In a market where SIM-free is growing rapidly, the low overheads, flexibility and adaptability of MVNOs are proving advantageous.
The market potential of these businesses continues to increase as regulators demand a thriving wholesale market in exchange for consolidation in the operator space.
The past 18 months have also seen the arrival of a host of new, radically different MVNOs in the UK market. These new brands operate using very different business models from the traditional players, whether that’s Anywhere Sim’s network-roaming proposition or the ‘free’ FreedomPop contract. The new companies are challenging industry expectations about what customers can expect from a mobile network.
The anticipation of further consolidation in the operator space has resulted in new entrants to the MVNO space from more traditional channels. As well as the addition of Dixons Carphone to the market, BT has launched an MVNO and Sky has announced plans to move into the mobile domain.
These brands fit more into the classic description of MVNO but are nonetheless making significant attempts to differentiate themselves from the rest. Since its launch, BT has claimed its network is the most powerful because it also uses WiFi hotspots to boost connectivity. Dixons Carphone’s iD launched with the boost that it was bringing back the one-year contract and could offer international roaming across 29 different countries.
The MVNO arena is also set to be the battleground between over the top service providers and traditional mobile players. It’s the logical step for a Facebook or Apple if they want to provide mobile service, and is something that Google is already doing in the US. That said, for MVNOs margins are tight and growth is hard fought.
It’s not the type of asset that is easily built and sold. For all the rumour and speculation in the market, you only have to look at the fact that there has been no buyer come in for TalkTalk and that Tesco Mobile has not been sold. We’ve seen the protracted entrance of Sky into mobile – a reluctant mobile player for years, the business is now taking its time in launching its MVNO.
An MVNO’s efficient structure is made possible by a range of companies that provide the tools and support to offer new services and compete with the big players on price. From payment services and virtual numbers, to WiFi calling apps and disruptive pricing, the MVNO space continues to be a hotbed for innovation. The Mobile MVNO special takes a close look at this dynamic and exciting part of the industry.
Aggregation for the nation
In the UK, the lean regulatory environment that surrounds MVNOs makes it relatively
easy to launch a new service.
This is sped up yet further and made cheaper by the existence of virtual network aggregators (MVNAs) and enablers (MVNEs), who provide a quick-to-market service for new players.
These businesses are now helping the MVNOs branch out into new service areas, and fighting their corner when it comes to access to 4G, as a number of the companies explained to Mobile.
MVNE Digitalk is one of many upping their game to better equip MVNOs not only to launch in the market, but also compete, looking for new ways for virtual players to stay relevant as networks diversify their services.
Chief strategy officer Mark Ashdown says: ‘It is about providing a solid foundation. The UK market in particular is a highly competitive market place – once an MVNO is in the market place we need to provide the tools to allow them to stay there and be proactive and reactive.
‘Using our platform they can start to tailor make their services because the part an MVNO needs to play in the mobile world is one of differentiation. The main mobile networks are fiercely competitive, UK prices compared to other western European countries are pretty low to start with and MVNOs come to chip away at that even further. It can’t always be about a race to the bottom, it’s about creating value for the MVNO in given areas and being able to target your product.’
An OTT advantage
For MVNE X-Mobility, this comes through over the top (OTT) services, which has helped new market entrants such as FreedomPop claim a share of the UK market on the Three network. CMO Shanks Kulam explains that MVNOs, for too long, have been held back by network operators who don’t allow players to be overly creative with their offerings. OTT services such as virtual numbers, Kulam tells Mobile, allows MVNOs to do more.
‘MVNOs have been tied into providing services similar to MNOs,’ he says, ‘and this doesn’t allow for much creativity or disruption – but now suddenly you can do so much more. The likes of Google Fi and other mega brands are looking to move into mobile disruptively so it’s not just a case of being another means of offering low-cost calls. It really allows for the first time for MVNOs to be very creative in the kind of service they can offer – the MVNO can be completely virtual and not even have a SIM.
‘We saw the opportunity for virtual numbers arise mainly from the West Coast in the US, where OTT apps are being combined with real mobile numbers. We had a number of partners to expand services outside the US, which we have done successfully with companies such as FreedomPop. We are working with pure OTT and traditional MVNOs. With the 4G capabilities and allowing video without having to download a plug-in, it suddenly enables brands and MVNOs to offer more disruptive services than MNOs provide today.
