The move toward MVNOs gathers pace

By Matthew Reed

Last week, Oman’s telecoms regulator awarded five “reseller” licenses, allowing the new licensees to launch MVNO services, subject to agreements with host operators. The regulator insists on the term “reseller” rather than MVNO, but in effect they are MVNO licenses.

In Jordan, two license-holders are planning to launch MVNO services, though progress has been held up as a result of a successful lawsuit brought by Orange Jordan against the Jordanian regulator’s legal framework for MVNO operations in the country. But the regulator expects to be able to issue a revised framework shortly, which will allow the two licensees – Friendi Mobile, which also holds one of the new Omani licenses, and the retail chain i2 – to move ahead with their plans.

In both Jordan and Oman, licensees say they expect to launch MVNO services by the end of the year. In addition, Bahrain’s regulator said earlier this year that it will allow MVNOs if agreements are reached between MVNOs and MNOs.

In key markets, such as Egypt and Saudi Arabia, the introduction of MVNOs is still thought to be some way off – about three years away, according to industry insiders – but the regulators in those countries are likely to be studying developments in Jordan and Oman closely. And MNOs in Egypt and Saudi Arabia will most likely be trying to assess what the introduction of MVNOs in their markets means for them.

In Africa, there is only one MVNO: South Africa’s Virgin Mobile. (Operations that are described as MVNOs are not permitted in South Africa, so Virgin Mobile is officially a joint venture of Virgin and host network Cell C.) Africa needs more MVNOs, according to Virgin Mobile CEO Peter Boyd. After a somewhat shaky start, Virgin Mobile has experienced strong subscription growth lately, which seems to confirm that there is a demand for the service. Virgin Mobile had signed up just 100,000 customers a year after its June 2006 launch, but on its second anniversary that number had risen to 495,000.

There is a fairly strong case for MVNOs in the Middle East and Africa. Most countries have or will soon have two, three or more MNOs. And when there are already several MNOs in a market, each with its own network, introducing another MNO that will have to incur the costs of building another network might not be the most effective means of increasing competition.

An MVNO, on the other hand, does not have to build its own network – instead, it uses spare capacity on the network of its host – so its pricing can be competitive. An MVNO can also target particular market segments that are overlooked by MNOs, which tend to focus on the mass market. That niche segment might be the fans of a particular soccer team or, even more specifically, Omani fishermen, who might find it useful to have a service that sent them a text message with the latest prices of hamour.

Or an MNO could use an MVNO partnership as a spoiling tactic against a rival MNO. For example, an MNO that concentrates on the upper end of the market but has a successful rival targeting the lower end could link up with an MVNO to also target the lower end without compromising its premium brand.

MVNOs, like other ventures, are not always successful. US MVNO Amp’d, which targeted the youth market, was one notable failure, filing for bankruptcy in 2007.

But MVNOs have enjoyed fairly strong growth in Western Europe, where they accounted for 7.73 per cent of all mobile subscriptions at end-2007, according to Future MVNO Strategies: Customer Segmentation and Market Evolution, a report published by Informa Telecoms & Media last month.

MVNOs have not achieved as high a level of penetration in Asia Pacific, but this year saw the high-profile launch of Virgin Mobile in India.

MVNOs have been slow to get off the ground in the Middle East and Africa, but perhaps this is where the next big launches could come.