ArkadiPanitch is the founder and CEO of Effortel. Mr.Panitch previously worked for Mobistar (Orange Group), Boston Consulting Group and IBM.
ArkadiPanitch holds a PhD in High Energy Physics from the UniversitéLibre de Bruxelles and founded Effortel in 2005.
MVNOs exploit opportunities in niche markets, especially in ‘single dimension’ subscriber segments. One such segment is the ethnic MVNO that addresses travelling nationals or immigrants in a foreign country by offering services in their own language, but most of all by offering the lowest prices for calling home. A particular successful model is the retailer MVNO with their regular customer base, distribution channels and trusted brands. The secret to MVNO success is in identifying tightly packaged services for ‘discovered’ markets, which more often than not address low ARPU subscribers, needing little maintenance, where simplicity is key.
Non-telecom brands, predominantly retailers, are becoming increasingly aware of both the marketing and revenue opportunities they can access by launching their own mobile virtual networks. The MVNE (mobile virtual network enabler) platform has also been deployed by operators looking to serve niche markets, such as ethnic communities abroad wishing to stay in touch with families and friends at home, or low ARPU customers with very basic connectivity needs. This article discusses the MVNO market that is growing rapidly, as both new and established brands capitalise on tailored mobile services to build and extend relationships with their customers.
An irresistible opportunity
The MVNO sector is vibrant, active and growing significantly. To date, initiatives within the sector have been led by retail brands such as Carrefour. These brands have effectively pioneered a new business model, now serving as a beacon for manyoperators, showing that they can capture markets which are often ignored by major mobile operators. The attraction of developing in this sector is based on both the potential commercial rewards and the ease and relatively low cost of entry.
When these factors are combined with not uncommon lead times of twelve months having now tumbled to twelve weeks (and sometimes less), the feasibility of accessing incremental revenue streams through an extremely agile manoeuvre becomes not only self-evident but also positively compelling.
At the heart of the Carrefour Mobile value proposition is simplicity at all levels: from simple pricing, to easy off-the-shelf access to the service. The simplicity attracted high numbers of users quickly, through a strategy of offering a ‘Pick Up& Pay’ starter kit containing everything a customer needs - except a mobile phone which, as a ‘switcher’, the customer already has. Launched through Carrefour’s stores in Belgium, the platform now provides an ongoing communication medium for the retailer itself, serving as a tool through which loyalty-driving initiatives, and promotions, can be delivered at an extremely low cost.
Through its widespread store universe, offering daily contact with large numbers of potential users, Carrefour had ready access to its target audience: a common characteristic amongst high-volume retailers. Efficient distribution is the cornerstone of any successful MVNO business,Whereas Carrefour has been able to publicise its service in-store, other operators areyet to find ways of alerting users to their services. In Italy, BLADNA (a subsidiary of Vodafone Egypt) wished to access an audience not so conveniently gathered together in large numbers in limited locations such as stores. To overcome the problem, BLADNA provided the means for retailers and local shops to activate SIM cards for smartphones - an innovation which enabled it to reach its target market, and steal a competitive edge.
The definition of simplicity
That numerous clear market motivators exist is evidenced by the success of many operators now identifying basic needs amongst defined user groups, and targeting tightly defined services to address them. Whilst such a statement may almost qualify as a definition of marketing, raising the question, ’So what’s new?’ the key to its focus lies in the word ‘basic’. Many of the emergent user groups buck the trend of today’s often intensely techno-savvy mobile user, someone who connects in through mobile usage to his or her second life- whether it be a densely populated universe of friends, or an extended work environment. Users falling into such a profile are enthusiastic adopters of mobile apps, unable to contemplate the concept of life-without-a-phone. A device which was once essential to their lifestyles has now become integral to them.
