Standard Bank confirms South African MVNO launch

Following rumours earlier this year that Standard Bank had plans to launch an MVNO, the South African bank has finally confirmed the not so secret news.

In a conversation with both MyBroadband, Standard Bank confirmed the imminent launch of a South African MVNO, but didn’t have much more to add..Standard Bank, which has around 12 million retail customers for its financial services in South Africa, will join more than 10 MVNOs already operating in the market, as well as MNOs Vodacom, MTN, Cell C and Telkom.

After the launch, Standard Bank will become the second major bank in South Africa to launch a mobile virtual network operator following the steps of FNB, which launched an MVNO way back in 2015. Earlier this year, Stephen Bailey, former Virgin Mobile South CEO and now MVNO CEO at Standard Bank Group, attended the MVNOs World Congress where he took part in an onsite interview.

“MVNOs currently hold only about 1% of the South African markets,” said when asked about the local market. “The number of MVNOs coming to market has accelerated greatly in the last 12 to 18 months. We’ve seen financial services businesses come into the market. Two banks in South Africa are launching an MVNO. One has launched, and one is about to launch. That’s some interesting developments. I think that like in many other markets the MVNO market will probably take about 10% subscribers in the market.

“I’m very bullish about growth prospects in South Africa for MVNOs. It’s a relatively untouched model in our markets. I think, what’s interesting for us as South Africans is our close proximity to Sub-Saharan Africa. And in Sub-Saharan Africa there’s only, that I know of, two MVNOs in Kenya. There’s no MVNOs in West Africa and only two, as I said, in East Africa.

“Looking into the crystal ball is not so easy. In terms of what excites me most about what the opportunities coming up is I think the rollout of eSIM [which] is very exciting for MVNOs. As MVNOs we offer new niche offerings to our customers. I think eSIM just makes it much easier and less expensive to acquire those customers because there’s no need now to distribute a physical SIM to those customers. I think it offers a whole lot of opportunities in digital channels, direct customer and marketing opportunities. So that’s one of the things that I’m particularly excited about in the coming five years.”

You can see the full interview below.

 

What defines the European MVNO market?

Telecoms.com periodically invites expert third parties to share their views on the industry’s most pressing issues. In this piece the MVNOs Series team investigates the latest trends and challenges facing the virtual network operator market in Europe. What are the lessons to be learnt from them?

The European MVNO market is the world’s oldest, largest and most mature. Boasting more virtual network operators and more user subscriptions than any other region, MVNOs in some European countries command as much as 15 to 20% of the total mobile market.

By 2020, some estimates put the total number of MVNO subscribers on the continent at upwards of 110 million – not far off four times the total number in the USA.

With market liberalisation occuring in some European countries as early as 1995, and the world’s first recognisable MVNO – Virgin Mobile – launched in the UK in 1999, the region’s virtual networks have had close to two decades to emerge, grow and evolve. Operating in a market where 84% of the population owns a mobile phone and the mobile industry contributes nearly €600 billion to GDP, the incentives for European MVNOs have arguably been greater than anywhere else on the planet.

And in the EU, representing a significant proportion of the continent’s domestic markets, including some of the biggest in the likes of Germany, UK, France and Spain, MVNOs have also found a highly supportive regulatory framework.

Yet success brings its own pressures, the European MVNO sector, and the mobile market in general, is intensely competitive. With mobile ownership having sat close to saturation point for a decade or more, vertical growth has become harder and harder, sparking fierce price wars and waves of consolidation. ARPUs first from voice and then from data have tumbled, the product of regulatory intervention and much as competition.

As the market stands on the brink of its 20th anniversary, forces such as Roam-Like-At-Home take part in shaping the European MVNO industry heading into a third decade. The EU’s decision to ban roaming charges within its borders is a question yet to be answered. As we shall find out in the upcoming months, RLAH could deal a significant blow to the industry or, alternatively, present a much-needed opportunity.

Snapshot: The European MVNO Market 2018

Comprising around two thirds of the continent’s nation states and population, it is no surprise that much of  Europe’s MVNO activity is concentrated within The European Union (EU). Around two thirds of all the continent’s MVNOs are found in just five EU member states – Germany, the UK, France, Netherlands and Spain.

Germany boasts one of the world’s largest domestic MVNO markets, with around 48 million subscribers and revenues of US $11 billion. This huge sector enjoyed rapid growth following a wave of operator consolidation in 2014, when the regulators sought to mitigate against price inflation by handing 30% of network capabilities to MVNOs.

The UK, meanwhile, has been described as one of the world’s most crowded MVNO markets, with 13.5 million customers shared out between upwards of 100 virtual operators. However, 86% of these customers are shared out between a dominant ‘Big 6’ group of large MVNOs – Tesco Mobile, Virgin Mobile, GiffGaff, Lycamobile, Lebara and TalkMobile.

With Sky another sizeable player in the UK market, it is noticeable how big name brands from outside the traditional mobile sphere have used the MVNO model as a way into the UK market. Overall, one in seven UK mobiles are connected via a virtual operator and the sector is worth more than £2 billion.

As in most areas of industry and commerce, no one is quite sure how the UK’s looming departure from the EU will impact on the MVNO sector, both domestically and on the continent. Outstanding issues to be resolved include whether the EU’s Roam Like At Home (RLAH) rules will still relate to UK subscribers travelling in the EU, and how carriers which operate networks both on the continent and in the UK (including Vodafone, Orange, Deutsche Telekom and Telefonica) will handle wholesale arrangements in the newly separated markets.

Outside the EU, the biggest single domestic MVNO market in Europe is Russia. Although conditions for virtual operators in Russia have long been viewed as challenging due to the dominance of the country’s big 3 carriers and little sign of regulatory intervention to liberalise the market, MVNOs are now estimated to control 2.6% of the country’s mobile subscribers. Some analysts confidently predict that this will grow to 14 to 15% by 2022.

Carrier Tele2 Russia certainly appears to be taking active steps to increase its MVNO footprint, reporting 831,000 virtual subscribers on its network at the end of 2017. Its model seems to be using MVNO agreements to attract large non-telco players into the mobile space – Tinkoff Bank has this year announced a 1 billion rubles investment into its MVNO spin-off, Tinkoff Mobile, while Moscow-based ISP AKADO Telecom has also announced signing an agreement with Tele2.

