The MVNO sector is set to get more crowded during the next 12 months, as large companies look to diversify into mobile and more cash is made available to fund start-ups.
The latest meeting of Telco Den, a cross-industry think tank for the MVNO industry, discussed how innovation was critical for these players to compete with larger mobile network operators.
Members of the panel were encouraged by signs that larger businesses were more prepared to invest than they were 12 months ago. Erik Britton, director at Fathom Financial Consulting, said he felt there was a tax grab coming in the corporate space and was cautiously optimistic this could lead to cash-rich businesses investing where there are growth opportunities.
‘If the MVNO sector can demonstrate that it is growing and can offer genuine and positive real returns on investment then there is a massive ‘wall of cash’ available that can potentially flow into it, notwithstanding the structural problems that prevent that from happening more widely,’ said Britton.
Nick Parbutt, director of wholesale for Vodafone UK, said he was confident the MVNO sector could offer such growth. ‘This year it seems that [large] businesses have adjusted to the new economic conditions and are more willing to invest. As a result, we are seeing greater interest in MVNOs as they look for incremental revenue growth.’
‘Value not cheap’
The panel agreed that new entrants would have to innovate and offer value-added services, rather than just compete on price. For a business to thrive, it would need to target specific propositions at specific groups, rather than offer a ‘one size fits all’ strategy. International MVNOs such as Mobile Vikings and Kajeet (see box, below) were praised as good models, as was UK MVNO CyCell. Among its offers is a handset featuring only four buttons with pre-programmed numbers.
Dan Meader, mobile director at TalkTalk, said new entrants to the MVNO sector would help fuel innovation. ‘We will see a growth in the number of MVNOs as larger companies use mobile products to add value and create a greater stickiness factor with their existing customers and more distinctive brands,’ he said.
The panel was convinced that the ethnic MVNO market still has a future, despite Alpha Telecom recently ceasing to trade and Lebara undergoing a restructure. Cognatel CEO Mark Ashdown said it was natural that while some companies would thrive in the space, others would find it difficult. He said: ‘I feel we will be moving into another phase of the ethnic long distance market.’
As the MVNO market gets more crowded, the panel said there was more of a need for a united voice to ensure better standards. Ashdown said: ‘The MVNO marketplace has reached such a tipping point that we need an industry association and local regulation and possibly a quality and standards kitemark to give consumers greater confidence.’
Telco Den members
Mark Ashdown – Cognatel CEO
Nick Parbutt – Vodafone UK director of wholesale
Dan Meader – TalkTalk mobile director
Justin Norris – DIGITALK founder and CEO
Andrew Harringon – Founder of financial advisory firm AHV Associates
Michael Lowry – Partner at corporate law firm Addleshaw Consulting
Erik Britton – Fathom Financial Consulting director
Nicholas Constantinopoulos – KPN former wholesale director
Stuart Wilson – Vodafone UK commercial marketing expert
Andrew White – Founder of MVNO consultancy Piran Partners
Innovation from overseas
The panel highlighted several international businesses that have brought smart thinking to the MVNO market Mobile Vikings
This Belgian MVNO will probably have exceeded 100,000 members by time of publication. The community-driven MVNO mainly focuses on mobile internet, although texts and calls are available, with no minimum contract period. It has no marketing budget but uses social media to promote its offer – 68% of members have been referred by another. Constantinopoulos said: ‘It has an ARPU of E37 and a churn of between 1% and 3%. It moved quickly to press the pedal and found opportunities through new structures.’ Kajeet
Kajeet is targeted at American children and its flexibility for parents was what impressed the panel. The MVNO has no contracts, activation or termination fees, but offers a string of parental controls, from who they can call and what websites they can access, to time blocks for certain parts of the day. It also offers a GPS phone locator service for $0.99 per month.