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MVNO – One Name, Many Flavors 2005 Wireless & Mobile WorldExpo May 2005 www.businessedge.com © 2005 BusinessEdge Solutions Inc. All rights reserved. What is an MVNO > Mobile Virtual Network Operator • Purchases wholesale network voice and data access from a Host Network Operator (HNO) and sells own branded wireless service to customers • Product design and creation (within HNO operational parameters) • Defines the addressable market, develops campaigns, advertising, promotions, acquisition, loyalty and retention • Owns the sales and distribution strategy and operation • Owns the customer relationship • Network element ownership and control varies from none to extensive – depending on the MVNO model © 2005 BusinessEdge Solutions Inc. All rights reserved. 04.12.05 | Confidential | 2 Agenda > Wireless Industry > Becoming an MVNO > The MVNO Eco-system • MVNO • MVNE • HNO • MVNC&SI > Summary © 2005 BusinessEdge Solutions Inc. All rights reserved. 04.12.05 | Confidential | 3 Communications Industry Landscape > Communications convergence is happening. It is being driven by the desire of all companies to own the customer, grow revenue, and increase customer satisfaction > Boundaries between services provided by traditional cable, wireline and wireless providers are rapidly being eroded > BUT in parallel we are seeing the traditional value chain disaggregating Voice Technology Push • • • • Broadband IP Content Mobility Video Applications Content Services Delivery Transport Wireless © 2005 BusinessEdge Solutions Inc. All rights reserved. Business Pull • • • • • Customer Demand Lower entry barriers Dis-aggregation Shareholders Insurgents Data 04.12.05 | Confidential | 4 The Wireless Service Provider Challenge > Market Maturity Semi-Annual US Wireless Industry Subscriber Growth • Many Operators – little differentiation • Post Paid market growth is declining • MOU up, RPM down • Price sensitivity and competition are high • Cost Per Gross Add increasing • Profitability is key as investors look for returns • Investment in the core network remains high Source: Merrill Lynch, US Wireless Report 2003 > Service Provider Response • Increased Customer Choice • Convergence of technologies • Technology • Restructuring © 2005 BusinessEdge Solutions Inc. All rights reserved. 04.12.05 | Confidential | 5 Wireless – Industry Restructuring Fixednetwork operators > MVNOs Media companies • Old, Young, Credit Challenged Consumer Electronics • Segmentation of the market MVNOs Retailers • Pre and Post paid > Consolidation Financial Pure Plays • Rogers / Fido • Cingular / AT&T • Sprint / Nextel • Alltel / WWC • Regional / Super Regional > Partnerships • Cable / Wireless • Wireless / Wireline institutions > There are currently more than 20 MVNOs in Europe today > Virgin Mobile has shown that MVNOs can be successful in the US market place > A number of strong brands and communications companies are well advanced in their consideration of MVNO status © 2005 BusinessEdge Solutions Inc. All rights reserved. 04.12.05 | Confidential | 6 Agenda > Wireless Industry > Becoming an MVNO > The MVNO Eco-system • MVNO • MVNE • HNO • MVNC&SI > Summary © 2005 BusinessEdge Solutions Inc. All rights reserved. 04.12.05 | Confidential | 7 Reasons for Becoming an MVNO New Products New Markets Existing Markets Existing Products • Bundle to improve Wallet Share • Mobility Based • Greater reach and diffusion. • Lifestyle adaptations • Up Sell – Cross Sell • Adaptation and enhancement • New Channels/outlets • Location based • Mobile market • Distribution to Mobile • Affinity relationships • New Price and bundle plans • Access to new customers • Convergence • Extended reach with lower barrier to entry • New channels © 2005 BusinessEdge Solutions Inc. All rights reserved. 