Across Europe’s most developed MVNO markets, there are mixed views on the potential for growth. In KNect365’s global MVNO market survey carried out earlier in 2018, some respondents described growth prospects as ranging from slow to stagnant. A common theme was that traditional MVNO models are increasingly being squeezed through a combination of price competition and over-saturation in the market, although there were varied opinions on whether this made it difficult for new players to enter the market or else created new opportunities for innovative entrants with disruptive approaches.

Despite the tough trading environment, more than a quarter of respondents (28.5%) still cited Europe as the region offering the best growth opportunities for MVNOs. Some analysts argue that European consumers, already at an advanced stage of engagement with mobile services, will soon start to look beyond price for increasing levels of specialisation and personalised service. This plays into the hands of agile MVNOs which have the experience serving niche markets while network operators, already faced with dwindling retail margins, are more and more likely to turn to wholesale business models instead.

On the other hand, there is a school of thought that suggests it is becoming harder and harder for MVNOs in Europe to operate out of the shadow of their network operators with any degree of independence. Some insiders told us they see MNOs aggressively targeting traditional MVNO territory in a bid to bolster their own dwindling margins.

As Henrik Liungman, Vice President of Services at ACN Europe, commented: “The trend is clearly towards larger data plans. The MVNO’s are struggling to compete with the MNO’s unlimited data offers on the retail side. 100G plans or unlimited data with caveats are not something MVNO’s can offer with the current cost structures.”

Europe’s MVNOs are looking to brand new markets and brand-new business models away from the consumer sector in business services. In the UK, for example, more than 20% for the MVNO market is now focused on business. In Germany, the connected car market is the most advanced in the world, creating brand new opportunities for agile, specialist operators at the intersection of IoT and eSIM technologies. Yet another significant trend is digitalisation, with the adoption of cloud-based ‘as-a-service’ business models by virtual operators positioning them ideally to make the transition into B2B, and to take a step up the value chain to offer mobile enabling services to emerging IoT markets.

The research-based report Shaping the European MVNO Market looks closely at the impact of consolidation on the market and ask whether carriers and virtual operators alike might not benefit from more collaborative rather than competitive relationships.

With pricing on voice and data having practically become a zero-sum game, it looks at ways MVNOs are diversifying services to seek new value streams and assess the impact of OTT entrants.

The report also explores the impact of new technology, specifically how digitalisation is changing business models and the size of the IoT opportunity, and ask whether over the next decade Europe’s MVNO sector might see a significant shift away from consumer to B2B markets. Download the report!

Maximizing Value from Digitalization and Virtualization

Telecoms.com periodically invites expert third parties to share their views on the industry’s most pressing issues. In this piece the MVNOs Series team explores two of the key terms used to describe the next phase of the digital journey: digitalization and virtualization.

We are living through an age of digital transformation. Since the development of the first digital computers in the middle of last century, the march of the byte – the basic unit of digital information – has been unstoppable, infiltrating virtually every aspect of human activity.

It is tempting to look around and see our lives as fully digitized, what with the prevalence of computers and laptops at work and in the home, smartphones and other mobile devices, the internet and the Cloud, and the perceptible shift of activities that once took place exclusively in the physical world into the virtual.

But all the signs are that we have perhaps only just reached the end of the beginning of the digital journey. The potential transformational impact of emerging technologies – the Internet of Things (IoT), artificial intelligence (AI), Big Data analytics, virtualized networks – could dwarf anything that has gone before. And the mobile industry has a central stake in all of them.

According to joint analysis from the World Economic Forum and Accenture, if the right opportunities are grasped in the right ways, the combined value-add of digital transformation to industry and society over the next 10 years stands at $100 trillion. Such is its critical importance as enabler and carrier of digital progress, providing the “access, interconnectivity and applications” on which it is built, telecoms stands to benefit to the tune of $2 trillion in additional value.

Put simply, connectivity is a vital ingredient in the joined-up digital world we are emerging into. Thanks to its ubiquity and scale, no technology is better placed to deliver than mobile.

Understanding Digitalization: Transforming Operations and Business Models

Defining the meaning of the term digitalization attracts some debate, a reflection of the fact that it is a relatively new concept where consensus and shared understanding is still emerging. Some of this controversy centres on whether the term should describe the use of digital technology to change/upgrade specific business operations or the creation of entirely new business models, and how it therefore relates to the concept of digital transformation.

Behind all the semantic wrangling, it is important to acknowledge that digital technology is having a significant impact on the mobile industry at both an operational and strategic level. Under pressure to keep up with consumer demand, to not be left behind in the digital arms race and to arrest the slide in declining revenues from traditional voice services, operators view digitalization as both a means of protecting margins by cutting costs and of creating new revenue streams with innovative services geared for new markets.

As well as these competitive pressures towards internal transformation, the mobile industry also has a special relationship with digitalization in the wider economy. As connectivity is widely accepted as an essential ingredient in delivering smart, integrated, hyper-networked digital systems, mobile has been described as the glue which can hold digitalized operations and services across all sectors together. The mobile industry therefore controls a resource that is critical to the entire concept of digitalization – a key part of the digitalization experience for mobile operators is therefore how they can cash in on that value.

Digitalization of mobile

Another factor which muddies the waters when it comes to getting to grips with what digitalization means for mobile is the fact that, across many industries, digital transformation is often viewed as synonymous with cloud migration. If that were the case, then large swathes of the mobile industry, particularly MVNOs that operate as online-only, cloud-based businesses, meet the criteria for having already undergone digital transformation.

The Cloud is undoubtedly an important part of digitalization. Online-only MVNOs gain certain benefits from being based in the Cloud, such as lower overheads from having neither network infrastructure nor physical stores to burden them, plus the agility to get close to niche markets and respond rapidly to shifting demands. But should we define an online MVNO which is simply selling voice and data packages from a digital store – in other words, operating the same business model but via a different channel – as fully digitalized? Does that model maximise the full potential digitalization offers to mobile operators in terms of value?

When asking what digitalization can achieve for mobile, industry insiders frequently refer to companies like AirBnB, Uber and Netflix to provide a yardstick. More than just adopting a cloud-based operational model, these are companies which have used digitalization as a defining strategic principle and have been so successful they have transformed entire sectors.

From MVNOs’ perspective, the lesson that these digital start-ups have managed to shake enterprise-sized incumbents out of their positions in the market should also no be lost.

