July 27, 2017

Why Do Telecoms Develop MVNO?

Over the past six months, many companies around the world have announced the launch of their MVNO (mobile virtual network operator) services. Why do telecom brands want to develop MVNO and what are the benefits? Read the article to find out more.

The Degree of Independence

From a technical point of view, MVNOs are classified according to the degree of independence of the virtual operator from the backbone (which the network provides). In order not to delve into unnecessary technical details, we consider only two main types:

  • Light MVNO. In this case, the virtual operator provides only the brand and develops a tariff line. All the rest (billing, SIM cards, networks, connection points, roaming, support) is provided by the support operator. When connecting to a virtual operator, the subscriber in reality signs a contract with the main operator. Light MVNO version assumes minimal costs, but the virtual operator’s product capabilities are limited by the capabilities of the main operator.
  • Full MVNO. In this case, the virtual operator implements everything (except for the network itself) on its side (including its SIM, operator code, billing, number capacity, connection points, roaming contracts and the like). This option allows you to implement anything: the most daring product concepts (for example, you can conclude an agreement with two supporting operators and give your subscribers the best quality in a particular place). However, in this case, substantial investments and telecom expertise are required. In the intermediate types between these two, different parts of the infrastructure may belong to either the reference or the virtual operator.

Purpose

Before thinking about starting a virtual operator, a company needs to build a strong brand or a strong retail network. Of course, if the company is strong in both areas, they can achieve the optimal result.

Multiplayer players
These are companies that offer their customers packages of various services. For example, fixed-line operators can provide their subscribers with Internet, television, and telephony.

Multiplayer players using MVNO can solve the following tasks:

  • The increase in customer loyalty. In this case, simple arithmetic works: when using only one operator’s service, the expense is about 15%, when using two services (for example, wired Internet and television)—about 5%, with the use of three services and more—less than 2%.
  • Additional revenue from the customer base. Since the ARPU (average revenue per subscriber) of a mobile subscriber is comparable to the ARPU of a subscriber of a fixed-line, this option is just as interesting. As a rule, SIM-cards are distributed among existing customers, and the task of attracting new customers due to MVNO is not considered.

Retail
Retail can also serve as a good basis for launching MVNO, as it has a good sales network and direct contact with a potential customer. In addition, many retailers have a strong brand. From the point of view of retail, the launch of a virtual operator is, first of all, an increase in the efficiency of its sales channel and the addition of a new (high-margin) product to its line—that is, a direct benefit.

Banks and Financial Organizations
With banks and financial organizations everything is simple: banks, as a rule, have a strong brand and a good sales network, which is ideal for launching MVNO. Not surprisingly, in this category, there has been a lot of announcements. For banks, the main benefit of running MVNO is to increase the loyalty of its client base, the attractiveness of its core product, and the effectiveness of existing sales channels.

Additional revenue can also be viewed as a goal, but it must be recognized that for banks and insurance companies, the revenue on the main product per customer is incomparably higher than the average revenue per customer from the telecom operator.

Some companies from this category also set the goal of increasing the client base of the core business, even though this task is difficult to implement in practice. We also saw cases in which MVNO planned to reduce the cost of sending SMS and for large banks, this can be justified.

Ethnic Operators
This group includes projects targeting different ethnic groups residing in the territory of a certain country, region, or state. Such operators offer their clients service in their native language, favorable tariffs for calls to their home countries, and microfinance services. As a rule, such operators launch in close partnership with the local operator for this ethnic community. Therefore, if you have access to the ethnic community, then think about starting MVNO—this can be a rewarding experience.

Specialized Interest Communities
This segment is distinguished by a strong brand and a fanatical attitude of customers towards it. For such companies, MVNO can become an interesting project in monetization. However, children’s brands are not yet represented in this category, so we can hopefully expect some interesting announcements.

Unique Product
This is an additional segment, which is slightly out of this proposed classification. Typically, it includes projects that develop a unique telecom product and implement it in the MVNO infrastructure. For such companies, MVNO is the main business, and their main task is the generation of revenue. However, the product must be truly unique and a breakthrough, since the support operator is unlikely to give an opportunity to compete on price with its offers.

Who Should Not Do This?

Announcements about the launch of MVNO is an opportunity to attract attention. In a year we will probably see a drastic reduction in the number of MVNO projects, and some projects will not even be able to start. If you look at the list of MVNO projects, you’ll find most projects were shut down and did not meet the expectations of the creators.

First of all, if you do not understand how to create a long term advantage for your audience using MVNO, you should not create a virtual operator.

If you decide to develop MVNO, the first thing you need is to find a reliable switch and billing solution provider, which will ensure you uninterrupted and stable operation. JeraSoft billing solution allows providers and operators to handle all parts of the billing process in an integrated and efficient manner. For more detailed information on how to begin with MVNO, read our previous article (How To Start an MVNO?)

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