APAC MVNO market is the fastest growing and most diverse in the world

Telecoms.com periodically invites third parties to share their views on the industry’s most pressing issues. In this article, the MVNOs Series talks to telecommunications expert Gary Bhomer to get his views on the current state of APAC’s MVNO sector. With over 25 years’ experience in the Telecommunications industry, Gary Bhomer discusses growth drivers in the region, eSIM, digital enablement, 5G and the emergence of b-brands in this e3xclusive Q&A.

Could you start us off by telling us a bit about growth in the APAC region? 

The APAC MVNO market is indisputably both the most diverse and fastest growing MVNO region in the world. Naturally, growth and adoption vary greatly between countries, with some slower than others, but that does not detract from its overall growth performance when compared to other regions. between countries. Whilst there are a few countries where activity is high, countries Australia, Japan, Hong Kong, Malaysia and South Korea are ones to watch as they are leading the way with MVNO adoption in the region.

Markets like Australia and New Zealand are well developed with similar MVNO penetration and characteristics to major European countries.  Japan, South Korea, Malaysia and Singapore are well developed Asian markets with substantial progress in MVNOs. Then you have the rest of the Southeast-Asian markets like Indonesia, Thailand, Vietnam, to name but a few, which have only opened up relatively recently to MVNOs. If we add China into that mix, you’ll see that Chinese operators are currently in the process of entering other markets as an MVNO, and you’ll also see a substantial mix of MVNOs in their home market, with more of a focus on large Enterprise MVNOs like Alibaba and Lenovo. India has so far has seen very little in terms of progress of MVNOs, but it remains a huge opportunity just the same.

Generally speaking, the regulatory environment in most Asian countries has become much more supportive of MVNOs, resulting in accelerated MVNO subscriber growth in the region. APAC really is a fascinating region in terms of MVNO development with quite diverse telecoms regimes and stages of development where each country has its own unique characteristics.

Of the many exciting technologies entering the market, which ones do you think will have the most significant impact on MVNOs in the APAC region and why?

There are two major developments that I see having a substantial impact on the MVNO market, which are eSIM and digital enablement.

Starting with the former, eSIM will soon to be ubiquitous amongst handheld devices. Indeed, this virtual solution to the SIM is set to become available by default on the majority of new handsets being launched. In markets where MVNO penetration is sub scale (i.e. < 20%), like most Asian markets, this technology will create a huge opportunity for MVNOs to attract and connect with new customers. Especially as eSIM technology becomes more mainstream.

It will, further, substantially simplify and accelerate the process of migrating from one provide to another, removing a barrier to change similar to what Mobile Number Portability (MNP) did for the industry over the past 10-15 years.

Onto the latter, digital enablement is sure to cause waves in Asia because of the region’s demographic.  That is, Asia’s demographic chiefly comprises young users who are, by and large, tech-savvy, active mobile users. As one might expect, the younger mobile users like to use their mobile phone for just about everything and anything, preferably through an intuitive user interface or an app where they have full digital access to various services and contextually relevant offers. Here, we are not just talking about flexible and personalised plans, we are talking about gaming, e-commerce, and value-added services etcetera.

We have already seen the success of Circles.Life in Singapore and Yoodo in Malaysia, both of which have developed business support platforms through which they can use insights and data analytics to quickly launch new products and services for their customers in a more intuitive and engaging manner.

I expect many more new MVNOs to enter the Asian market and beyond being fully digital as those that do not adapt will be left behind.

There is lots of evidence about digital disruption in other industries like taxi (e.g. Uber and Grab), travel and accommodation (e.g. Tripadvisor, Airbnb), media and entertainment (e.g. Netflix, Prime, Apple) etc. All of these services have been enabled by communications networks but they have not had a proportionate increase in commercial benefit. The Telecoms industry must adapt or it risks being left as a pure ‘bit pipe’ player.

What are your thoughts on 5G, what are your predictions and expectations for 5G launch and roll out, and how do you think the above will affect MVNOs?    

There is a lot of hype surrounding 5G, and with good reason. 5G promises to improve speed and lower latency in ways no technological development has done before. Symptomatic of these benefits is the enablement of new business models. Ones that revolve around IoT connectedness, driverless cars, new industry models in healthcare, manufacturing, smart cities, in particular, can flourish given 5Gs high speed and low latency capabilities. Overall, I predict that 5G will transform the industry over the mid-long term.

In the short term, I am of the view that MVNOs are unlikely to reap any major benefit from 5G. Not least because in order for MVNOs to access 5G, mobile network operators (MNOs) would have to agree to resell the 5G access to them. If the past is anything to go by, we should expect to wait some time before this happens: there are still some operators limiting access to 4G technologies, despite its widespread adoption over the past 5 or so years. Removing MVNOs even further from the possibility of harnessing 5G for their own gains, there is also a distinct possibility that operators will seek to charge a premium for 5G access.

