Mobile Virtual Network
Operators:
Introducing the business concept of
"One doesn’t need to own a cow to
milk a cow”
S-38.042 Seminar on Mobile Operator
Strategies and Games, fall 2003
12.11.2003
Timo Smura and Mika Marjalaakso
Presentation Outline
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What is a Mobile Virtual Network Operator?
Key driving factors enabling the MVNO opportunity
The MVNO opportunity
Different MVNO types
MVNO backgrounds
MNOs and MVNOs in Finland
MVNOs business on modeling point of view
Conclusions
− about the business opportunity
− a few selected suggestions to the MOB business game
What is a Mobile Virtual Network Operator?
Mobile Virtual Network
Operator
- doesn’t own a network nor
have a radio spectrum license
- buys wholesale network
capacity from a network
operator
- makes, however, significant
investments to network
infrastructure to obtain better
control on services offered
Mobile Network Operator
- owns and runs a network
- own radio spectrum license
- acts both network and service
operator
Content
Mobile portal
Network
• News
• Travel info
• Games
• Smart phone apps.
• Sports
• Mobile operator’s
wap site, e.g.
wap.sonera.net
• GPRS, PDC,
CDMA, UMTS
Content
provider
Content
aggregator
Mobile
virtual
network
enabler
Service
operator
Network
operator
Customers
Supp. infrastr.
Services
Terminal
• Provides network
access services to many
service operators
• Technical infrastructure
for billing etc.
• Voice, data and VAS
services
• Own technical infrastructure
to certain extent
• M-commerce
• Operator branded
phones
• Non-operator branded
phones
Key driving factors enabling the MVNO
opportunity
Western Europe mobile market reaching saturation
−Nordic countries already saturated at 90%
−Introduction of pre-paid subscriptions has had a large
impact
Deregulation opens the mobile markets to competition
−No need for own spectrum licenses or radio networks
−Regulator-controlled interconnection prices
The focus in revenues is expected to shift from basic
services to more content-based value-added services
−Convergence, evolution towards IP over everything
−New entrants may have excellence in content-creation
−Also increasing shift from voice to data services
The MVNO opportunity
Virgin Mobile, Key Figures
− 269,681 net connections in Q3 2003
− Total customer base 3,183,347 (30th
Sept. 2003)
− Customer growth up 56% since Q3
2002 (2,013,382)
− Record Q3 2003 turnover of £112,6m
− Nine month EBITDA of £67m
− Nine month operating profit of £59m
− Nine month turnover of £309m
− >1500 emplyees
− >6000 distribution outlets
Different MVNO Types
• ITU: MVNO = an operator that offers mobile services but
does not own its own radio frequency
• Different categorizations exist, mostly technology-based
Network
operator
Service
Provider
Marketing
Distribution
Customer Care
Tariffing / Billing
Network Services
Switching / Routing capabilities
Radio Access Network
Enhanced
Service
Provider
Mobile
Virtual
Network
Operator
MVNO backgrounds
• MNOs have their roots in the fixed line business
− leverage on the existing network and ownership of spectrum
licenses
• MVNOs can emerge from a plethora of industries
− leverage on strong brands and extensive distribution networks
Fixed network
operators
Consumer
Electronics
Automotive
Media companies
MVNOs
Retailers
Financial
institutions
MNOs and MVNOs in Finland
PGOne
Fujitsu Services
Wireless Maingate
Suomen 2G
DNA Finland
Tele2
Cubio
Radiolinja Suomi
Radiolinja
Origo
Terraflex Europe
Finnetcom
CDF Mobile
Globetel
Saunalahti
TeliaSonera Finland
Sonera
Mobile Networks
Ålands Mobiltelefon
• Three GSM licenses, four UMTS licenses >> four MNOs
• Currently ten MVNOs, with very heterogenous backgrounds
Modeling MVNOs: The Big Picture
Conclusions: the business opportunity
• it’s as real as life, which we can see from the figures put on
the table by Virgin Mobile
• we don’t have lots of financial information about the success
of MVNOs in Finland
− Saunalahti has quickly acquired some amount of new customers,
but the profit level has been far from Virgin figures so far
• end-users have already experienced the deregulation
activities in declining prices and simplified pricing schemes
• many MVNOs have entered the market to learn the business
and prepare themselves for the emerging, more content and
data-based 3G market
Conclusions: some remarks on the
current MOB business game
• Current version does not recognize the division between
service operator and network operator
• MVNOs could be modelled in many ways
− Computer-controlled vs. Player-controlled
− Relationship with MNO players: No interface vs. full negotiations
− Types: Service provider, Enhanced service provider, Full MVNO
− Different strategic alternatives: cost or service leader
• Simplifications required for feasible implementations
Conclusions: three improvement suggestions
1. Implement MVNOs with fixed interconnection cost and the
network capacity bought virtually from nowhere
− MVNOS implement the cost leader strategy
− significantly lower capital (approx. 20% of MNOs costs) and
operational expenditures
− fixed interconnection prices determined by the game operator
− restricted set of services a MVNO can offer
2. Introduce means for negotiation, the network capacity is
bought from actual players
− network capacity is bought for a certain period of time
− switching costs for a MVNO due to investments to the network
infrastructure (e.g. VAS servers, billing and charging systems,
integration costs)
− wholesale pricing options for MNOs who decide to sell excess capacity
3. Give the players a possibility to act as MVNOs with
different strategies
− service leaders must select a service mix they intend to offer
− requires for modeling financial flows based on service demands per
customer group and actual costs to produce a certain service
Thank you!
It’s time for questions and answers.
capacity
network
operator
virtual
service
operator
virtual
service
operator
virtual
service
operator
virtual
service
operator
virtual
service
operator
services