04.12.05 | Confidential | 8 Show Me the Money Costs MVNO MVNO Profit 40-60% • Network usage – access, roaming, directories etc • Connection fees • Subsidies – Upgrades, promotions etc • Value added services • Content fees • IT Services 50:50 • Billing HNO • Voice Access • Basic Services Bad debt, loyalty etc Operating Costs 10% • Care • G&A 30-50% Approximate Distribution (post paid) © 2005 BusinessEdge Solutions Inc. All rights reserved. Key Understanding your customers and their usage habits e.g.: • Overage / underage • Churn 04.12.05 | Confidential | 9 Key Environmental Factors > Host Network Operators are open to MVNOs • Competitive rates • Looking to improve network utilization • Accept some loss of customer control • Recognize price pressure > Competitive market > Low penetration vs potential > Low feature function vs potential > Friendly Regulatory regime > Number Portability > Under served segments © 2005 BusinessEdge Solutions Inc. All rights reserved. 04.12.05 | Confidential | 10 Critical Success Factors for the MVNO > Know the customer > Key factors that drive brand value are: • Have a direct relationship = lower acquisition cost • Market Penetration / Coverage • Know their habits / patterns = focus the offer • Satisfaction (Quality of service and Care) • Have loyal base • Revenue / margin per customer > Have a strong brand • Breadth of services offered • Churn • Brand value will have a significant impact as communications service providers move towards converged services: • All targeting the same customers as a means of increasing wallet share • Defending against fast moving insurgents with niche offerings in core areas > Up Sell, Cross Sell & Bundle • Companies providing multiple services are, generally, able to generate High Revenue Per Customer – on average 35% higher © 2005 BusinessEdge Solutions Inc. All rights reserved. 04.12.05 | Confidential | 11 Agenda > Wireless Industry > Becoming an MVNO > The MVNO Eco-System • MVNO • MVNE • HNO • MVNC&SI > Summary © 2005 BusinessEdge Solutions Inc. All rights reserved. 04.12.05 | Confidential | 12 MVNO Eco-System MVNE MVNC&SI HNO MVNO © 2005 BusinessEdge Solutions Inc. All rights reserved. 04.12.05 | Confidential | 13 Wireless Entry Strategies > New entrants to the wireless market have a number of options to consider > The level of control of products, services, channels and customers will determine the level of investment that is necessary for organizational, processes, systems and product development initiatives > The different options for the business model have associated risk/reward profiles that must also be considered Build wireless network H H MVNO / MVNE MVNO – build wireless systems MVNO: Own systems Control Potential Reward Buy wireless WSP Buy / build carrier or network MVNO – carrier systems MVNO/ MVNE MVNO: Carrier systems Resell – cobranded with carrier Resell / agent – carrier brand Co-brand Reseller L L L Risk H © 2005 BusinessEdge Solutions Inc. All rights reserved. H 04.12.05 | Confidential | 14 Cost L Flavors of MVNO > Not all MVNOs are the same > The objectives of the MVNO will affect the level of dependency and range of services that are required from the partners > HNO services offered vary. A gap analysis on coverage and capabilities with the MVNO goals is an early requirement > Identifying gaps with HNO and internal services will identify MVNE needs and role MVNO Style Market Pre / Post Wireless Knowledge Integration to Business Systems & Processes Low to None Low Low to None – Customer Database Prepaid & Post Paid Medium to high Low Pre planned Strong brand, loyal base, content leverage Prepaid – future post paid Low to none Low Low to None, some customer knowledge Communications companies who want higher wallet share and improved loyalty Post and Pre Low to medium Medium to High Bundles Extensive systems infrastructure Convergent Communications companies with vision Post and limited pre Medium to high High Extensive systems infrastructure Tier 2/3 WSP’s who need exit strategy from high network investment Post and Pre High High Extensive systems infrastructure Pure Play Repeaters Content Based Converters Highly Segmented Brand extension Primarily Prepaid, Professional MVNO’s Segmentation Growing Post Paid © 2005 BusinessEdge Solutions Inc. All rights reserved. 