For mobile operators, then, the Cloud represents an important first step on their digital journey, providing a platform for further change in terms of cost reduction, flexibility, technology adoption and service innovation. But if we were to write a recipe for ‘full’ digitalization for a mobile operator, a process strategically geared towards maximising the benefits, there would be plenty of other ingredients to add to the mix. Here are the staples:

Strategies built around consumer demand

The reason why Cloud migration alone – old models in a new channel – does not amount to ‘full’ digital transformation is that the Cloud offers the freedom and the technology to do so much more. Mobile operators are now able to reshape services and customer experiences to deliver exactly what the customer wants, which logically should therefore be the centrepiece of strategy. In an industry where both customer acquisition costs and churn are high, giving a reason for loyalty through improved customer experiences carries a high value.

Gary Bunney, CEO of BSS and analytics service specialist MDS Global, says that the modern digital consumer, given so much choice and power in all other areas of retail and commerce, is no longer so inclined to accept fixed, off-the-shelf mobile packages. “We believe customers are demanding more control to create the plans they need,” he said. “And they want this control across a range of different networks, services and applications. With this control comes the ability to action. To change, amend, add or terminate without contractual restriction.”

Applications and platforms

The key to delivering on customer demand is software. Bunney talks about enabling customer control via a “self-service application”. Amol Phadke, Accenture’s MD of Global Network Strategy and Consulting, likewise describes the most innovative, disruptive digital MVNOs adopting a ‘software-driven operating model’ that is “dependent on automation, analytics and AI.

Software plays a key role in driving flexibility and value in mobile services by decoupling services from physical infrastructure. Moreover, as the sophistication of software increases, the cost of both development and delivery through the Cloud decreases, offering businesses and consumers alike more for less.

Data

Of the three specific technologies Phadke names, automation and AI speak of the customer empowerment and ‘self-service’ control Bunney recommends, but also of efficient, fast convenient services. Analytics, meanwhile, gives digitalized MVNOs the opportunity to fully personalize service based on all the data that becomes available via applications and platforms. Jaco Fourie, Head of Product Management at BSS specialist Qvantel, says: “Digital solutions allow for more rapid shifting of data gathering tools. This enables more data to be collected and analysed … and used to personalize the customer journeys in digital touchpoints automatically for superior customer experiences.”

Bespoke services

Fourie goes on to argue that analytics “paves the way for rapid and real-time offers and deals that can be tailored and modulated to match the trends and data that is being gathered on them.” The marriage of software and data in a Cloud environment allows mobile operators to create dynamic customer experiences that adapt to changing demands. It also allows them to throw off the shackles of voice and pure data packages and innovate with new potential revenue streams from new services.

Federico Homberg, Head of Mobile Wholesale Business Development at Deutsche Telekom Germany, told us that he sees an increasing trend in virtual operators moving away from “branded reselling” to a “full MVNO” model. “With a full MVNO you have no constraints when it comes to building your own products,” he said. This alludes to another significant trend in digital transformation for mobile players, the move towards DevOps operations, where programming and development skills are highly sought after to enable operators to build their own bespoke software and platforms.

As well as looking at the impact on the mobile industry, the report Maximizing Value from Digitalisation and Virtualization opens the discussion up to look at the broader role of mobile as digitalization continues apace across industries and in consumer lifestyles. It assesses what kind of services mobile players, and MVNOs in particular, are able to offer to support the increasingly digitised demands of both B2B and B2C markets, looking at areas such as IoT provision and Over-the-Top (OTT) value-added services as routes into brand new revenue streams.

Its analysis also focuses on the potential for mobile companies to transform service levels as well as service types, redefining customer and end-user experiences in innovative, dynamic ways which tie in with the expectations of increasingly digitised audiences. Finally, the research evaluates the risks and rewards of all of this, the challenges MVNOs face in embracing what amounts to significant technological, operational and cultural change, and what they can do to maximise the benefit.

This in-depth report also offers analysis on mobile as digital enabler, the new horizons in customer experience and service personalization & differentiation. Download the full report and discover how you can make the most of this opportunity.

Q&A with David Glickman, CEO of Ultra Mobile, & Sarah Neill, VP / GM at Ultra IoT Connected Lab

As previously reported by the MVNOs Series, it’s been an exciting year for MVNOs in North America. One of the most mature and developed MVNO markets in the world, the region does justice for its reputation of being intensely competitive yet still filled with opportunity. If we look at the US market for example – one of the most diverse, complex and competitive MVNO markets within the region – it has been the home to some of the biggest stories around the North American mobile industry in 2018: the big four carriers’ merger and acquisition announcements.

With only a few weeks until the MVNOs Series takes over Miami with the MVNOs North America 2018, they caught up with David Glickman, CEO of Ultra Mobile, and Sarah Neill, VP and General Manager at Ultra IoT Connected Lab, on the latest developments in the region.

What are your views on the T-Mobile and Sprint merger? Is it a really merger or an acquisition, and will their MVNOs merge too? What the greater market consolidation means for MVNOs in North America?

[David Glickman] It’s technically a merger, but it looks and feels a lot like an acquisition. MVNO’s won’t merge in a direct sense, but the New MNO may decide not to maintain so many relationships, and if they end some contracts, those MVNO’s will need to partner with AT&T or Verizon which is tough, or their customers are going to have to find a new home, which is likely one of the existing MVNO’s. It’s an important year for MVNO’s to show their value and earn their place at the new table.

What are your thoughts on the Lifeline programme? Should MVNOs be responsible for this kind of service instead?

[DG] Lifeline requires a carrier to provide an adequate service to a less profitable segment of the market. To be able to do this, it goes beyond government subsidy and also relies on an affordable business model and aligned resources and priorities. This is always harder for MNO’s who are motivated to look first at the most profitable customers, and this has historically been one of the opportunities that MVNO’s have seized. So, in this same way I think it makes a lot of sense for MVNO’s who can operate on lower overheads and hold a niche strategy and therefore aligned prioritizations to take the lead on this market.

As we look at the North American price discrepancies – more for more or more for less? What works best? How should MVNOs approach this kind of strategy?

[DG] If MVNOs focus on more for more, they start to compete directly with the “hand that feeds them”. An MVNO is rarely going to beat an MNO that is motivated to compete directly. So, I don’t believe an MVNO would ever want to go head to head with an MVNO. The more for more strategy only works for the top of the market that are willing to pay more for more. In this competitive market, there’s an oversupply of service, and a growing base of customers that are willing to get less for less, which initially drove the growing acceptance and popularity of MVNO’s, but now as the MVNO’s continue to improve their own services, off their initial lower base, these customers are getting more for less. It’s still targeting the lower end of the market, which still carves out a divide between the target between MNO’s and MVNO’.

