now been fierce, with the established national airlines having difficulty making any kind of profit that can give a return on billions this industry craves in investments. The recent travel recession has lead to lay-offs and forced airlines to reorganize.

But the above account of the troubles of the major airlines could just as easily been about the Western European mobile operators. Tough competition, major losses, billions in investments, lay-offs and reorganizations are also part of a mobile operators everyday life - but up till now at least the mobile operators had been spared from the unbelievable competition from discount companies dumping prices. However, this is about to change.
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Good Morning, this is your wake-up call:
"It's time to get up - the discount mobile service providers are coming to town"

The Discount Mobile Service Providers will spread throughout Western Europe and have a huge impact on all the players in the mobile industry - and for some players that impact could be devastating!

"Money makes the world go round" - but will the Discount Mobile Service Providers grab the money from the mobile world? In this business it is the mobile operators money that is making the wheels turn around. For example it is the mobile operators that are paying for the often very expensive mobile licenses that give access to develop and use new mobile infrastructure and technology. It is the mobile operators that are paying the manufactures for all the new expensive equipment they need to build the infrastructure. It is the mobile operators that are the mobile handset manufacturers largest customers. And last but not least the mobile operators are buying all sorts of mobile services from many smaller suppliers and developers.

During the past few years however, mobile operators in Western Europe have had difficulty in making money...
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