The top five markets to watch in the Asia-Pacific MVNO sector

Telecoms.com periodically invites third parties to share their views on the industry’s most pressing issues. In this article, Helen Gaden of the MVNOs Series talks us through some of the key findings of a recent report they conducted into the Asia-Pacific MVNO market.

The Asia-Pacific region is alive with examples of every single nuance that plays a role in the MVNO industry – positive, open regulatory environments, and those that shut the door on virtual operators completely, highly successful symbiotic relationships with MNOs and monopolistic wholesale markets that strangle innovation and opportunity, MVNOs extending their reach into new markets, into new services, driving value with new business models, and embracing new technologies. Look to the APAC region and you can see it all.

The only problem with such enormous size and diversity is that it can be difficult to see the picture in full, or even to know where to look. However, there are certainly some key countries which emerge as key markets to watch; that standout as impressive growth drivers for MVNOs. In fact, there are five to be specific: China, Australia, Singapore, Japan and Vietnam.

Starting with the former, China’s MVNO sector finally seems to be finding its feet. With the entire Chinese mobile ecosystem adding an estimated $750bn to the country’s economy in 2018, equivalent to 5.5% of its GDP, China is certainly a nation where mobile technology takes central stage in economic strategy. And after testing the waters with an initial MVNO license trial in 2014, the Chinese government finally decided it had seen enough to make the experiment permanent last year, opening up licenses to international players for the first time as it looks to increase competition in the market.

As Renato Andrade Reis points out, China already represents a huge success story for MVNOs in that the 5% share Chinese MVNOs have of the country’s 1.2 billion mobile subscriptions has been achieved against the background of some hostile market conditions. “In China the market has developed despite the issues on pricing that in the beginning were complicated due to heavy competition from the local operators,” he said. “Growth has been based innovation – gaming, VAS, extra features. Chinese MVNOs really do present something of a white paper strategy example.”

In Australia, likewise, the market has grown substantially. As Gary Bhomer, founder and principal at Sydney-based firm Tel-Consult, points out: the growth in the Australian MVNO market “shows no signs of abating, with several new entrants on the way. Over the past two years MVNOs have taken an additional 3% market share and now account for a total of 13%.

“We’re seeing more non-traditional telco’s launch mobile propositions as an extension of brand. For established brands, an MVNO strategy can be a good way to extend an existing brand into a new segment, and provide a compelling way to interact and cross sell / up sell as well as leverage unique insights into your customer base. Recent examples include Nu Mobile, owned by Macquarie Bank, which has aggressive plans and second hand handsets as their key differentiator (Boost Mobile also recently launched second-hand device sales).“Other pending launches include Circles.life who are expecting to launch in the coming months following on from their success in Singapore, having also recently launched in Taiwan and planning at least two other Asian market launches.

Onto Singapore: their MVNO market has experienced one of the fastest rates of growth anywhere in the region over the past couple of years. Spearheaded by Circles.Life, one of the big MVNO success stories anywhere in Asia, virtual operators’ share of market climbed to 3% by the end of 2018, after the first virtual operators launched only two years previously.

While Circles.life embarks on aggressive expansion plans into other regional territories, 2019 has seen a succession of new MVNO launches in Singapore itself. The trend seems to be for larger telcos using the MVNO model to launch sub-brands targeting younger consumers, with examples including Giga, owned by the MNO StarHub, and Grid Mobile, a joint venture between Singtel and ST Telemedia. International players are getting in on the scene, too, with Malaysian brand redONE launching a subsidiary in Singapore ahead of planned roll outs in Vietnam and Thailand too.

But it isn’t just MVNOs that are adding to the competitive nature of Singapore’s mobile industry, either. Australian operator TPG Telecom last year became the fourth MNO running a network in the city state’s condensed mobile market, and announced its arrival with a low-cost SIM-only offer.

Across the pond in Japan, where more than 80 active MVNOs operate and over 18 million SIM connections are active, the Japanese virtual operator sector is one of the longest-standing and most developed across the APAC region. It has also enjoyed one of the most sustained periods of growth of any market – since 2014, Japanese MVNOs have more than doubled their share of mobile subscriptions, with the figure standing at 10.6% at the end of 2018.

During the same period, mobile ARPUs fell by 9%, which industry research consultancy Analysys Mason says compares favourably with the rest of the region. So while a growth in MVNO market share tends to be associated with falling prices due to increased competition and discounting strategies, Japan’s MVNOs have been able to grow share with theoretically better margins than most.

A couple of Japanese brands to draw attention to include the IIJmio consumer brand, which boasts 1.074m subscribers, and Rakuten Mobile, which has 1.5 million subscribers and recently announced the takeover of fellow Japanese MVNO DMM Mobile for US$21.2m.