How can MVNOs in North America differentiate themselves? What makes MVNOs different in a sea of voice, SMS and data offerings?

[DG] Domestic voice and text has to be unlimited. It’s so commoditized that it’s no longer just a part of the product mix, it is the base. That leaves the differentiators to be:

  1. data
  2. to a diminishing extend, international voice,
  3. increasingly value-added services like streaming services, free or exclusive content, and
  4. bundling.

MVNOs have started to look at the opportunities in IoT, video distribution, hospitality, education etc. Can you please share what do you consider the opportunities for MVNOs in these sectors? Most importantly, how should MVNOs approach these opportunities? For IoT, for example, should they specialise in one vertical?

[Sarah Neill] 10% of IoT devices will use cellular connectivity, so this is big volume. And with the roll out of 5G, demands on IoT support and connectivity will propel. We are focused on becoming the Ultra-fast implementer for innovative IoT companies. We want to work with companies that are committed to moving from contact to implementation in 30 days. We believe scale, speed, and ease are going to be critical to be a valuable MVNO in the IoT space. And it’s our huge advantage over MNO’s, we don’t need volume commitments, or business plans, we just want companies that are looking to launch quickly. At Ultra Mobile one of our key strengths is agility, execution and speed to market, so we want to take what we do ourselves to partners and open up this B2B pipeline for likeminded business operators.

Meet with with David Glickman and Sarah Neill at the MVNOs North America 2018, taking place at the Downtown Hilton, Miami, 16 – 17 October.

Q&A with Bobby Bathia, CEO and Founder at TrakInvest Group

As discussed in the MVNOs Series report ‘An Introduction to Blockchain’, characteristics such as automation of contracts and transactions, the ability to manage enormous networks of users efficiently, security and speed are just some of the reasons why analysts predict that Blockchain could add $1bn in value to the telecoms industry in the space of five years.

In order to discuss these opportunities further and draw a full picture of what Blockchain actually means for the telecoms industry, Logan Armendone-Mowbray, Content & Communities Manager for KNect365’s MVNOs Series, spoke with Bobby Bathia, CEO and Founder at TrakInvest Group.

Why do we need Blockchain and how is it currently being used across the board?

Blockchain has the power to connect the world globally and seamlessly in all industries. It offers the promise of faster, secure execution and a better management of the overwhelming data that is being generated. With the decentralised power of blockchain, not only are the existing business models being disrupted but also many newer business models are now possible. For instance, in TrakInvest, we are creating a reward economy that works seamlessly across the world using the power of blockchain.

Blockchain is being used across a multitude of industries. In the finance industry, transactions can be conducted much more securely with a permanent ledger being created and recording millions of transactions each day. In real estate, smart contracts are being used to record transactions and release funding only when all conditions are met. Similar concept can be applied to the legal industry for the execution of wills or the education industry for providing certificates on smart contracts.

What are the prospects and the potential of Blockchain for the telecoms industry?

Blockchain in telecom industry has a potential to bring about significant improvements in identity theft prevention and providing global servicing across multiple service providers. USD 38 billion is spent annually as a result of fraud costs in the telecom industry primarily in identity and roaming frauds. Blockchain adoption could significantly reduce the variety of frauds and also optimise ID management through instantaneous and automated smart contracts. Value added services across service providers can be made accessible to users that travel across countries where in, when someone travels they retain their number and are able to download a local package at much cheaper rates from the local service provider through blockchain.

How can Blockchain help with fraud prevention and ID management? What are the other key benefits to enterprises?

Blockchain can prevent fraud with the use of automated smart contracts between the host network and the visited network. Every time a subscriber accesses the host network, the smart contract gets triggered and the user is automatically billed based on the services used. Customer IDs can be stored on the digital blockchain network and can be accessed any time an identification is required. Currently, every time a person wants to sign up, they need to prove their identity and credentials using physical or digital documents which are stored within the database of one service provider. When they decide to switch, the data is required once again. If stored on blockchain, the identity of the person can be used across multiple parties with a fee being charged every time the id is accessed. Telecom service providers can add on an additional revenue stream for providing identity verification to third party providers.

What’s the relationship between Blockchain, 5G and IoT?

Providing 5G services involves providing access across various networks which means the handling of heterogeneous access nodes and diverse access mechanisms. Selecting the fastest access node for every user will be a central challenge in the future. Blockchain can enable a new generation of access technology selection mechanisms to build sustainable solutions. A blockchain can also enable secure and error free peer-to-peer connectivity for thousands of IoT devices with cost-efficient self-managed networks.

What are the benefits for MVNOs who embrace Blockchain and adopt Blockchain- enabled business models?

The biggest benefit for the MVNOs is the ability to quick launch global services without investments into infrastructure and commitments. Providing value added services due to a shared view of transactions and liabilities helps in the elimination of third parties, resulting in cost savings.

How can MVNOs use Blockchain to improve data management and engage with their customer more effectively?

MVNOs can extend blockchain-enabled identity and access solution to provide data storage and verification services to private clients. For instance, an educational institution signs up with the telecom provider to digitize and store certificates of subscribers on the blockchain. For those subscribers who also sign up and are alumni of the university, their identity and degree certificate are verified by the university through traditional channels, and the university assigns the digital copy of that certificate along with all details to the subscriber.

If a prospective employer of the subscriber now wants to verify the credentials and inspect the certificate, the subscriber only needs to produce the digital certificate available on the blockchain and the employer can be sure that this has been issued by the university and is genuine. The telecom provider can further benefit by extending related authentication services to corporate clients for all types of documents, such as insurance certificates, airline tickets, hotel reservations, etc., where digital storage and verification may be required at some point.
Attend MVNOs Europe 2018 for more insights on what Blockchain means to the telecoms industry. The event will take place at the ILEC Conference Centre in London, on 6 – 7 November.

 

Bobby-Bathia-CEO-and-Founder-TrakInvest-Group-MVNOs-Asia-Speaker-Singapore_400x400 (002)Bobby Bathia has 20+ years of experience across private equity and investment banking as a Principal for J.P. Morgan Partners and then a Managing Director and Head of Principal Investments at AIG. He has executed over $5bn+ of equity and mezzanine transactions in Asia across various industry segments. As means of background, Mr. Bhatia attended Stanford (Scholar’s Program) and Duke Universities (BA Economics / Asian Literature).

