Whilst for consumers using their phones in Europe became significantly cheaper, the decision made by the EU to ban roaming charges across its member countries has clearly impacted the mobile wholesale market. To keep up with the all the recent changes, wholesalers need to adjust their business strategies and consider different approaches.

Head of Business Development for Commercial Roaming at Deutsche Telekom, Federico Homberg talks innovation, growth areas and how telco operators should respond to the fast-progressing digitalisation and expansion of OTT services.

What initiates have been undertaken by operators to stay ahead of the curve?

Deutsche Telekom strongly believes that the networks are the foundation of all services rendered to its customers and invests more than any of its competitors into network infrastructure. E.g. in 2017, Germany alone, DT invested 5.4 billion Euros: Fiber rollout, mobile network rollout, 5G network rollout, Narrowband-IoT network rollout, rollout of the European Aviation Network together with our partner Inmarsat etc. For 2018, a 5.7 bn € investment in Germany is planned. In specific growth areas, such as IoT we are undertraking multiple initiatives: We are partnering with small & agile companies – as we did e.g. with a company called “1nce” in the NB-IoT space. We are investing into companies like “relayr”, an IoT startup that enables interoperability between through industrial-grade platforms. And we are outplacing innovative business ideas as external companies so that they can grow their business without the legacy of a big organization. An example would be “mobiledgeX”, a company building a mobile edge computing platform.

Will operators ever be able to regain their position in the market as key innovators?

Due to their size, their legacy systems, regulation etc. operators have a couple of structural disadvantages over OTT companies. Our main advantages though are that we control the whole value chain – including the transport layer. Our customers can be sure to have the latest technology (e.g. 5G), highest speeds, highest levels of security and end-to-end service levels. We might not be top innovators in all areas – but in our main disciplines such as network services we are the best. Innovation is not only new products. Innovation is also e.g. process innovation (see last question) or business model innovation (see first question) or structural/cultural innovation. At Deutsche Telekom for examples, our leadership principles – Innovate, Collaborate & Empower to Perform are not just PowerPoint. It is happening across all levels. But cultural innovation takes the most time!

Why do more and more operators launch their own MVNOs?

To be honest, I don’t see more and more operators launching their own MVNOs. In fact, the number of MVNOs is decreasing for years already. With business models such as branded reselling it is difficult to scale. With business models like light or full MVNO you add a lot of complexity on the strategic level (e.g. how to differentiate the main brand and the MVNO brand), on the marketing level (marketing expenses, expenses for sales channels etc.) and on the financial level (ARPU dilution). This is at least true for human communication. For IoT it might be slightly different. Here, launching own MVNOs with lightweight platforms might lead to a cost advantage – despite the aforementioned challenges which also prevail here.

What are the new business models in the market?

We observe a trend from lightweight business models such as “branded reselling” to heavier models such as “Full MVNO”. There are two major reasons for that: First, as a branded reseller it is very difficult to scale. Second, as a Full MVNO you have no constraints when it comes to building own products. A rather new business model is a Capacity MVNO, such as Drillisch in Germany. As part of the merger remedies in the merger between Telefonica & O2 Germany, Drillisch hat the opportunity to buy up to 30% of the merged network capacity. In addition, I am curious to see how Red Compartida – a wholesale only network in Mexico – will develop. IoT wholesale is a growth area that will probably come with its own business models.

What are the growth areas for wholesalers?

We consider IoT in different flavours as one of the area: NB-IoT, low latency platforms etc. In addition, serving wholesale customers via APIs (e.g. for numbers, for A2P/P2A SMS) using aggregators looks like an interesting area – just like Amazon Web Services but for Telcos.

How does the demand for data impact the segment differentiation and unit price based wholesale models?

If I look at the different Reference Offers out there which publicly state the conditions at which a third party can become MVNO on a network – they have rather simple pay per use conditions: You pay e.g. x€/MB data. With this model, it might be difficult to build e.g. data bundles. It might work for prepaid only MVNOs but even there it might be difficult. If a host MNO is serious about his MVNO business, wholesale pricing models will have to become more differentiated allowing MVNOs to compete. Differentiation can be reached e.g. by offering different maximum speed.

How do telco operators respond to the fast-progressing digitalisation and expansion of OTT services?

As said above, Deutsche Telekom follows different strategies such as partnering, outplacing and investing. In addition to that, Deutsche Telekom is building a Pan European production platform that is supposed to produce all voice or data services centrally. While using this central production platform, our local legal entities would be able to localize the offerings to their local needs. This will not only increase our speed in rolling out new services but also create synergies. For M2M/IoT we have created a centralized platform the “MISP” (Multi-IoT Service Platform). This platform supports all layers from global connectivity to device & service management and further into analytics, vertical applications and the integration into business processes. All of our local entities can use this IoT production plant with either standardized products for mass market approach – but also for IoT products that are tailored to the needs of specific customers and/or verticals.

This year’s MVNOs World Congress features the Wholesale as a Service track – offering a comprehensive 2-day specific agenda, that identifies the key factors influencing wholesale revenue, service consolidation and the new growth areas within the market.