‘It also allows Three to use us to on-board more customers onto MNO networks. Other operators have been quite publically less interested in the MVNO space but I don’t agree with that approach – it seems quite old school. The market is certainly hotting up and the largest brands on the planet are moving into this space.’
No 4G for me?
For Transatel boss Jacques Bonifay, the problem lies in providing 4G services. The MVNE recently launched the Post Office MVNO into the market on EE last year, but this was delayed. Post Office head of mobile Geoffrey Smythe tells Mobile that the delay came from having to wait for 4G, something that Bonifay blames on the network.
‘4G came into the market a while back,’ he says. ‘We imagined Transatel would have 4G access two to three years ago it was just a recent addition. The typical position from the MNO is to charge more for 4G and to me that is not logical. The technology allows higher bandwidth and enables the end user to do more megabytes. If you price the megabytes at the same price as 3G and 4G, then by definition the ARPU for the operator will be higher, so I don’t understand why we should pay a premium, as from an industrial standpoint it doesn’t make sense.’
Bonifay describes the UK MVNO space as one where business is difficult, expressing surprise that a tougher stance is not taken by UK regulator Ofcom. ‘Some time ago there were more players in the UK market’, he says, ‘but business is difficult, the MVNO business is difficult, your biggest supplier is your biggest competitor. EE and Three are big players in the MVNO space, O2 is not very visible in the market and Vodafone has stepped back a little.
‘I’m surprised that the UK regulator doesn’t look at it; they are very much on the off side. They don’t really ask questions or look at how the market is evolving. If I compare theUK and France, the French regulators keep on asking questions and the UK regulators look at things from further away, but it’s a different way to do things.’
Making the most of money
MVNOs have laid claim to the ‘significant’ profits of the mobile money market, one which has largely been abandoned by UK networks, TransferTo has told Mobile. CEO Eric Barbier explains that the remittance platform works with UK MVNOs such as Lebara to give them a simple route into the prepaid airtime and mobile money market. Despite describing the market as lucrative, Barbier believes that networks have preferred to take a step back, leaving the market to MVNOs.
Operators in the UK have given this market to the MVNOs. As far as I understand they are not being aggressive in this segment and we have seen this in a few markets in Europe where they prefer to have MVNOs to target this segment. If you really want to go into the remittance space, either you have offices abroad or you work with us. Telcos have really embraced mobile financial services and it is becoming more and more important, so the revenues and profits they are making are becoming significant.
‘In the UK we work with Lebara because it is targeting this segment of the market. We are bringing it revenues and transactions from countries it could not otherwise get.’
Moving into payments
On the other side of the spectrum are mobile payments. This has largely been the focus of hardware manufacturers, with Apple Pay and the anticipated launch of Samsung Pay and Android Pay. Payments platform Gemalto provides a number of services to help both MNOs and MVNOs move into this space. According to Howard Berg, senior VP of UK & Ireland, the latter has taken a ‘wait and see’ approach to mobile payments.
‘MVNOs are key customers but they are looking at the market and waiting to see how it develops. We provide trusted services hub and a virtual cloud to make it easier for MVNOs to connect to major UK banks.
‘Each MVNO has its own market position, and while mobile payments is a great initiative, it’s not high up on many wish lists. Virgin Media is attacking the business market and its strategy on everything depends on its strategy to the wider market. For a lot of MVNOs it’s about findings how payments fit into their strategy, There haven’t been a lot of payments from MNOs or MVNOs, it’s all about manufacturers and that’s where the momentum is at the moment.
‘The danger is the confusion overload to the consumer, so a lot of MVNOs in particular are thinking about customer priorities and saying that actually connectivity is the biggest issue at the moment. Payments are probably on that list but a lot are using Apple Pay and Android Pay almost as a free trial to see what happens.’
Fast and flexible
New MVNOs that want to be even more streamlined in their approach and have their launch guided through without needing to invest significantly in UK-based staff can also use consultants to launch in the market with even greater ease.