What’s driving growth in the North American MVNO market?

In the commissioned report ‘Shaping the North American MVNO Market’, the MVNOs Series team explores how the winds of change have been blowing through North America’s mobile markets over the past 12 months and the impact that is having on MVNOs.

The North American MVNO market is one of the most mature and developed in the world. It is also one of the most diverse, complex and competitive, with three major markets in three huge countries demonstrating very different characteristics and very different opportunities for MVNOs.

In terms of total number of MVNOs, North America sits third out of all global regions behind Europe and Asia, but in terms of MVNO subscriptions, it is second only to Europe. The region accounts for a significant proportion of new MVNO entrants globally, cementing its reputation for being intensely competitive yet still filled with opportunity.

A closer look at USA, Canada and Mexico

Perhaps it is a matter of perception. The three big North American mobile markets – USA, Canada and Mexico – all pose different challenges to MVNOs. In the US, it is intense competition, in Canada a lack of regulatory support, in Mexico exceptionally low ARPUs and carrier dominance. But that is not to say opportunities do not exist across the region.

In fact, growth prospects for MVNOs in North America are better than average. According to Research & Markets, the North American market will grow at a CAGR of 8.1% to 2022, above the global forecast of 7.4%.

In the US, the world’s biggest consumer of mobile data and by far and away the region’s biggest mobile market, consolidation in the carrier sector is changing the wholesale landscape.

Without a doubt the biggest stories of 2018 in the US mobile industry have been those concerning the Big Four carriers on the merger and acquisition trail. The yet-to-be-ratified merger of T-Mobile and Sprint, the third and fourth biggest operators in the US, represent what many analysts see as a necessary piece of consolidation in an increasingly cramped and crowded market.

AT&T, meanwhile, has already had its $85bn takeover of giant media conglomerate Time-Warner approved. The acquisition puts AT&T in pole position to control the burgeoning market for ‘added extra’ OTT media services such as TV subscriptions, live sports streaming and even movie access being bundled in with mobile contracts, especially as it already owns online TV subscription service DirecTV.

Gregory Gundelfinger, co-founder and CEO of MVNA Telna, shared his insights. “In Canada, the MVNO market is still heavily regulated and controlled by the incumbent carriers,” he said. “The MVNOs are sub-brands of the carriers that offer cheap or no-frills pricing. Virgin Mobile is owned by Bell, Fido is owned by Rogers, Koodo is owned by Telus. The regional carriers have MVNO characteristics such as disruptive pricing, these include networks such as such as Freedom Mobile, Eastlink and Videotron. There are limited growth and disruption opportunities for MVNOs and regional carriers in Canada.

“The US MVNO market has faced unparalleled challenges including uncertainty around government subsidies for the Lifeline program as well significant competition from the MNOs. T-Mobile’s “uncarrier” value propositions and aggressive pricing have caused Sprint, AT&T and Verizon to respond, thereby making it less compelling for customers to utilize MVNOs.

“ARPUs in Mexico are among the lowest in the world, with many MVNOs requiring massive scale to be sustainable. Altan Redes, one of the first mobile operators to launch exclusively as a wholesale network or MVNE, means that barriers for becoming an MVNO have been lowered. This presents new opportunities for entrants into the market,” he concludes.

The Road Ahead

Competition on pricing continues to be a dominant theme in the US MVNO market. This is viewed as both inevitable and a little surprising, depending on who you ask. On the one hand, it is a basic principle of market economics that a crowded supply side will push prices down. On the other, such is the maturity of the US MVNO sector that you might expect intense competition on pricing to have given way to service differentiation a little more than it has so far.

The triple threat of intense pricing competition and the continued incursions of big carriers and big cables into traditional MVNO markets is certainly putting pressure on virtual operators in the US. But how concerned should the sector really be?

We asked Boost’s Peter Adderton to talk us through the challenges and opportunities that lie ahead.

On the entrance of big cable into the mobile market, Peter said: “What it means for the MVNO space is another deep pocketed company looking to grow in a highly saturated wireless market, making it even harder for smaller MVNO’s to compete.”

However, he also warned against pressing the panic button too early, stating that so far it “means very little.”

The bigger picture, however, is that the top of the US mobile ecosystem is seeing a lot of consolidation around the big players, both incumbent carriers and new entrants. Consolidation comes as growth slows and enterprises seek to find new revenue streams. As that trend continues, it is likely that operators and big digital companies entering the market will increasingly target traditional MVNO territory.

Peter argues that the competitive pressure will reach a critical point where MVNO numbers simply have to fall, whether through natural wastage or through their own cycle of consolidation. “My concern is and has always been that MVNOs have never truly been able to operate independently of the host carrier unless they have large enough scale – think Tracfone, and that’s it,” he adds.

For all its complexity and high levels of competition, North America remains a land of opportunity for MVNOs. While a market as mature as the US does not offer the same scope for attention-grabbing levels of growth as some emerging MVNO markets elsewhere in the world, it remains a great place for MVNOs to set up and do business. A well-established wholesale market, regulatory support and a market of 300 million-plus smartphone owners sees to that.

In the full version of the report, you’ll find an in-depth analysis of the North American MVNO market performance – particularly in the US and Mexico. Discover what the opportunities and challenges are, as we look up close at the significant growth in IoT connections, the role technology is playing across the region and the changes in the wholesale and regulatory landscape. The report also examines the potential impact of the US government plans to significantly reduce the Lifeline programme.

 

Download the report ‘Shaping the North American MVNO Market’ and discover why automation and self-serve are tied to MVNOs’ financial growth.

eSIM smartphone market set for growth following Apple iPhone support

Telecoms.com periodically invites expert third parties to share their views on the industry’s most pressing issues. In this piece Logan Armendone-Mowbray, Content & Communities Manager at KNect365, explores how with Apple onboard the eSIM market is set for accelerated growth and why the technology is likely to impact operator’s roaming revenues.

The benefits of Apple’s eSIM adoption in the latest iPhones will extend further than just consumers, who will be able to choose an operator dynamically. The decision to expand eSIM support to iPhones is expected to accelerate eSIM market growth in general, boosting deployment and development of the technology.