For mobile operators this is a major money consumer segment, so their services and efforts are single-mindedly driven by the need to protect, develop and grow the sector. Small wonder that these are high ARPU (average revenue per user) customers requiring high maintenance - they simply cannot, at any time, be ignored since they tend to be comfortable in the mobile operator space, shopping around for better deals and richer experiences, if their current arrangements appear to fall short on either front. Low ARPU customers are easier to service and can be considered ‘one-dimensional’ in the expectations they have of what their mobile phone can do for them. For MVNOs, this is where the opportunity lies.
Specialist ethnic MVNOs
One case in point is the ethnic community living away from home. For example Italy has a community of Chinese people numbering 500,000. Daily Telecom is an ethnic MVNO dedicated to this community.Mobile calls to China and Hong Kong are offered at the price that is lower than a price of a local call. The customer experience - from website and signup to IVR and voicemail - is delivered in Mandarin.
Another example is BLADNA, a new Arabic MVNO hosted by a local network in Italy and dedicated to the North African ethnic community. This defined user group comprises mainly Egyptian, Moroccan and North African nationals and is one of the largest foreign immigrant communities living in Italy. Planning, implementation and launch of the MVNO was achieved in the space of two months. It offers tailored services for Arabs including an Arabic speaking call centre hosted in Egypt, tailored products and services and the lowest rates for calling back home, through a high quality service.
The Facebook generation
The speed, ease and low cost of deployment of the MVNO support its growth as a valuable marketing tool for retailers and as a platform generating considerable success amongst ethnic communities. It should be considered, however, that the opportunities do not exist in these two areas alone. In the months to come, creative and forward-thinking companies and organisations will explore the low ARPU customer and find considerable lifetime value potential in the segment. Opportunities will be identified amongst grandparents, for example, who want nothing more than basic voice and messaging services, or younger target audiences with unsophisticated needs and limited budgets.
FreeM, launched by Polish MVNO, InMobile, addresses this latter audience.It is designed for the target demographic of 15-25 year-olds who are universally active on social networks, but who may not have access to the disposable income required for regular data access. It is believed to be the first subscription free, advertising funded mobile service to provide consumers with free data access.FreeM initially presents users accessing a social network site on their mobiles with short, full screen advertisements. In return, their accounts are credited with a half-megabyte data traffic allowance, equivalent to approximately 30 reloads of the mobile version of Facebook. Access is available even when the user’s account balance is zero and no compulsory top-ups are required. At launch the free access applies to a range of social networking, web and messaging platforms including Facebook, Twitter, Wikipedia, Windows Live Messenger and Google Talk.The FreeM service is being marketed via Facebook and is available on any phone with a web browser and the ability to transfer data. Telephone calls, text messages and data access outside of the ad-funded service are subject to top-up fees as part of a standard ‘pay as you go’ (PAYG) package.
MVNOs create a single market proposition
Forward thinking retail brands, and other operators around the world, are now recognising the value of owning the mobile relationship. The case is strong for retail-led MVNOs, especially given the opportunity for market differentiation through close alignment between a retailer’s MVNO and its core business. This approach creates a stronger link between retail and telecom products, and promotions, in the mind of the customer. Using this model subscribers’ can receive free voice minutes, or free access to mobile broadband and data services in return for buying groceries or other consumer goods.
The MVNO acts as an extension of the retailer’s marketing effort, increasing sales and building loyalty. As a result of this cross-marketing and promotional strategy the MVNO becomes an attractive prospect to consumers, particularly with regular shoppers of a retail chain. The technology is now available that allows retail brands to take full advantage of a mobile division attached to their core business: discounts, offers and loyalty card schemes can all be focused on single SIM card. Targeted promotions and loyalty points can all be sent directly to a mobile device via SMS or other forms of mobile technology. Retail brands will eventually be able to integrate mobile payments and location based services into their business strategy through closer MVNO integration.
However, organisations, both retailers and others, are still faced with the challenge of developing a working and balanced business model (based on a single P&L) to facilitate a single market proposition, making it easier to balance out costs and to measure benefits.
This can be achieved by working with an MVNO partner that can successfully integrate its resources and functionality with the existing retail business. Through closer alignment the MVNO is able to provide greater value to an organisation’s business than just additional revenue.