Operators in emerging markets should embrace MVNOs

MVNOs have a small but significant role in mobile markets. The overriding perception remains that they have the potential to disrupt network operators’ businesses, regardless of the actual damage they do to them. As such, the overriding perception among network operators is to be wary of virtual operators, unless they bring clear value to them that doesn’t threaten to diminish their own.

MVNOs are defined by the relationship they strike with their host operators, and because this relationship is largely defined by the host operator, the MVNO is bound to always be in an inferior relationship to them.

MVNOs are also seldom aided by regulators, who are disinclined to mandate that network operators open up to them, so in part they are implicitly complicit in ensuring they remain in a position of weakness.

This means that the threat of MVNOs is much less than in reality. In the first years of the virtual operator, MVNOs often competed solely on price, which gave them something of a bad name to network operators, fearful that opening their networks to virtual operators would ultimately force them to lower their process.

But over time, MVNOs began targeting niche segments of the market with a clear proposition distinct from what was already available.

Aware of this, an increasing number of forward-thinking network operators have proven willing to sign-up MVNOs, mainly to tap a segment of the market their brand and proposition has been unable to tap. Indeed, MVNOs, particularly in the US, have failed when they have targeted similar areas of the market to that of the host operator.

MVNOs are likely to proliferate in the Middle East, Africa and parts of Asia Pacific over the next few years. The markets in these regions are ripe for new service providers tapping markets that have been unserved by incumbents. These incumbents have also had the time to define themselves, and the more adventurous among them will become increasingly willing to allow partners with strong brands distinct from their own to target new customers using their networks.

Saudi Arabia, Turkey, Egypt, India, Pakistan, among many others, are likely to see the entrance of MVNOs in the next 1-2 years, according to research carried out for the latest Informa Telecoms & Media report, Global MVNO Markets.

According to this report, the number of subscriptions to MVNO operators and resellers is forecast to grow 44% from 104.1 million at end-2009 to 150.3 million by end-2013 – a compound annual growth rate (CAGR) of 9.6%.

At present, there are 550 MVNOs or resellers globally as confirmed by regulatory authorities and approximately 85 million subscriptions to these MVNO and reseller operations.

This may sound like slow progress but, given that most of Europe’s MVNOs were launched in the mid-1990s, this follows a similar evolution path to the global cellular market – it took 13 years to add the first 85 million mobile subscriptions.

The success or failure of MVNOs is dependent on building a strategy that is complimentary to potential network hosts. If MVNOs in emerging markets can build a business case that enhances rather than challenges the network operator’s, then we can expect to see a plethora of new virtual operators emerging in major developing markets in the next few years.

Network operators in these markets should welcome propositions that promise to use spare network capacity to bring in new revenue by allowing virtual operators to target new or unserved segments of the market.

  • MVNOs North America


  1. Avatar Gustavo Bonesso 20/07/2009 @ 6:29 pm

    Paul, why South America is not mentioned as a possible market for MVNO’s?

  2. Avatar Evans 21/07/2009 @ 1:05 pm


    It’s a fair call and I think it’s about time.

    However, I also think the role of the regulator is key to the success of MVNOs in emerging markets. The problem I see is that regulators in developing countries tend to operate at either extreme; they’re either too powerful (due to political influence) for network operators to operate freely and effectively, or too weak such that network operators bully the regulator or have it their way so much that the consumers suffer. There are several cases in point.

    Nonetheless, times are changing very fast and regulators in these markets may well adapt to changing times and realise what’s best for their markets.

  3. Avatar Adebayo 22/07/2009 @ 3:50 pm

    Interesting and I have to agree, however I feel price will still be a major factor in Africa at least. The infrastructure required to target the niche market will come at a cost and possibly low APRU, so the MVNO will probably not survive. However if the MVNO is associated with a brand then it can target the urban areas where the operators already have spare capacity and required infrastructure allowing the MVNO to consolidate the subscribers associated with that brand under one umbrella

  4. Avatar Pien 03/08/2009 @ 2:22 pm

    I’m also curious if the MVNO ‘model’ in emerging markets will also be used by the MNO itself to target specific market segments/niches – as a co-brand. Plenty of examples in the developed world(e.g. KPN vs Telfort). This is often done in retail, why not Telcom? The MNO can differentiate from the(ir) MVNO by means of service portfollio, service quality (e.g. reach, priority) and price.

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