On the other side of the coin, Vietnam is one of the youngest MVNO markets anywhere in the APAC region. In fact, the country’s first virtual operator launch took place as recently as April 2019. But after nearly a decade of frustrated attempts to get MVNOs off the ground in a nation of 95.5 million people, largely because of apparent reluctance on the part of the country’s MNOs to switch focus to wholesale services, there is now real hope that the model could take off in a big way over the coming years.

The pioneer Indochina Telecom Company (Itelecom), for example, has agreed a deal with carrier VinaPhone, mobile subsidiary of telecoms giant VNPT. Itelecom is reported to be focusing its initial service offerings on industrial workers in nine provinces and cities. Malaysia’s redONE, meanwhile, has plans to become the country’s second virtual operator by October this year.

The country also has a young, tech-savvy population, with high rates of smartphone penetration backed up by a fast, extensive 4G network. This, naturally, bodes well for hopeful MVNOs. Whilst the big carriers, Viettel, VNPT (through is Vinaphone brand) and MobiFone operate in a saturated market which has experienced flat growth for the past five years, the kind of service innovation and differentiation brought by MVNOs looks the main route to returning the mobile sector to growth.

 

For a more insights on this, download the free MVNOs Series report

Q&A: Renato Andrade on industry growth and transformation and in APAC MVNO space

Telecoms.com periodically invites expert third parties to share their views on the industry’s most pressing issues. In this piece Renato Andrade, an independent MVNO consultant for Acqua Telecom, sat down for an exclusive Q&A with the MVNOs Series to talk growth in Asia’s MVNO market, disruptive technologies and the ways in which MVNOs can leverage IoT to achieve success.

Can you give us a snapshot of the APAC MVNO industry as you see it?

We are seeing exciting developments in APAC’s MVNO industry, that’s for sure. Back in 2015, there was a lot of excitement surrounding the launch of MVNOs in China, but that was short lived: following a market war between the MNOs in the country, it became impossible to launch any MVNOs because the wholesale pricing actually ended up being higher than the retail pricing offered by MVNOs. Korean and Japanese MVNOs came into similar trouble due to regulatory changes.

Now, however, the APAC MVNO market in gaining momentum. This year, the regulatory blockers that had in the past stymied MVNO growth were lifted, which has consequently allowed MVNOs to flourish. This is especially true of China, where is has now claimed a healthy 5% share of the entire market.

In addition to the more relaxed market regulations and subsequent drops in wholesale prices, it must be noted that, particularly in China, Value Added Services from the MVNOs themselves play a big part in the customer attraction to these brands. MVNOs in the APAC market have been quick to catch onto this, following in the footsteps of frontrunner China. What does this mean? Let’s just say that the booming MVNO industry in China created somewhat of a domino effect, in that it demonstrated to other governments in the region that opting for the alternative option of MVNOs  can be a good (in this case very good) cause to pursue.  That is precisely what happened in Thailand and, soon thereafter, in Indonesia.

Whilst the growth we are now witnessing can be attributed an loosen market regulation and the drop on wholesale prices, it must be noted that, particularly in China, Value Added Services from the MVNOs themselves play a big part of the customer attraction to these brands examples which are closely followed in other APAC markets. Let’s just say that the booming MVNO industry in China created somewhat of a domino effect, in that it demonstrated to other proxi governments in the region that opting for the alternative option of MVNOs  can be a good (in this case very good) cause to pursue.  That is precisely what happened in Thailand and, soon thereafter, in Indonesia.

How is the telco landscape evolving the APAC region and how does this relate to MVNOs?

Much like the telecom operators in the rest of the world, telecom operators in the APAC region are focussing their efforts on 5G. More specifically, they are focussing on 5G deployment and working around the issue of profitability: how can they ensure that 5G is profitable for their business?  Unfortunately for operators in the APAC region, they also share a common dilemma felt by the other operators elsewhere on the planet.  5G has huge potential as an opportunity, yes. That’s a given. But, unfortunately, there aren’t yet enough applications available for operators to be able to sufficiently leverage this technology to drive up their profits.

That’s where MVNOs come into play. Now that MVNOs are no longer are viewed by operators as a threat themselves, yet, as a partner on diversifying the MNO’s customer acquisition efforts, MNOs are looking for MVNOs to also further help them fund their 5G deployment. IIJ in Japan has demonstrated that in Japan by partnering with Docomo and reaching areas and market niches that were not available to them before. The majority of MVNOs in Malaysia the same as they even sell their plans and cards within the main MNO’s shops and retailers.

On another level, yet still related to the growth of the MVNO market worldwide, MNOs are also depending on MVNOs to bring forward technologies and solutions themselves couldn’t focus on such as IoT, AI, MFS and others.

On IoT, for an MNO to operate a simple Smart City project it involves a high degree of knowledge of the particular city, customer service, engineering work, product managers and all the other resources needed for the project to be completed. For MVNO however, given that these are ventures themselves and developed by locals, deploying such as solution is much simpler – no high degree of planning (assuming these are locals) and 100% of the times much more successful and cheaper. Hence MNOs are absolutely open to support such MVNOs going to maket as it is a win win situation.