04.12.05 | Confidential | 15 What an MVNE can do? Logistics Managed Service MIS & Admin Back Office Interface Financials HNO Care Center Credit Ref Core Operating Systems Taxation Payment Interface $Banking $$ © 2005 BusinessEdge Solutions Inc. All rights reserved. Printing 04.12.05 | Confidential | 16 MVNE Market Positioning > MVNEs form a critical component within the MVNO market > Ensuring that the MVNE offers the services and time to market required is critical MVNE Capability High FEP B BEP C Ability to Execute • The range off services offered by MVNEs varies greatly FEP A PEP A FEP C • For full service the purpose designed MVNEs are able to offer a greater depth of: FEP D PEP B FEP E IEP A BEP A • Service IEP B BEP B • Flexibility PEP C • Best in class solutions Low Component Services Offered Full Source: BusinessEdge Research © 2005 BusinessEdge Solutions Inc. All rights reserved. 04.12.05 | Confidential | 17 Host Network Operator Selecting an HNO Partner depends on the level of integration with the MVNO core business H Converged Complexity The greater the integration required the more sophistication is necessary Bundle Host Network Operators have different drivers • Wholesale – Focus is on driving network use via a partner wholesale model Wireless + Data • Customer Growth – Only supports MVNOs that are outside of own market focus Wireless L Wholesale Services offered Integrated / Custom © 2005 BusinessEdge Solutions Inc. All rights reserved. • Brand based – Selective about the quality of the brand and revenue generation potential of selected partners 04.12.05 | Confidential | 18 How does and MVNC&SI Add Value? > Entry into the Wireless Service Provider market requires careful and detailed planning supported by flawless execution > The role of the Consulting and Systems Integrator provides industry specific expertise and experience supported by structure and methodology > The MVNC&SI acts as the trusted advisor, independent of both the HNO and MVNE The MVNC&SI Provides: Build and Test Marketing MVC&SI MVNO MVNE Finance Systems & Services © 2005 BusinessEdge Solutions Inc. All rights reserved. • Strategy and Planning • Wireless Subject Mater experts • Business case and Operational Models • User Experience definition, design and implementation • Architecture – Process, systems and technology • Requirements Management • Integration to own systems • End to End testing • Program Management 04.12.05 | Confidential | 19 Planning for an MVNO > To be a successful MVNO requires careful planning RF Switch NW NW Svcs Apps & Service Billing Care Mktng Sales Mobile Network Operator (MNO) Host Network Operator (HNO) Mobile Virtual Network Enabler (MVNE) Mobile Virtual Network Operator (MVNO) MVNO Planning Host Network Partner Enabler(s) > Who are my customers > Coverage mapping > HNO/external enabler > What markets & channels > Ease to deal with > Experience > Level of integration (business / network / services) > Experience / predefined interface points > Ability to configure / customize to fit with MVNO systems / process > Services to be offered – differentiation > Partner management systems > Partners and interfaces > Available wireless knowledge > Settlement / revenue assurance > Ease to deal with > Market acceptance and testing > Cost > Cost > Time to market goals > Time to market > Time to market Create Integrated Playbook © 2005 BusinessEdge Solutions Inc. All rights reserved. 04.12.05 | Confidential | 20 Agenda > Wireless Industry > Becoming an MVNO > The MVNO Eco-System • MVNO • MVNE • HNO • MVNC&SI > Summary © 2005 BusinessEdge Solutions Inc. All rights reserved. 04.12.05 | Confidential | 21 About the Presenter > John Green is the Wireless Industry Partner for BusinessEdge Solutions working in the wireless, cable / broadband and wireline segments of the communications industry. He has more than 25 years of Operations and Information Technology experience of both the wireline and wireless industries. John can be reached at [email protected] or by calling 732.828.3200 > BusinessEdge Solutions is an industry-focused systems integration and consulting firm that offers a unique asset-based approach that blends industry experience with seasoned technical expertise in the communications, financial services, insurance and pharmaceutical and health sciences industries > As an early MVNC&SI BusinessEdge is providing services to a number of MVNOs, MVNEs and HNOs throughout the lifecycle, from strategy to implementation © 2005 BusinessEdge Solutions Inc. All rights reserved. 04.12.05 | Confidential | 22