MVNO market to face fragmentation, says Cognatel CEO

MVNO market to face fragmentation, says Cognatel CEO
The MVNO market is set to explode as it becomes increasingly segmented, according to Mark Ashdown, CEO of MVNA Cognatel.

Ashdown, who has been involved in various areas of mobile since 1995, predicts the mobile market will emulate the fixed space. He says: ‘I’ve been involved in the prepay long distance market since 1995.

‘Back when deregulation was hitting the fixed line market in the mid 1990s, new business was going in and carving out a new market.

‘Speeding forward to today, what I see happening in the mobile marketplace is what happened to fixed in the 90s.’

Cognatel stormed into the market in October when it announced it had inked an MVNO ‘aggregator’ deal with Vodafone. The MVNA has already signed up ethnic MVNO iCard Mobile – which it poached from Three.

Cognatel’s end-to-end, fully hosted solutions will reduce the time it takes MVNOs to get to market and ensure that they have the right processes in place to ensure long term success.

Ashdown says: ‘Cognatel is in a good position because we can offer the marketplace [ethnic market services] Long Distance International (LDI).’

He refers to ‘phase one’ MVNOs currently in the market, saying: ‘We see a couple of large players who bought to market in MVNOs. We will see lots of new MVNOs enter the market, partially through MVNAs – and competition is going to get fierce.’

According to Ashdown’s estimates, there are in the region of one billion of calling prepaid LDI minutes being used at the moment. ‘That is big,’ he says, adding: ‘approximately 35% of prepaid is being switched over to long distance international. In terms of fixed mobile substitution – about 60% to 70% is still sitting on fixed. Not all of it will switch across but there is a lot left to go.’

The ethnic market will see ‘floods of competition from a to z destinations’, predicts Ashdown. He says: ‘We will also see operators focus on niche marketplaces. MVNAs can focus on these areas. We lower the barriers to entry. Our billing and CRM system is key, as you can brand and segment your customer base.’

The MVNA model allows companies to take a proposition to that community and then segment that community, where the targeted MVNO can also do promotions, says Ashdown.

He adds: ‘We can take the proposition close to the customer. We talk about segmentation and micro-segmentation. Consumers get something closer to them.’

Ashdown cites a specialist MVNO, such as one targeting the Chinese community, as an example. He says: ‘They can build up people to run the community and the whole stickiness of the proposition. The analysis is from a high level.’

Market fragmentation

The MVNO market is like the TV market, says Ashdown. ‘If you go back to before the Sky days, there were four channels, like there are four networks at the moment,’ he says.

‘This is starting to fragment massively. I buy Sky for the sports content. Someone else will want the Discovery channels or MTV, plus there are the ethnic channels. Fragmentation with TV will come to mobile.’

Ashdown champions the MVNA model, which he says ‘allows more to exist’ and promotes competition. He says: ‘Now you don’t need a Virgin or Tesco proposition. If people target a community then it’s about where do I go to get local services? Where is the local community centre? Then you have to start to pump content and promote content.’

As well as its recent sign up iCard, Cognatel has ‘a couple more’ MVNOs signed up, which the company will be announcing next year. Ashdown says: ‘One in particular has local community focus play. They have great value propositions. They will have all sorts of propositions. There will be value-added services such as SMS balance transfer – this will allow credits to be shared around the local community.’

He adds: ‘We have a very interesting pipeline at the moment. We are working with the customer and ensuring their success. So what is your Go-To-Market-Business Plan? We are only going to be successful if they are successful. That is Vodafone’s philosophy too. It’s our success and the success that drives the community.’

However, a major trend and concern for LDI is churn, says Ashdown, so Cognatel is trying to look into the business model where churn is.

‘It’s looking at when the customer comes on board,’ he says. ‘It’s doing all the retention pieces such as free text.  It’s about acquire and retain – you must get customers.’

Although Ashdown is sure of eventual consolidation, he is adamant there will be ‘fierce competition’ in the MVNO market in the next 12 to 18 months.

‘There will be lots of new entrants,’ he says. ‘The Dutch market is ahead of the UK – it has 60 MVNOs – there are niche plays. In the UK there are 20 active MVNOs and the market is three times bigger. There is so much more room.

‘I’m sure there will be more MVNAs,’ says Ashdown. ‘I am a strong believer in competition as long as competition is fair.’
Written by Mobile Today
Mobile Today

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