Making a case for MVNO entry in India, NOW

April 15th, 2009

The growth story of mobile market in India is no brainer. Indian GSM operators added a record 9.1 million subscribers in February, reaching a total of 277.1 million users, (this is only GSM, the market is split 70% – 30% in GSM – CDMA). Bharti Airtel Ltd, India’s top mobile operator added 2.73 million, taking its subscriber base to 91 million that gives it a GSM market share of 33%. Vodafone Essar Ltd added 2.5 million users to reach total 65 million with a market share of 22%. State-owned Bharat Sanchar Nigam Ltd (BSNL) added for the month of Feb 2009 a total of 1.5 million users taking its subscriber base 44 million giving it a market share of 17%. Other big operator, Idea Cellular added 1.5 million to reach 41 million and attained a market share of 15%.

What are the main reasons for this high demand situation? Call rates as low as one US cent a minute (low prepaid tariffs). Aggressive customer acquisition campaigns with lifetime prepaid numbers without usage restrictions are being offered to the new customers. Availability of cheap handsets in the market has helped to reduce the entry barriers for segments with low income. A tertiary reason at best is the expansion of networks to smaller towns and rural areas, supporting the penetration growth.

What have been some recent movements amongst players interested in MVNOs in India? Attracted by a huge customer base, many players are looking to present themselves as serious players. There are reports that Nokia and Ericsson may be seriously considering MVNOs in India with Nokia already entering Japan to offer high end handsets as part of its MVNO strategy there. Apparently, both companies may have approached the DoT  regarding their plans, following the Indian government’s recent decision to lift the ban on MVNOs in the country. Amongst the established telecom players who see MVNO as a route to gain footprint in the absence of MNO license include Telekom Malaysia, BT, Verizon and France Telecom among others. No surprises at Mobile ESPN’s interest in MVNO in India to leverage the sports fanaticism within the country. On the other hand, India ranking at the very top on number of sms per user has attracted ValueFirst, a leading provider of SMS services to India. Even some telecom operators who have license for telecom within India but do not have network want to reduce the start up cost and enter into MVNO agreements with already operating players. SWAN Telecom, one such player, is reported to have approached BSNL. Topaz Telecom of UK is also keen on having MVNO operations in India.

Is the regulation ready at last? The DoT (Department of Telecommunications) and TRAI (Telecom Regulatory Authority of India) have sorted the difference in shaping the MVNOs in India. The DoT has released detailed guidelines for MVNOs in March 2009. The department has decided to peg the entry fee for MVNO at a maximum of Rs 85 crore or USD 17 Million for a pan-India license. The maximum entry fee for Metro and circle A states has been pegged at Rs 5 crore or USD 1 Million, Rs 3 crore or USD 600 K for circle B states and Rs 1 crore or USD 200 K for Circle C states. The commission has set the floor price at Rs 1 crore for metros and circle A states, Rs 50 lakh for B circle states and Rs 25 lakh for C circle regions. As per a sector monitor of India, the main conditions for MVNO launch include:

a: Any company (not limited to Telco or allied industries) that fulfils licensing conditions (FDI, substantial equity) are eligible for a MVNO license.

b: While an MNO can have any number of MVNO’s attached to it, one MVNO cannot get attached to more than one MNO is a service area. As for the entry fee, it is proposed to be 10% of MNO’s entry fee as prevailing on date in that service area subject to a maximum of Rs. 5 crores for Metros and Category ‘A’, Rs. 3 crores for Category ‘B’ and Rs. 1 crore for Category ‘C’.

c: MNO should pay spectrum charges also on the revenue of MVNO(s) or all the payments made by MVNO(s) to MNO, whichever is higher.

d: The subscribers of MVNO(s) should be counted towards parent MNO for the purpose of spectrum allotment in bands where subscriber based criterion is applicable for spectrum allotment.

e: An equity holder, having 10% or more equity in a MVNO cannot hold 10% or more equity in another MVNO. Also, an equity holder having 10% or more equity in an MNO cannot hold 10% or more equity in a MVNO

f: Definitions of circles, validity of licenses (20 years) as well as the FDI limit (74%) are the same as those currently in use by MNO.