Where operators are willing to provide 5G for their MVNOs, I expect the initial use case to be around mobile or fixed broadband replacement, given its initial, more limited coverage. This will likely be followed by 5G mobile plans with the promise (and delivery) of higher speeds and allowances.

And onto IoT, what impact will this technology have on the APAC region?

IoT is still in its early stages, but I feel we’re on the cusp of more widespread adoption. There is no shortage of devices, platforms, networks and solutions, however these essential inputs haven’t really managed to come together to offer end-to-end solutions. This is where MVNOs get to play an important role moving forward, as they can take away the complexity for potential end users via partnering with relevant providers. These IOT MVNOs will have to move away from traditional consumer mobile offerings to more complex B2B solution providers in order to become successful.

In your panel discussion at this year’s MVNOs Asia event, you’ll be discussing the growth of b-brands in the APAC region. Could you tell us a bit more about this?

Most countries have seen an increase in b-brands, which is where an incumbent mobile operator uses a second brand to target a segment or demographic their existing brand has difficulty addressing. It is also a way for an operator to protect its retail brand when targeting customers with lower ARPU seeking a simpler offering without the bells and whistles traditional operators offer. This has been the traditional domain of a large number of successful MVNO’s and therefore has a negative impact as they are seeing their bases targeted by these b-brands putting more pressure on MVNO revenues and margins.

As a result of b-brands entering the market MVNO’s have to work even harder to develop and deliver a differentiated and compelling proposition. It is not enough to have cheaper prices and low-cost distribution as these are not sustainable differentiators. MVNO’s must therefore develop new products and partner with companies that can help them evolve and adapt to the ever-changing dynamics of the marketplace.

 

If you want to find out more insights from Gary, find out more about the MVNOs Asia event where he’ll be speaking.

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

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.

Huawei claims 50 5G commercial contracts worldwide

At its Asia-Pacific Innovation Day Huawei announced it has now signed 50 commercial 5G contracts globally and shipped 200,000 5G modules.

Huawei loves to host its own commercial events, at which it can control the message and invite partners to come on stage and talk about how great it is to work with Huawei. This kind of event is more important than ever for the company now that it’s fighting a running PR battle with the US government and strives to convince everyone else not to abandon it.

While US allies such as Australia and Korea feel compelled to largely go along with whatever sanctions the US imposes on Huawei, the rest of the APAC region is crucial to its fortunes. Obviously China will always support it, but very populous countries such as India and Indonesia are of crucial strategic significance and have to obvious reason to pick a team in the US/China trade war.

Huawei positions these events as general telecoms get-togethers that it’s happy to host and pay for out of a desire to help everyone progress. It therefore keeps the more aggressive corporate propaganda under wraps most of the time and largely contents itself with nebulous aspirational pronouncements about the potential of technology and the importance of cooperation among the global telecoms community.

“5G is arriving at the right time,” said William Xu, Huawei Director of the Board and President of the Institute of Strategic Research. “More specifically, 5G can provide wide coverage, large bandwidth, and low latency on the basis of traditional connections. It can also provide slicing for different applications. This new feature makes it adaptable to a variety of complex industrial applications. With the advancement of 5G, there will be many 5G-enabled applications that will change the world. At the same time, 5G, AI, IoT and cloud are improving everyday life and nature, making the world a better place.”

Having said that, he was still keen to stress how well Huawei, specifically, is doing in this drive to make the world a better place. Those 50 (unspecified) deal wins compare with 42 Announced by Nokia in June, with 22 of them named, and 24 named 5G contracts published by Ericsson. So it seems to be broadly level-pegging between the three networking giants and, while Huawei doesn’t appear to have been crippled by the US hostility, it’s reasonable to speculate it would have a significant lead over its rivals under normal circumstances.

WhatsApp making progress on WeChat emulation ambitions

Facebook has been promising some sort of payments solution for WhatsApp, and it seems to be making a bit of progress in Indonesia.

According to reports from Reuters, Facebook is in discussions with several potential partners to offer a mobile payment feature in the app in Indonesia. Although this is not Facebook’s first venture into mobile money, there is a stuttering initiative in India, the Indonesian experiment will focus on creating a digital wallet to tap into one of the worlds’ fastest growing eCommerce markets.

Earlier this year, Facebook CEO Mark Zuckerberg suggested to investors a wander towards mobile money was an ambition of the business, though this should actually surprise few. When you consider the success of Tencent-owned WeChat in diversifying the offering of the messaging app, Facebook is playing catch-up.

For those who haven’t used WeChat, what you can actually do is quite remarkable. The app was solely focused on messaging to start with, but now you can send images, make phone calls, peer-to-peer payments are included, as are in-store purchase via NFC and paying utility bills. Soon enough, cards could become redundant, such is the growing usage of mobile payments through digital wallets and WeChat.

If Facebook could capture a slice of this success, WhatsApp might start to begin paying off the $19 billion Facebook had to fork out during the acquisition.

