Predictions of continued growth in MVNO subscriber numbers is attracting new brands to the industry. However, these new players' desire to offer the same next-generation services as their host networks poses challenges in terms of policy control.
The benefits of mobile virtual network operators (MVNO) are well established, but the business model is becoming more challenging as new brands seek to offer next-generation services, billing specialist Redknee warns.
Mobile services including data and video mean host networks must review their billing and analytics systems to accommodate modern MVNOs, says Namit Garg, director of MVNO/E Solutions at the firm. The challenge, he notes, is in monetizing the usage of the network by sub-brands, which requires a new approach to the host operator’s management of network policy, wholesale and retail revenue models and partner billing services.
Host networks realistically have two main options to meet the challenge. Update legacy billing systems, or deploy a second billing and customer care stack specifically to meet the dynamic needs of new partners
Avoiding the big bang
While Garg says cleaning up the problem from the root is a reasonable option in theory, in practice “those transformations can take years.” The changes take time because large tier-1 carriers in the US and Western Europe with wholesale divisions hit a roadblock when it comes to updating legacy retail billing stacks, in order to extend their wholesale offer to next-generation sub-brands and MVNO partners.
As a result of the legacy systems’ inflexibility, complexity and slow time-to-market, many operators are choosing to deploy a second stack for partner brands, Garg explains. Such systems allow operators to “launch new innovative services in days rather than months” and acquire net new subscribers via the partner brand.
The onus is on the host network to deploy second stacks that support quick time-to-market, differentiated offerings and policy-focused data monetization options, at least in the case of smaller MVNOs, Garg argues. Clearly he would prefer them to pick Redknee’s operator billing solution, part of its Mobile Network Support suite. He claims the set-up can be deployed out-of-the-box to handle actions including address activation, provisioning and customer care. Third-party revenue share capabilities and analytics tools covering data and quality of service are also included.
While some larger MVNOs would like to “control their own destiny,” Garg says host networks should embrace an MVNO’s desire to run its own systems, because the MVNO partner is still adding net new subscribers to the host operator’s network.
Medium to Large MVNOs are also an ideal target customer for Redknee’s MVNO billing systems, which aim to offer virtual operators the ability to create relevant promotions based on the content subscribers consume. Garg notes offering MVNOs billing options that offer a “post-paid experience in a pre-paid model,” - such as ensuring subscribers aren’t cut off without warning when at the limit of their credit - is a key element in ensuring a good customer experience.
The growth of MVNOs is also resulting in the emergence of mobile virtual network enablers (MVNEs) and aggregators (MVNAs). These firms can capture the low hanging fruit offered by brokering partnerships between host networks and new brands. Redknee offers MVNEs a cloud-based product sporting a range of pre-configured and automated systems designed to cut deployment costs for MVNOs.
China Telecom Europe is the most recent example of a telco using an MVNE to establish an MVNO operation. The firm launched CTExcelbiz in the UK in May, using the services of MVNE Transatel to broker a hosting deal with Everything Everywhere. The service targets Chinese ex-pats and visitors with tailored services, free calls to other subscribers, and a local Chinese number for family and friends back home.
Analysts are already backing the niche service to be a success. While China Telecom estimates its potential market at 500,000 subscribers, Analysys Mason analyst Cesar Bachelet reckons the figure to be closer to a million users. He previously noted that Transatel helped China Telecom minimize its initial exposure by cutting the telco’s outlay on establishing its UK MVNO operation. The approach, he points out, enables the new entrant to establish a viable business without relying on huge subscriber numbers to do so.
CTExcelbiz could certainly prove a captive market for China Telecom, and the operator plans to use it as a springboard into other European markets. Germany and France are the initial targets, with China Telecom likely to leverage the EverythingEverywhere deal to access parent firms France Telecom and Deutsche Telekom.
However, Dario Talmesio, a principle analyst with Informa Telecoms & Media, injects a note of caution. He told Telecom Asia the MVNO space is becoming increasingly crowded in mature markets like the UK, and says the virtual operators that succeed will be those “that are able to be at the edge of the innovation curve, remain focused on their niche segments, and avoid spiraling down to price-only competition.”
Despite his caution, Talmesio points out Informa is predicting growth in global MVNO subscriber numbers over the next five years. The firm forecasts customer numbers will hit 186 million by end-2016, up from 85 million in 2011.
The numbers demonstrate the benefits to host operators establishing viable wholesale models for next-generation MVNOs. Garg says wholesale is becoming one of the primary methods for acquiring new subscribers for several tier-1 carriers, estimating that large operators can gain up to 15%of their new subscribers via this model.
Analysys Mason's figures also show the benefits, with virtual network customer numbers in the UK growing 60% to 11 million over the five years to 2011.