Is there still a future for MVNOs?

Telecoms.com periodically invites expert third parties to share their views on the industry’s most pressing issues. In this piece Navonil Roy, Managing Partner at Blue Sky Thinking, looks at some of the things MVNOs can implement to ensure they have a future.

Historically MVNOs (Mobile Virtual Network Operators) have grown in market situations where there has been an intrinsic growth of telecom usage in the market and the large MNOs (Mobile Network Operators) have not focused efforts at specific niche segments due to their lower profitability, difficulty in accessing etc.

Due to their lower cost base and focused business operations MVNOs have been able to offer aggressive pricing compared to MNOs and even managed to build a profitable business around niche markets.

However, in the recent past there has been an increased level of competition within the telecoms industry. As the large MNOs feel the business pressures due to the movement away from the profitable voice to the growing data business. The growth of over the top (OTT) services has increased the pressure on revenues and most markets have seen a reduction in their intrinsic growth due to the increase in penetration levels within the market.

With this increasing competition, MNOs are constantly seeking new consumer segments, including the niche markets that in the past were seen to be non-profitable. The pressure on top line growth is driving MNOs to target such niche groups even at lower profitability levels.

In order to profitably serve these niche consumer segments, MNOs are rehauling their operations and reducing their cost of service. These include launching standalone digital service brands that deliver the services via digital means alone, thus reducing costs significantly.

The impact of digitalisation to the costs is aiding MNOs in reducing their pricing and compete aggressively for competitive share. In the absence of organic growth due to market maturity growth via competitive moves has become increasingly crucial. This increased level of competitive activity has reduced the price arbitrage that MVNOs have enjoyed in the past.
In the light of these developments there is a need for MVNOs to relook at their offering and review where should they play to build long term differentiation.

Within this changing environment there is a need for MVNOs to build competencies that are beyond just pricing, access to consumer segments or lower cost of operations.

Some of the areas where MVNOs can add further value are:

Focus on specific service or industry vertical

Service areas like the Internet of Things and industry verticals like Healthcare require deep industry understanding and specialist skills. This offers an opportunity for MVNOs to build differentiation vs. MNOs who are broad based service providers and have difficulty achieving the level of industry focus that a focussed MVNO organisation can achieve for a single vertical.

Building service and industry competencies via value added services, go-to-market strategies etc. builds value for the MVNO offering beyond just price and creates barriers of entry from MNOs and other MVNOs.

Over deliver to specific communities

Historically MVNOs have had a focus on migrant communities and specialised in offering discounted calls. However, as the competition intensifies and the price arbitrage for IDD (International Direct Dialling) becomes less, the opportunity is in offering a range of relevant services to the migrant communities; including the likes of commerce, content and payments.

This model is replicable beyond just migrant communities to cover any communities that have significant size but not big enough for MNOs to focus on or a distinct community that MNOs don’t have a good understanding of or access to.

Some of these distinct communities with unique needs that the MNOs may not have focussed efforts include the geographically secluded, greying population, self-employed individuals.
The above two strategies (and there could be more) offer opportunities for MVNOs to remain relevant even in the current changing times and ensure there is still a future for MVNOs.

Navonil Roy is the Managing Partner at Blue Sky Thinking, an innovation and growth consultancy. Navonil has 20+ years’ experience in telecoms, media and communications. He is passionate about growing telecom adjacent businesses. His early involvement with MVNOs started with the development of a second brand for an incumbent telecom operator. In recent years, Navonil has been involved in sizing MVNO opportunities for telecom operators, and setting up new MVNOs. He strongly believes that MVNOs need to look beyond pricing to build differentiation. Prior to setting up Blue Sky Thinking, Navonil was General Manager at Maxis, one of the most profitable telecom operators globally.

 Hear more from Navonil Roy at the MVNOs Asia 2018, where he will take part in two panel discussions on price war, profit cannibalization and network digitalization. Reserve your place today!