Meanwhile, the big fish, BHARTI Airtel chief is reported to have warned that he doesn’t think MVNOs will succeed in India, due to the situation of the tariffs. He’s essentially hinting at the low ARPU in the market. However, the low ARPU is a cause or an outcome is debatable. In order to gain more spectrum in the upcoming 3G auctions, there has been excessive focus to gain customers with aggressive offers in the market bringing the ARPU down. This partly explains the recent growth in the times of crisis in the Indian telecom market, hopefully.

Value added services vs. Price: Racc móvil betting

March 26th, 2009

For the last months, multiple MVNOs popped out in the Spanish market targeting different niche groups (Llamaya móvil, Vueling móvil, Digi Mobil, etc.) with quite similar mobile offers (similar tariff structure, similar price per minute, similar handset portfolio) and no differential services.

Now Racc launched Racc móvil trying to overcome the inertia and offering a set of value added services such as GPS localization, handset substitution services, fraud coverage or family plans…with the little drawback of a minute price closer to traditional Movistar and Vodafone tariffs than to the average MVNO prices: 18-25 cents./min. vs. 8-9 cents./min. But still an opinion about Racc móvil offer can’t be made as offer is incomplete until the likely discounts in insurance prices for mobile customers are made public.

Will the 100.000 expected lines come from the current customer base or will the mobile services act as a gimmick to increase the insurance business? Let’s wait and see.

P.S. Euskaltel initiates the enabler business with Racc móvil.

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MVNOs are leading the take off of mobile VoIP in Spain

March 2nd, 2009

Except 3 UK and 3 Italy with its Skypephone offers, there are very few mobile players promoting the mobile VoIP. Few days ago, the chance to see soon such innovative offers in Spain was considered unlikely… but the MVNO dynamism changed radically the outlook.

Last week, the Spanish low cost MVNO Másmovil, that has just reached 100 K subscribers one year after its commercial launch, announced a partnership with the mobile application provider Fring. Fring is available for a wide range of mobile platforms (Symbian, Sony Ericsson UIQ, Windows Mobile, IPhone, Linux). It proposes a communication aggregator service that allows mobile subscribers to chat, to call through VoIP and to interact using other communication services such as Skype, MSN, Google Talk, ICQ, AIM, SIP and social networks such as Facebook or Twitter. The service is free and the only subscriber costs are the data traffic (usually cheap within the recent mobile Internet flat rate plans) and the VoIP communication cost (typically SkypeOut rates of 0.017 € per minute for a fixed destination). Therefore, Másmovil subscribers will be able to make calls at marginal rates estimated at 0.024 € per minute for a fixed international destination (*).

At the same time, Barablu was reported to launch an MVNO in Spain on Movistar’s network (Telefonica Group). Barablu is a mobile application provider similar to Fring.

So, what can we expect at short term? Probably, not much impact.

Before writing this post I decided to test the service. I discovered that the user experience… could be better. To resume:

  • you need a high end handset with a recent OS,
  • more surprisingly if we consider the partnership with Másmovil, you have to configure your mobile in English to run the application,
  • the communication rates (data traffic + SkypeOut rates) are cheap for fixed and international destinations but not competitive for national mobile destinations (about 90% of the traffic volume)
  • the latency during the call is annoying

Even if the Fring application is really easy to install and to configure, even if the connection manager (3G, GPRS, WiFi…) is very well thought, even if the Fring support service is efficient, the drawbacks described above will limit the offer impact to a niche segment of MSN addicted technophiles.

But, with a longer perspective, these initiatives appear as the first steps toward the future of mobile Internet services as communication services and not only content services. They will allow demonstrating that VoIP and open chat services don’t destroy revenues. They require a mobile Internet data plan that is not marginal with regard to the usual mobile ARPU. Moreover, the improved user experience generates more usage, more mobile Internet addiction (not to say fixed Internet substitution) that should be converted in revenue opportunities. Hopefully, the new revenue streams will balance the marginal lost of traditional voice revenues as reported by 3 UK during the MWC:



Source: Mobile World Congress Daily, Day 4

And the technical limitations should be overcome soon. The next releases of 3G HSPA standards and later 4G LTE should reduce the latency barrier for VoIP. The IP communication services will be pre installed and configured on the mobile handsets as announced by Nokia during the MWC, 2 weeks ago.