The eSIM smartphone market is set to reach 420 million units annually by 2022, according to ABI Research. This represents a shift in the eSIM smartphone market from one which was solely occupied by Google and its Pixel devices, which shipped 3.9 million devices in 2017.

“This is the moment industry players were waiting for. With both Apple and Google deploying eSIM enabled devices, this is only going to speed up the adoption of this technology. It is now more important than ever to refine profile portability and management, how greater connected devices can be added to user accounts and to have a clear customer journey mapped out,” says Tania Ferreira, Senior Producer for KNect365’s e-SIM Connect.

Analysts have started to put their bets on Samsung as the next OEM to integrate the eSIM technology to their devices. Phil Sealy, Principal Analyst at ABI Research, shared that “Samsung will likely adopt a tiered approach, integrating the eSIM into its S and Note range first, then expand into its A and C ranges later.” Other names on the ‘who’s next’ list include Huawei, LG and Xiaomi, all companies which offer a range of high-end smartphones. More localized vendors are also expected to come onboard, including OPPO, who are looking to expand beyond China.

As we contemplate which other devices might become eSIM enabled, it is likely that the technology will feature inside the multiple ‘smart’ devices in people’s homes, and shipping companies might start to explore the advantages of eSIM within IoT devices to track goods as they move along the supply chain. Ivan Laden, CEO at Blue Wireless, believes “IoT, 5G, eSIM are all developments which will offer major opportunities in the enterprise and government sector, enabling new applications around augmented reality, robotics and autonomous vehicles to name a few”.

Due to different eSIM solutions for different scenarios, like M2M and consumer market, “there’ll be more start-ups and small companies dedicated to different segmented areas, which could be too fragmented for traditional MNOs to tag in,” says Godfrey St. Claire, Chief Business Officer at Joy Telecom.

eSIM might impact operators’ roaming revenues as it might be incredibly easier for travellers to switch to a local operator when visiting a new country. On a Google’s 2017 blog post, Joy Xi, a product manager for Project Fi, highlighted the flexibility eSIM brings to consumers by explaining that “you no longer need to go to a store to get a SIM card for wireless service, wait a few days for your card to arrive in the mail, or fumble around with a bent paper clip to coax your SIM card into a tiny slot.” Adding that “getting wireless service with eSIM is as quick as connecting your phone to Wi-Fi.”

Joy Telecom focus on roaming and the outbound travel market in the APAC and Europe regions, specially travellers from China, Japan and Korea, is an interesting case study for operators and other MVNOs who might consider the flexibility brought by eSIM a threat to their roaming revenue. Joy combined MVNO and travel businesses together to best serve this niche customer group.

In Godfrey’s own words “for end customers, outbound travellers, telecom service is merely one part of their needs overseas, flight/cruise, hotel, attraction ticket, coupons… so many services they would want during the travel, and Joy wants to be an integrator of these areas.”

The eSIM form-factor is a transformative technology, which will undoubtedly impact the entire SIM value chain, including business models, sales channels, and processes across the smart card, secure IC, Mobile Network Operator and OEM vendor landscape. “This will mark the beginning of a significant required change in the SIM card hardware value chain,” adds Sealy.

Back in 2017, Joy Xi shared that whilst Google was piloting eSIM on their newest Pixel devices with Project Fi. They also looked forward to sharing what they learnt and “work together with industry partners to encourage more widespread adoption”. Now that Apple is onboard, eSIM integration into smartphones seems like fair game and widespread adoption looks much closer to reality.

But for Sealy, “today the market is not ready to completely embrace the eSIM for a number of reasons, and notably this is due to lack of MNO eSIM readiness. OEMs will need to remain mindful of this to continue supporting their respective global client base until all MNOs are ready to make the switch full time.”

The traditional SIM card is not going to disappear anytime soon, and Apple’s new range of iPhones is a testament to this fact, given its dual-SIM functionality. Yet, embedded SIMs present operators with multiple opportunities, including multiple devices subscription which could generate new revenue streams.

 

The e-SIM Connect 2018 is the only dedicated eSIM event. It’s your chance to meet with the eSIM industry leaders; including Kerrie Lenhart Hogan, Google’s Director of Business Development, Communication and Connectivity Products.

Q&A with Matt Jones, CEO at OVO

Across the globe, the OTT market continues to grow significantly and there’s still opportunities for growth within specific segments. Whilst TV advertising income declined by 7%, online audiovisual revenues grew by 25% year on year. Earlier this year, Ofcom reported that TV streaming services overtook pay TV for the first time in the UK. In the U.S, 59.5 million homes used OTT services in April – an increase of 15% year-on-year, according to comScore.

Cheaper prices might offer OTT streaming services a competitive advantage, but one of the main drivers of subscription is the access to unique and original content.

To offer a more in depth look and explore the opportunities in OTT, the MVNOs Series team caught up with Matt Jones CEO at OVO. In this interview we discuss how OTT is impacting MVNOs, whether telcos should invest in content production or focus on partnerships with content providers, and OVO’s approach to unique content.

What the expansion of OTT means for MVNOs? Should they invest in content production or should they rather partner with content providers?

With OTT disrupting the broadcast value chain we saw the opportunity to create a purpose-built media-telco. OTT has created fragmentation and ferocity with content owners reaching directly to subscribers bypassing aggregators and traditional broadcast networks.

Traditional broadcasters are acutely aware of this trend, and are working hard to diversify their channels beyond the TV set to satisfy and keep audiences. But beyond the major global players, pure OTT platforms working on low margins should be worried too. They have no alternative revenue streams to offset the rising cost of acquiring rights and their business models are dependent on acquisition or production of content.

As a purpose-built media-telco, we’ve created multiple revenue streams leveraging the best of entertainment and the best of telco, while avoiding the baggage from each incumbent industry.

What are benefits for MVNOs who decide to approach this opportunity?

MVNOs are uniquely placed to capture the attention of audiences migrating away from traditional broadcasting. MVNOs have well-known brands, committed customers and higher ARPU services. Most importantly, we have something that broadcast and OTT players don’t have straight away; we’ve got first-party data, an understanding of the whole household and existing relationships with customers that give us the need to speak with them regularly.

We’re also the provider of the basic commodity at the heart of modern broadcasting and OTT: data. That makes MVNOs uniquely placed to create genuine sustainable value beyond simple access to content. This unlocks an enormous prospect base for marketing, improves customer retention and gives our telco customers something to love beyond a good mobile deal. These benefits translate to ARPU and margin improvement while also opening up PPV and subscription revenues and advertising revenue streams.