The original purchase of WhatsApp was seemingly a means to capture a messaging application which was taking the world by storm. However, the data which WhatsApp would have offered the Facebook advertising machine would have been very beneficial. The team has found integrating the two platforms very difficult to date, though mobile money is certainly a way of creating additional revenues.

In Indonesia, the Facebook team is in discussions with several partners to tap into the eCommerce platform, though in India it is focusing on peer-to-peer payments in-app. There are several reasons for the differing approach, regulatory barriers being one, though experimenting with two ideas could offer two new features for a global rollout.

Interestingly enough, something which might get the White House twitchy is the alleged conversation with one of the potential partners; mobile payments firm DANA, which is backed by Ant Financial, an affiliate company of the Chinese Alibaba Group. Considering the current relationship between Washington and Beijing, these must be interesting conversations.

Globally, this is a very good move from Facebook. According to data from Sensor Tower, WhatsApp was the most downloaded application during the first quarter, with 223 million new installs, taking the total north of an estimated 1.5 billion users worldwide. This is a massive addressable audience, representing huge potential if the team can get all the moving parts to align.

China plummeting and India soaring but Apple just can’t get a break

IDC had a stab at smartphone shipments in two of the worlds most lucrative markets, and it does not make pleasant reading for Apple.

As the Apple management team has now decided against dishing out the specifics on iPhone shipments in the quarterly statements, analysts are the closest we’re going to get for sales figures. Here, IDC is suggesting a sluggish market overall in China, with iPhone sales dropping considerably, while the Indian market is booming, but Apple can’t claim a slice of the action.

Starting with the Indian market, IDC estimates 142.3 million units were shipped across 2018, demonstrating a 14.5% year-on-year increase, though the final quarter saw a 15.1% sequential decline. This might not look as bad as it originally sounds however, as Q4 actually increased year-on-year 19.5%, suggesting the third quarter was just exceptionally positive.

“Amongst the big highlights of 2018 were the online-focused brands that drove the share of the online channel to an all-time high of 38.4% in 2018 and a whopping 42.2% in 2018Q4,” said Upasana Joshi of IDC. “This was primarily driven by several rounds of discounts by e-tailers driving affordability through various financing options, cashback offers and buyback schemes.”

The Jio effect is clearly sustainable across the country as Indian consumers appetite for the digital economy continues to grow. With the disruptive telco promising further expansion, greater digital inclusivity and additional services over the coming months, more consumers might be encouraged to upgrade to more premium devices. As Joshi notes, the premium end of the market was the fastest growing price segment, demonstrating 43.9% year-on-year growth.

What will be worrying for the iLeader is the inability to get a foothold in the market and capture the attention of Indian consumers. India is traditionally a market driven by low-end devices, however the encouraging growth of handsets priced north of $500 should offer some traction for Apple.

Xiaomi led the market, having recently overtaken Samsung, with 28.9% of total shipments, a healthy 58.6% increase from 2017. Samsung collected 24.7% of Indian devices sales, while Vivo had 10%, Oppo 7.2% and Transsion with 4.5% completes the top five vendors. The remaining 27% of shipments were shared through multiple vendors, Apple included, though the bundled peloton chasing the leading five saw total sales drop by 10.7% year-on-year.

With sales across the world seemingly declining for Apple, the booming Indian market is one it can ill-afford to miss out on. Last year, it announced it was moving manufacturing into the country, with partner Foxconn aiming to be up and running in early 2019, while there are also plans to expand the retail footprint. The team reportedly plan to open three massive stores in both Delhi and Mumbai, owing to the success of retail operations elsewhere around the world.

While India might be a headache due to the iLife indifference of the locals, China is turning into a full-blow migraine for completely separate reasons.

IDC estimate Apple’s smartphone shipments have declined by 19.9% in China, while the home favourite Huawei saw its own shipments grow by 23%. Apple’s loss is Huawei’s gain, though it does appear the iChief is losing its prestige badge in the market.

These figures are of course estimates, as Apple has decided against telling anyone about specific shipment numbers, though the revenues over the last quarter give a decent idea. During the last quarterly results, revenues for the Greater China region declined by roughly 26% from $17.9 billion to $13.1 billion. In years gone, Apple used to be able to simply release a new colour variant of flagships and China consumers would be queuing out the door, but the bonanza is over for the moment.

The big question is why? Of course, there will be a preference from some for local brands, and there will of course be the cash-conscious. But ultimately you have to wonder whether Apple is living up to the brand promise which it spend so many years cultivating; where is the innovation?

Over the last decade, Apple has crafted a brand which is built on the principles of innovation and technological supremacy. Steve Jobs was the figurehead of this image, and many Apple enthusiasts were prepared to pay the premium on devices because of this identity. However, in recent years, Apple has done little to differentiate its devices and justify the pricing premium which is placed on products. Of course, this is not just Apple, innovation has stuttered across the segment, but gone is the assumption Apple immune to market trends.

With revenues declining across the international markets, and Apple set to sit out the initial 5G devices euphoria over the next couple of months, 2019 is starting to look like a very uncomfortable year for Apple.