Last but not least, the war for the mobile value chain control between mobile operators, handset providers and application developers can not be won to the detriment of mobile subscribers. Sooner or later, the major mobile players will have to open their service offers to VoIP. Otherwise, they will remain marginalized and outrun by more innovative competitors.

(*) All tariffs are VAT excluded

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New Orange flat rate tariff in Spain: a challenge for the low cost MVNOs?

February 24th, 2009

Few days ago, I heard that many young Spanish subscribers are optimizing their mobile calls using a low cost MVNO tariff plan (e.g. Másmovil, Simyo…) during the day and an Orange ‘off-peak’ flat rate plan (e.g. ‘Tarifa Plana‘) during the night. They use their free off-peak minutes from 6:00 pm to 8:00 am. On the other hand, Orange has just launched a new tariff plan, ‘Tarifa Plana 24h‘, with up to 1000 minutes free each month, any time, any network. Therefore, is the new Orange tariff plan competitive vs low cost MVNOs?

As usual with mobile tariffs, the answer is not straightforward (*).

First of all, we have to revise Orange’s tariff specificities:

  • The monthly fee is 59 €
  • The 1000 free min include a maximum of 500 min to mobile networks. It is a major trap provided that 90% of Spanish mobile traffic goes to mobile destinations
  • Extra minutes of calls are charged at an expensive rate of 18 cts € / min + 15 cts € setup fee (8 and 15 cts € with Másmovil)
  • SMS are charged at a prohibitive rate of 15 cts €, out of the free traffic allowance (8 cts € with Másmovil)
  • On the good side, calls are charged per second from the first second and there is no long term commitment, just an activation fee of 15 €

Then, we have to make some ‘reasonable’ assumptions: average call duration of 2 min, 90% of national traffic to mobile destinations, 1 SMS sent every 7 min of voice usage. The reports from the CMT (Spanish regulation authority) can support these assumptions.

And a quick excel simulation gives the following results:

Orange Tarifa Plana 24h vs Másmovil Contrato Libre tariff simulation

Orange Tarifa Plana 24h vs Másmovil Contrato Libre tariff simulation

As we can see, the new Orange tariff plan is more competitive than Másmovil one if the subscriber voice usage is each month between 7 hours and 12 hours. Practically, if we take into account monthly usage fluctuations, the ‘Tarifa Plana 24h’ of Orange is recommended for subscribers with a monthly voice national traffic average of 8h to 10h.

So young Spanish subscribers can go on with their multi SIM tariff optimization strategy…

(*) All tariffs are VAT excluded

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Digital dividend & 4G licenses: will Spain miss the opportunity?

February 19th, 2009

Ok, it is not only an MVNO topic… but MVNOs are more concerned that it looks at a first glance.

Flash back: about 10 years ago, Europe decided to switch from analogical TV broadcasting to digital TV broadcasting. The first idea was to maintain the whole analogical TV spectrum for digital TV broadcasting, allowing more channels of better quality. But little by little, it appeared that digital TV was requiring fewer radio frequencies than expected initially. Then, it was possible to release a part of the radio spectrum for other usage… especially mobile services. It is the digital dividend. The Ofcom (UK regulation authority) was the first one to move in 2003 with the allocation of 48 MHz (806 – 854 MHz) for future mobile services. In the meantime, other countries decided to go further by allocating up to 72 MHz (790 – 862 MHz) for the new generation of mobile services (4G). These frequencies are the most suitable for future Mobile Broadband services. France was the last country to take this decision as related in our post of November, after Finland, Sweden and Switzerland. Germany is reported to follow soon and UK has just revised its initial planning to reserve as well the whole 790 – 862 MHz band for mobile services. 

