Key events, Q1 2017
The MVNO market was highly active in Q1 2017, with a significant amount of market entry activity, as can be seen from the Figure below. While there were 7 confirmed launches during Q1 2017, there were 23 announcements of intention to launch – indicating even more activity to come later in the year, or in early 2018.
Please note: MVNOpro counts announcements of entry separately to confirmed launches, since not all intentions to launch result in a launch event. MVNOs make their intention to launch known at different stages – sometimes it is just executive speculation, or it may occur when they gain an MVNO licence or when they make an agreement with a network operator or vendor. We only count those where a substantive event has occurred indicating intention to launch. Even then, many companies who gain MVNO licences either sit on this licence for years or eventually decide not to launch an MVNO. Thus these intentions to launch are best interpreted as an indication of market interest.
There were also 8 market exits in this quarter. We count market exits as a company shutting down. But if we add to this where companies were acquired and merged into the existing business of a rival, there were 12 exit events in the first quarter of 2017. When we count market entries and announcements of intention to enter together there were 30 such events in Q1 2017. And there were also 5 announcements of ‘expansion’. This means where an MVNO announces it is going to roll out a new technology or move into a new territory (without setting up a separate company to do so).
Interestingly, if we take all entry events as a whole (both those who have launched, and those taking steps to launch), and examine the geographical pattern, then of the 30 entry events in Q1, 9 originate in Europe. If Russia is included in Europe, the European haul rises to 11 out of 30 entrants. LATAM (6), North America (2), Africa (5), Middle East (3) and Asia (3) are still a long way behind Europeans in terms of MVNO development activity.
It might be tempting to believe that European launches are concentrated in the less developed markets of Eastern Europe. However, this is not the case. The European market with the most new entrants in Q1 2017 was the UK (3), representing a third of European entrants.
What is notable is that while commercial and service agility may be critical for differentiation against both network and virtual rivals, few MVNOs continue to innovate once they have launched, and still fewer are continually innovating. This is reflected in the fact that there are far fewer ‘expansion events’ (such as rolling out a new product, price plan or moving into a new territory without setting up a new company) than market entry events. These events are far less frequent in the lifecycle of an MVNO than might be expected.
Of the expansion events that do occur, most focus on technical issues such as rolling out 4G (as is the case with Fastweb) or adding a new offering (such as MTT adding FMC to its B2B portfolio, and announcing it is developing unified comms).
The cause of the relatively small number of expansion events is often not a paucity of ideas, but because many MVNOs do not have an infrastructure to enable them to be more agile.
However, with ongoing consolidation in the network market, more vendors are now targeting the MVNO market at affordable price points. In markets where price competition ceases to be differentiating – due to lower prices overall, or mandated events such as the removal of roaming charges in Europe – MVNOs are challenged to find new ways to differentiate their offerings, either through innovative products, better customer service, or new business or charging models.
A good example of targeting and innovation comes from Malaysia’s RedONE. The company targets female users via female-dominated professions (such as teaching). Their ongoing strategy sees them leveraging credit card branding and a voucher system, blending mobile phone provision with fintech. RedONE sees great possibilities beyond telecoms in creating a community of users that can then be targeted with offers from retailers.
This lays bare the failure of many retail MVNOs to leverage between their core business and their mobile offering. It is almost as if when they become MVNOs, other than using their existing physical infrastructure (eg for recharge), they forget all their expertise in retailing. The MVNO part of their business is approached as a silo to their main business, rather than as an integral part of it. This means missed opportunities to build brand loyalty and further value.
 A Retail MVNO is one that has a retailing background eg a supermarket, consumer goods retailer and so on.