Should Telcos invest in content production or should they rather partner with content providers?

We do both. Particularly when it comes to partners that don’t have an established content product, we’ll produce it ourselves – which gives us the ability to create content that is of a quality the fans want and keeps them coming back.

In other cases, it will make more sense to provide the platform for third-party content. With our international sport properties for example, we’re taking content from overseas and making it available to local audiences.

Our philosophy is that the most important consideration in terms of who produces the content, is that the product is of a quality that will keep attracting fans.

How do you find something that is incredibly unique and also valuable?

The one thing we look for is avidity. A sport or entertainment property that has an avid fan base is always going to catch our attention. The opportunity for OVO is, avidity does not correlate with mainstream media attention in this country. Drag racing is an excellent example; drag racing fans watch by the millions, but the sport hasn’t been broadcast live on TV since the 1990’s.

We aim to be everything to somebody, rather than just something to everybody.  This is particularly true when looking at our focus on sports with well-developed grass roots participation right through to international competition. That’s important in broadcast because it pays homage to fans giving them pride in their participation and making their heroes accessible.

What new types of wholesale engagement can MVNOs develop with the network provider?

Our wholesale partner, Optus is a vital part of our ecosystem. Without its reliability and approach to partnering, there would be very little difference in the telco services provided in Australia.

Optus plays an active role in our business. It’s a closer relationship across all aspects of wholesale from ground zero service provisioning through to tech ops and all the way up through the executive team.

This allows us to design collaboratively using OVO’s unique purpose as the guideline for all product development. For OVO, a big part of that is data.
For example, with Optus’s help, we’ve been able to be first-to-market with a plan designed specifically for tweens and teens, and we’ve successfully launched mobile broadband as a legitimate alternative to fixed internet for millennial audiences and specifically sports fans.

Who are you looking forward to meeting at the MVNOs Asia 2018?

We’re really interested in talking to other MVNOs that have and/or are considering bridging media and telco, or have had success with media savvy audiences in their respective markets.

Our entire business has been constructed as a virtual platform that can be licensed to other operators globally. We’re open to talking to anyone that wants to learn about our AI-driven SDK and capability around media, and how that works in conjunction with our CRM and billing systems.

 

_RCP1791_WEBMatt Jones is an industry disruptor, launching the first of its kind Media and Telco brand OVO Mobile in 2015, Matt is the driving force behind convergence of new media & telco – by bringing together Telecommunications with Media Rights and digital broadcast for mass distribution. As OVO CEO, Matt was nominated for Start-Up Executive of the Year at the CEO Magazine Awards 2017 and was awarded runner-up. The Award recognises the achievements of leaders and professionals, and the contributions they have made to their companies across industry-specific categories. Matt lives on the northern beaches of Sydney with his wife Mel and daughters Charlotte and Lucy. Meet with Matt Jones at the MVNOs Series events – including the MVNOs World Congress and MVNOs Asia.

Is there still a future for MVNOs?

Telecoms.com periodically invites expert third parties to share their views on the industry’s most pressing issues. In this piece Navonil Roy, Managing Partner at Blue Sky Thinking, looks at some of the things MVNOs can implement to ensure they have a future.

Historically MVNOs (Mobile Virtual Network Operators) have grown in market situations where there has been an intrinsic growth of telecom usage in the market and the large MNOs (Mobile Network Operators) have not focused efforts at specific niche segments due to their lower profitability, difficulty in accessing etc.

Due to their lower cost base and focused business operations MVNOs have been able to offer aggressive pricing compared to MNOs and even managed to build a profitable business around niche markets.

However, in the recent past there has been an increased level of competition within the telecoms industry. As the large MNOs feel the business pressures due to the movement away from the profitable voice to the growing data business. The growth of over the top (OTT) services has increased the pressure on revenues and most markets have seen a reduction in their intrinsic growth due to the increase in penetration levels within the market.

With this increasing competition, MNOs are constantly seeking new consumer segments, including the niche markets that in the past were seen to be non-profitable. The pressure on top line growth is driving MNOs to target such niche groups even at lower profitability levels.

In order to profitably serve these niche consumer segments, MNOs are rehauling their operations and reducing their cost of service. These include launching standalone digital service brands that deliver the services via digital means alone, thus reducing costs significantly.

The impact of digitalisation to the costs is aiding MNOs in reducing their pricing and compete aggressively for competitive share. In the absence of organic growth due to market maturity growth via competitive moves has become increasingly crucial. This increased level of competitive activity has reduced the price arbitrage that MVNOs have enjoyed in the past.
In the light of these developments there is a need for MVNOs to relook at their offering and review where should they play to build long term differentiation.

Within this changing environment there is a need for MVNOs to build competencies that are beyond just pricing, access to consumer segments or lower cost of operations.

Some of the areas where MVNOs can add further value are:

Focus on specific service or industry vertical

Service areas like the Internet of Things and industry verticals like Healthcare require deep industry understanding and specialist skills. This offers an opportunity for MVNOs to build differentiation vs. MNOs who are broad based service providers and have difficulty achieving the level of industry focus that a focussed MVNO organisation can achieve for a single vertical.

Building service and industry competencies via value added services, go-to-market strategies etc. builds value for the MVNO offering beyond just price and creates barriers of entry from MNOs and other MVNOs.

Over deliver to specific communities

Historically MVNOs have had a focus on migrant communities and specialised in offering discounted calls. However, as the competition intensifies and the price arbitrage for IDD (International Direct Dialling) becomes less, the opportunity is in offering a range of relevant services to the migrant communities; including the likes of commerce, content and payments.
This model is replicable beyond just migrant communities to cover any communities that have significant size but not big enough for MNOs to focus on or a distinct community that MNOs don’t have a good understanding of or access to.

Some of these distinct communities with unique needs that the MNOs may not have focussed efforts include the geographically secluded, greying population, self-employed individuals.
The above two strategies (and there could be more) offer opportunities for MVNOs to remain relevant even in the current changing times and ensure there is still a future for MVNOs.
Navonil Roy is the Managing Partner at Blue Sky Thinking, an innovation and growth consultancy. Navonil has 20+ years’ experience in telecoms, media and communications. He is passionate about growing telecom adjacent businesses. His early involvement with MVNOs started with the development of a second brand for an incumbent telecom operator.
In recent years, Navonil has been involved in sizing MVNO opportunities for telecom operators, and setting up new MVNOs. He strongly believes that MVNOs need to look beyond pricing to build differentiation. Prior to setting up Blue Sky Thinking, Navonil was General Manager at Maxis, one of the most profitable telecom operators globally.