So, what about Spain? Until now, there was no spectrum allocation review and the digital dividend is still planned to return to TV broadcasters. But, the international pressure on the government and national regulation authorities is strong… On one hand, the mobile industry needs new frequencies to develop mobile broadband services, the main growth relay for the coming years. On the other hand, the TV industry is entering a deep crisis that challenges its traditional business model. We really don’t see how they could use effectively these frequencies when they still don’t know if TDT is an opportunity or a threat. Last but not least, the future of TV is likely to be on Internet, and likely on mobile Internet. Thus, we can reasonably expect Spain to follow the European the facto standard with the allocation of 790 – 862 MHz band to mobile services.

And now, what about MVNOs? As already related in this blog, MVNOs could benefit from the digital dividend in 2 ways:

  • At long term, the development of new services will create business opportunities for MVNOs. Yet, Simyo’s Mobile Broadband offer is probably the most competitive of the Spanish market and is a real ADSL alternative.
  • At medium – short term, the MVNOs could gain bargaining power against mobile network operators. For instance, the regulation authorities could ask for better mobile wholesale conditions for MVNOs in exchange of the new frequencies reserved for mobile services. In the same way, the abundance of new frequencies could lead mobile network operators to be less reluctant with regard to MVNOs. They might need their customer traffic and revenues to leverage the costs of network deployment.

Spain can’t afford to miss the opportunity of the digital dividend. In a period of crisis, the deployment of 4G networks will sustain the economic growth. The Ofcom estimates that the benefits for UK customers would be about €3 billion in NPV, just for the extension from 48 to 72 MHz of the radio spectrum allocated to mobile services. In addition, the Spanish market needs more competition. Once again from UK, the Ofcom report about telecom tariff comparison between France, Germany, Italy, Spain, UK and USA ranks Spain as the most expensive market (by far) for all the usage patterns. We can reasonably hope for decisions to improve the market competition and why not, to help MVNOs.

Want to launch an MVNO/MVNE? Or improve your operations? Valoris can help! Please contact us, or visit our website.

New MVNO in France: Prixtel

February 16th, 2009

More than a new MVNO, we should announce the birth of a new MVNO model. At least, it is the way Prixtel introduces itself.

Prixtel is a French service provider based in Aix en Provence, South of France. Created in 2004, it was targeting initially the professional segment with fixed telephony offers. Now, its strategy is moving progressively to mobile postpaid offers and to the residential segment.

Prixtel value proposition is based on the tariff adaptation to the mobile usage. To understand exactly the concept, it is necessary to review some specificities of the French mobile market. In France, most mobile postpaid offers are ‘forfaits’: the subscriber commits to pay a fix fee each month during at least 12 or 24 months. The offer includes the mobile subscription plus an amount of free minutes of national usage (e.g. 2 hours of national usage). If the subscriber exceeds the free minutes, the extra usage will be charged at a non discounted price per minute… To resume, if the customer subscribed a forfait of X minutes and his usage is of X minute each month,  then all is right for him. But, if the usage is going up and down then some months he will pay for minutes he didn’t use and other months he will pay heavy extra charges. Prixtel mobile offer proposes each month to adapt the invoice to the subscriber usage using the cheapest forfait of the market.

How Prixtel adapts its tariffs to the subscriber usage

Prixtel tariff adaptation vs mobile usage

Concretely, it uses reference forfaits from 6 mobile service providers: Auchan Mobile (MVNO), Bouygues Telecom (MNO), Orange (MNO), SFR (MNO), Tele2 Mobile (MVNO) and Virgin Mobile (MVNO).

Prixtel reference forfaits

Prixtel reference forfaits

So, why we are not 100% convinced by the proposal?