2015 saw Extreme networks partner with Mobilise Consulting to launch Extreme Mobile. The latter announced it would take care of day-to-day operations in a move it claimed would allow the newly launched MVNO to focus on building its brand.
CEO Hamish White says: ‘We specialise in MVNOs, that’s our bread and butter and we aim to accelerate the growth of MVNOs. We offer service and supply to make the MVNO brand successful, using our own technology to do so. You will never see us; we are usually in the background offering operational support so that the brands can focus on themselves.
‘Starting an MVNO is quite difficult because there isn’t much differentiation in the market, but to make a successful MVNO you need to make sure you pinpoint it on the consumer. So we focus on the community to help them do that.
‘With Extreme Mobile we offered an insurance package to extreme sportists and had advantage of the brand and knowledge of that specific audience, which also helped us pinpoint exclusive services. Price is important but if you have a good price point then it’s more about how you can differentiate it for the niche consumers.
‘A lot of MVNOs went solely on price in the beginning, and if you want to be successful in the UK you have to offer more than price, or you cannot make a difference. GiffGaff made a difference because it is different – focused on the member-to-member community and it functions more as a club. The art of having a good MVNO is to differentiate yourself on more than price, and that’s something we could do with a brand like Extreme.’
Sensing the service potential
The suite of services offered by MVNOs is now more far reaching and diverse than ever
before. The flexible nature of the businesses means they can often move quickly into new areas by partnering with companies that are experts in that space.
One area is international calling. In this market, white-labelled OTT applications are being used to give virtual players a quicker route into this market. Enabling them to do so is Wavecrest, a call termination business that has partnered with the likes of Tesco Mobile and Lebara.
CEO Chris Adams says: ‘We created an international call termination and OTT app for Tesco Mobile, which is branded and generates fresh retail minutes bound for international destinations. We go out to wholesale partners and we trade those minutes and put bilateral swap deals in place.
‘A lot of the international calling apps we launch are for mobile operators who see it as a defensive strategy against rivals trying to attack their market. For instance aortal has a UK-based app and is trying to use brand in India to appeal to the consumer base here, but it’s also a very quick entry point and a test bed to a market.
‘Tesco is precious about its brand and we have proved that we can deliver a solution – it’s been around for four years and product is still growing – plus we have the ability to take it vision and develop a solution for them under one roof. A trusted brand is key in this market – international calling brands are not so well trusted or well known, Tesco saw a market, had its brand and had a distribution channel set up, so it was an ideal match. We also work with Lebara and the White network on EE.’
Wi-Fi solutions provider Devicescape enables MVNOs to take advantage of the demand for data, providing access to a network of Wi-Fi hotspots to provide the same seamless experiences as mobile data. Mike Hibbard, director of marketing, explained that when it comes to launching new services into the market, MVNOs move faster than networks.
‘Our customers are mobile operators or MVNOs,’ he says. ‘We get onto devices through them and they preload it. If it’s preloaded it will fire up – no log-in or account – we just look after the connectivity. In the UK we launched Virgin Media, which has a different operational model. It’s not like we’re not talking to the big guys, but one thing that any vendor will say is that operators tend to move quite slowly and MVNOs move quickly, it’s just about adjusting to a different audience.
‘In the UK we’ve got a situation where we are in the process of reducing operator numbers, history tells us that reduction in suppliers tends not to lead to drop in cost, but it doesn’t work like that.
'Analysts are predicting that prices will go up – that creates an environment in which players who have a different cost base and different approach believe they can come in and target a segment of market with a very price-competitive offering. The fact that Freedom Pop is looking at getting into the UK market suggests it has identified this as somewhere where it can get a return.’
The drive to diversify services has also seen a number of new entrants enter the market, looking for new ways to stand out. MVNO Shebang was acquired last year by employee benefits business Personal Group to combine airtime with employee benefit packages.
Insurance provider Allianz also recently secured a partnership with Lebara, in a move to offer a free second medical opinion to the MVNO’s migrant customer base. Theo Bouts, head of Global Life and Health at Allianz, says that the collaboration with Lebara can be used to better target audiences they may not have access to.
He says: ‘Migrants are a large and under-served community to which Lebara, together with Allianz insurance and service companies, can provide excellent protective support. I believe this launch is just the start of how we can benefit migrants globally.