 Hear more from Navonil Roy at the MVNOs Asia 2018, where he will take part in two panel discussions on price war, profit cannibalization and network digitalization. Reserve your place today!

 

The prospects and potential of Blockchain for the telecoms industry

In ‘An Introduction to Blockchain’, the MVNOs Series team explores what Blockchain is and what it can do. The report starts with a crash course on Blockchain basics, before moving the focus to its wide-ranging benefits, its synergies with other emerging technologies, and the impact it could have on the telecoms ecosystem across-the-board.

In the short space of a couple of years, Bitcoin and other cryptocurrencies have gone from frontier technologies used by shadowy figures on the edges of the World Wide Web to being courted at the highest levels of government and corporate finance.

To many, the emergence of functioning decentralised currencies not tied to any national bank or state authority has the potential to revolutionise money, banking and fiscal organisations at all levels.

But for many businesses and tech insiders, the concept of digital money isn’t the most interesting part. It is what lies beneath the surface of Bitcoin, Ethereum and all the others, the technology that drives them, that offers real cause for excitement.

For many, the real revolution starts with Blockchain.

Blockchain is the foundation on which cryptocurrencies are built. What really excites people about it is that its main functions and capabilities – simultaneously and securely logging and registering transactions across a shared self-authenticating network – have potentially groundbreaking applications far beyond the narrow confines of cryptocurrencies.

Much like the Internet of Things (IoT), Blockchain advocates believe it will fundamentally change how commerce, trade, industry, public services and mechanisms of social organisation operate. It has been called the technology that will usher in ‘Web 3.0’, a technology so powerful it will ‘digitize away’ the majority of the barriers and friction points we still experience in how we transact and interact.

Like most industries, these grand claims are being made about the potential impact of Blockchain in the telecoms industry too. According to GM Insights, the economic value of Blockchain will grow by a CAGR of 75% to become a $10bn industry by 2024. MarketWatch believes that $1bn of that value will come from telecoms alone.

Blockchain basics

Blockchain first emerged to prominence with the launch of Bitcoin in 2009. No one is quite sure when Blockchain itself was developed, or who by, or whether it was invented to serve the needs of Bitcoin or existed as a concept independently of it.

One useful way to trace Blockchain’s development is to look at the different technological concepts it makes use of, which also helps answer the fundamental question – what exactly is it?

Blockchain has been described as an amalgamation of technologies that were in existence well before 2009, namely: peer-to-peer networks, private key cryptography and decentralized exchange protocols.

Another popular aspect of Blockchain is that it represents a fundamental departure from the typical ‘client/server’ web architecture. Instead of having central servers running databases and programmes controlled by a central authority, you have a completely decentralised network which depends on the whole, not single points within it, to operate.

Manaz Gupta, author of Blockchain for Dummies, sums up the drawbacks to the linear, Microsoft Office-like approach to recording transactions:
“With traditional methods for recording transactions and tracking assets, participants on a network keep their own ledgers and other records… This traditional method can be expensive, partially because it involves intermediaries that charge fees for their services. It’s clearly inefficient due to delays in executing agreements and the duplication of effort required to maintain numerous ledgers. It’s also vulnerable because if a central system (for example, a bank) is compromised, due to fraud, cyberattack, or a simple mistake, the entire business network is affected.”

Yet as with IoT four or five years ago, much of this remains hypothetical. With practical applications of Blockchain outside cryptocurrencies still very much at a formative stage, there remains a healthy degree of scepticism about what the much-vaunted technology can achieve.

Blockchain benefits for business

Even after all the progress in digital technology seen over the past couple of decades, businesses today still face some common problems, such as:

  • Time lags between transaction and settlement, for example those caused by having to authenticate processes one after the other.
  • Duplication of effort on the buyer and seller side, sometimes requiring third party involvement for validation, which creates further inefficiencies.
  • Exposure to risks in centralised systems, for example from theft or fraud. A single point of control also means a single point of vulnerability for entire systems.
  • Many overlapping, proprietary payment systems have evolved with little coordination between them. Some, for example credit cards, use a “walled garden” approach to set a high price on participation.

Gupta argues that the digital evolution of business has only served to make these flaws more and more apparent. With more and more trade and commerce conducted online and on mobile, there are more transactions happening than ever before, due to greater accessibility and simplicity. Blockchain is viewed by many as the ideal solution because it offers the following characteristics:

Speed

The decentralised, distributed architecture of Blockchain means that transactions can in theory be processed across any number of nodes / network members simultaneously. In practice, there is a small-time lag involved – Bitcoin famously refreshes its ledger every 10 minutes, but more recent applications of Blockchain have reduced this to seconds.

Efficiency & cost savings

Where there are increases in speed, there are usually efficiency gains to be made. But Blockchain is not just about doing things faster, it also allows for much leaner, streamlined processes. One consequence of a distributed ledger is that it avoids duplication. Every shared version is automatically updated with each transaction, you don’t need different parties creating their own records.

Process automation

Automation is widely associated with efficiency gains. Blockchain automates and therefore speeds up key elements of a transaction process, such as exchange and validation. But it can also contain software programmes which in their own turn automate any other business process capable of being automated.

Security

Arguably one of the most attractive features of Blockchain to businesses is the inherent security built into the architecture. Ever since the internet first arrived, there have always been concerns about conducting sensitive transactions over open networks. Thanks to cryptographic hashing and network validation, systems built on Blockchain are simply not vulnerable to fraud, hacking, identity theft and other forms of abuse the way traditional networks are.

Trust and transparency

In a world where there is a lot of mistrust about political institutions and vested economic interests, there is a lot of focus in the world of business on becoming more open and equitable. Blockchain lends itself to creating more transparent ways of doing business in several ways.

With that in mind, like any new disruptive technology, until people see it working in their industry, it is difficult for people to grasp what it is, what it can do, and what its potential might be. With the ‘An Introduction to Blockchain’, the MVNOs Series team aims to remove some of the myth and mystery surrounding Blockchain. We look in more detail at some of the ways it is already being used and why so many people back it as the next big disruptive force in business and industry.
Download the full report and discover why the mobile industry should keep an eye on Blockchain.