At least for 3 reasons:

  • The offer is complex and it is very difficult to tell a mobile prospect what his concrete benefit is. 
  • The offer may not be so competitive.  
    If the subscriber commits for 24 months and if its usage is exactly of 3 hours, then the Prixtel invoice will be 32,90 € (VAT included), about 0.183 €/min. For instance, with Simyo and without commitment, he would pay just 0.19 €/min…
  • Last but not least, the idea of tariff optimization is not so innovative. For many years, French service providers have been proposing adjustable forfaits. At the moment, Orange and SFR are offering tariff optimization for the professional segment. Few years ago, it was also available to the residential segment (e.g. through the Orange ‘Optima’ option) but it disappeared from offer catalogues… 

Want to launch an MVNO/MVNE? Or improve your operations? Valoris can help! Please contact us, or visit our website.

Blyk 2009: the road to maturity

February 11th, 2009

Blyk’s 2009 start is hot.

Hereafter, an overview of the last anouncements of the UK add funded MVNO:

  • Sep. 2008 – 200 k active subscribers, 180 brands using the advertisement services, 1 year after launch
  • Nov. 2008 – 40 M€ raised to support the operational development
  • Jan. 2009 – Blyk co founder Antii Öhrling replaces Shaun Gregory UK CEO
  • Jan. 2009 – Blyk’s new tariff announcement, replacing the voice minutes and SMS free allowance for a free crefit of 15 £ per month, giving the subscribers the opportunity to use the gift for data services 

So, what does it mean ? Some posts (see Wireless Federation post) interpreted all these moves as possible troubles. Ok, the crisis is spreading in Europe, especially in UK and Blyk is not immune.  But, we prefer to interpret the recent moves as a proof of maturity.  First, with 40 M€, the company should be able to last 2009 and beyond. Second, the new CEO is a co founder and the appointment is probably not related to any strategy turnaround. Third, the commercial performance is strong. Very few MVNOs in Europe gained 200 k subscribers in one year. Fourth, it is not obvious that the previous tariff offer was better than the new one. At least, customers value it since Blyk membership requests grew by 30%. Last, it looks obvious that many Blyk subscribers (young, web oriented, probably social network addicts) will appreciate data services for free… and it opens the door to new marketing services based on mobile internet.

The age target of Blyk is really narrow (aged between 16 to 24 years) and the usage habits changes are rather unpredictable with so young subscribers. The challenge for the MVNO will be to grow with its customer base.  Thus, we consider that the recent moves are positive and they are the first steps on the road to maturity.

Want to launch an MVNO/MVNE? Or improve your operations? Valoris can help! Please contact us, or visit our website.

New etnic MVNO in Spain: DIGI.mobil

February 9th, 2009

In October 2008, we announced a 3rd wave of etnic MVNOs in Spain. The recent launch of DIGI.mobil illustrates perfectly this move.

DIGI.mobil Spain is backed by RCS & RDS, a romanian communication group that operates a 3G license under the DIGI.mobil brand (1.2 M subscribers claimed in October 2008). It uses Telefonica’s network. DIGI.mobil service differentiates from previous etnic MVNOs such as Lebara, Happy or Talkout by focusing uniquely on one large immigrant group in Spain, the Romanian community.

Of course, it offers very competitive mobile tariffs from Spain to Romania (from 0.05 €/min for RCS & RDS network destinations) and even to the rest of Europe (from 0.07 €/min for fixed destination). But DIGI.mobil value proposition goes much further the discounted tariffs. It proposes a dual number SIM card that connects to Telefonica network in Spain and to DIGI.mobil network in Romania. Additional features include:

  • A unique voicemail, for both phone numbers
  • A call forward system at 0.05 €/min to receive calls to Spanish number while in Romania
  • Recharges available in Spain and in Romania

Likely, many Romanian immigrants won’t have to pay roaming fees during the next summer holydays. But before that, DIGI.mobil Spain will have to develop effective sales channels. The web page is really limited and it consists mainly in calling for distributor candidates.

By itself, the service is not original. Transatel Mobile already proposes similar features with its EasyPass offer. However, it targets the cross-border workers and the frequent travellers high value segments. Thus, DIGI.mobil innovation rests in proposing the service to the price sensitive immigrant population. We can now imagine similar offers for other communities in Spain, especially the Moroccan community that already has its dedicated MVNO in France and Belgium with and, both operated by Maroc Telecom.