On MFS, by partnering with banks and Fintech companies, MNOs are expanding their Valeu Added Chain and bringing in new profits, increasing customer loyalty and ARPU on the process…and they don’t need to apply for Banking licenses, operate banking services, etc. They are simply making profits.

On AI very much the same, only this time it is outside development and research been fed into the existing MNOs structure and hence lowering costs, improving their service resulting on gains for the MNO. Imagine for a second that the MNO had to develop the AI themselves, the cost of such and the time for it to be implemented.

Are there any disruptive technologies that you see shaping the MVNOs industry in the APAC region in a significant way?

MFS is favourite of mine in terms of new technologies that have been implemented by MVNOs. EThis applies especially to Asia, where the WeChat and Alibaba payment platforms that use MFS technology are already common practice. MVNOs are enjoying ahealthy chunk of that market, with scertain MVNOs actually surviving solely on their banking services.  For some,  it may has been seen to be responsible for over 70% of their profits.

Undoubtedly the most talked about technology is 5G. You touched on 5G before, but what are your predictions and expectations for 5G launch and roll out, and what impact will this have on MVNOs?  

For MVNOs , the main play for 5G will be the development of the VMNOs – Virtual Mobile Network Operators – also referred by the MNOs as 5G Slicing.  Given the huge cost of deployment MNOs must contend with on their network, VMNOs will  very soon play a key role for MNOs  in expanding their reach to rural, hard to reach areas and customer niches. I see this as the MVNO of the near future, something that I expect will be the norm from 2020.

MNOs call it 5G Slicing and MVNOs call it VMNOs. It is basically the same. It means that the MNO would “slice” their frequency for 5G and create a “private channel” on which the MVNO could directly explore. For instance, Emergency services requires a private channel within the frequencies and antennas in order for it to be always available. IoT services also have the same requirements…so much they may even be placed on alternative networks, such as IoT-B or LoRa, etc on 4G.

MNOs are at the moment looking to sell these “slices” to several players and the pricing these players pay for it supports their own Network development.

How can MVNOs work with IoT and how can they become successful in the IoT space?

MNOs have neither the resources nor the knowledge to implement Smart Cities projects in less populated cities, whilst MNOs MNOs lack the attention requirements to attend to SmartMeters or Smart Services on an individual level. In fact, even if they did, their numbers would never add up to justify the implementation on the first place.

These are some of the millions of opportunities available for IoT MVNOs – covering the ground MNOs can’t.  Energy companies may need a set of coverage and systems in order to monitor their networks which sometimes may involve rural, difficult to reach from a traditional Network designing plan that MNOs are accustomed to deploy, or perhaps within a city, focusing on the buzz of Smart Cities, areas underground need to be monitored or require a more extensive set of systems to monitor for instance surveillance or smart services. The list is vast and no constrained by any means at the moment as thousands of projects are launched every year focused on monitorisation and smart services.

In your panel discussion at MVNOs Asia, you will be addressing the role of IoT in the APAC MVNO space. Specifically, what role will IoT play in shaping the APAC MVNO industry?

The IoT key role for MNOs is the deployment of 5G. We need to look back 5 years and remember all the promises 5G have made in terms of connecting devices and hence growing MNOs ARPU and reach. The reality nowadays for IoT is that the MNO needs ideas, operations, entrepreneurship which have come at a high cost and most of the time low profits. The way out of the problem is to outsource IoT services to smaller players, rightly called IoT MVNOs whom are more flexible and ready to take the task.  Everything from Smart Cities to Smart Meters are now better handled by such MVNOs and the MNOs are embracing that.

 

Interested in hearing more insights from Renato? Find out more about the MVNOs Asia event where Renato will be speaking

Telenor and Axiata pull the plug on mega-merger

Operator groups Telenor and Axiata had intended to merge their Asian operations but have now decided it’s just too much hassle.

The proposed merger was announced back in May. “We are on the verge of making a new history,” said Axiata Group CEO Tan Sri Jamaludin Ibrahim, at the time. “This proposed mega merger of equals would create a Global Champion, headquartered right here in Malaysia.”

But by the time we got to Axiata’s quarterlies last week, there was talk that the move was set to fall through. Ibrahim wasted little time in scotching those rumours, insisting that the talks were still on track, but that they were always bound to take a while due to the complexity of the deal.

Well now it looks like that priced-in complexity is the reason for the whole deal collapsing, respite recent reassurances to the contrary. “Over the last four months, both parties have been working on due diligence and finalising transaction agreements to be completed within the third quarter of 2019,” said the short announcement. “Due to some complexities involved in the Proposed Transaction, the parties have mutually agreed to end the discussions.”

This is pretty embarrassing for both companies. Of course due diligence needs to be followed but what could have taken them four months to uncover? No more details have been revealed but you have to assume that either some corporate skeletons in the closet were uncovered or one of the parties involved has gone off the whole idea for some reason.