Want to launch an MVNO/MVNE? Or improve your operations? Valoris can help! Please contact us, or visit our website.

The hidden MVNO market right at home in Spain

February 4th, 2009

With scores of pages dedicated to the evolution of MVNOs in Europe in general and Spain and France in particular, we may have skipped altogether a market that has a huge potential for MVNO play. Let’s begin by defining what MVNOs offer to then validate if the hidden market is for real. A classic MVNO offers voice minutes and sms (bundles are rare though) with various tariff plans that suits a particular profile. A more sophisticated MVNO offers some data plan coupled with voice and sms. Yet other MVNOs (that I call captive MVNOs) which serve the core strategy of the main business may be in retail, banking or whatever else. Whatever else??

Yes, we have missed this Whatever else big time. Let’s take Spain as an example. MVNOs have positioned themselves as low cost, ethnics, businesses oriented or have found some other niche. What about the mass-market, the main customers of the traditional network operators? Why do we assume that they don’t want or cannot be served by the MVNOs? Why are the MVNOs satisfied at nibbling the fringes when the whole pie is up for grabs? Does it take a lot to notice that the tariffs of MVNOs are cheaper than the traditional operators? Then, why MVNOs are not aggressively going for segments that are mass market. Let’s analyze the questions above to get to our conclusions.

Beginning with definition of mass market segments as the segments that have minimum common binding criteria with respect to their telecom needs, they are easily identifiable and can be located efficiently. Few examples of mass market segments may include, for example:

  • Data over voice customers – With so much of noise around 8 € cents/min (Simyo) and now even 7 € cents/min (Hits Mobile) for national voice calls, the MVNOs are not focused on data yet or see it as part of bundling strategy or a fringe benefit.
  • VOIP customers – With the broadband penetration well over 30% in Spain and the mobile internet becoming a reality with each passing day, VOIP based MVNOs have a market to capture with all out data plans. Smart international tie-ups can result in cost savings that can be passed to the customers.
  • Traditional media consuming customers – Spain has been traditionally a highly paper consuming country, voracious readers and newspaper addicts. These people have set habits of consuming media, of accessing the media (corner store, café, street shops). Traditional publishing houses that missed the shift from bricks to clicks now have an opportunity to make a come back and the already online media companies with scale have yet to embark on MVNO path (Bildmobil in Germany).


Spanish Mvno Market

Many more such supply side and demand side segmentations exist that are yet not attacked. In my view it’s not just the pricing but a wholesome value proposition that will drive the MVNOs in Spain going forward. In the next blog entry, I will analyze the macro economic and sector enablers that call for entrance of new MVNO players in Spain this year.

Want to launch an MVNO/MVNE? Or improve your operations? Valoris can help! Please contact us, or visit our website.

Simyo launch in France: update

February 3rd, 2009

The French mobile market is usually very soft. Maybe that is why Simyo entry strategy in France looked so disruptive and raised concerns…  4 weeks after the public launch, it is time to review what is happening.

First of all, the communication campaign is a success. The buzz surpassed all the expectations. The TV spot starred by Pascal Duquenne was commented on all major French TV channels and Simyo created a dedicated web page to capitalize on the web traffic. On the other hand, the campaign received very few negative comments on how is presented and used the trisomy handicap. All a success for Simyo and its communication partner, the Buzzman agency.

On the other hand, the tariff offer is already perceived as one of the most attractive in the market. A rapid comparison of cheapest tariffs per min places Simyo in the third position.  But the main competitors are asking for heavy commitments (minimum duration & minimum monthly charge) whereas Simyo proposition is free of engagement.

Nevertheless, the ultimate criteria to evaluate the launch will be the commercial performance. It is too early to evaluate how many customers activated a Simyo SIM card. We can only imagine that the success of the communication and the price positioning will help to offset other weaknesses of the offer such as the absence of mobile number portability and the exclusive online sales channel.

Want to launch an MVNO/MVNE? Or improve your operations? Valoris can help! Please contact us, or visit our website.