The MVNO market is booming around the globe, and with good reason: it’s becoming increasingly easier for both mobile network operators (MNOs) and entrepreneurial companies to enter the market.
And with the MNVO market expected to reach over $70 billion globally by 2020, it’s a good bet that Latin America (LATAM) will be in the thick of that growth.
Indeed, we’re already seeing a strong showing by MNOs across the region, who are taking advantage of the strong prepaid market as well as their ability to launch new sub-brands and targeted campaigns, and approach niche markets with customised offerings. This interest from the MNOs themselves is a bit of a difference in how the business case for the market is being approached in the rest of the world. In other MVNO markets, such as Western Europe and Asia-Pacific, the strong growth has actually come from third-party companies attracted by the economic potential of the market, not necessarily from the MNOs themselves.
As we look at the MVNO market in Latin America as a whole, we’re seeing strong momentum from certain countries, including Mexico, Chile and Colombia, while other countries, including Peru and Argentina, are showing strong growth patterns.Mexico, in particular, is being buoyed by the projected implementationofthe shared network in700Mhz spectrum bands recently voted on by the Mexican telecommunications and transport ministry (SCT). Virgin Movil, in particular, has taken a strong position in Latin America. VMLA (Virgin Mobile Latin America) has been available since 2012 in Chile, and then launched in Colombia and Mexico.
Indeed, agencies in Latin America are making significant efforts to regulate the market to increase the amount of spectrum allocated for mobile services with acceptable business practices. Despite these early successes, there remain challenges for MVNOs seeking to enter the market. Despite its growth potential, the LATAM region is characterised by decreasing ARPU, income disparities and regulatory constraints, as well as lingering issues of spectrum capacity in certain markets. While regulatory challenges are to be expected in some markets, there are other obstacles that would-be MVNOs must fully understand on the business side before embarking into this market.
These challenges include:
Scarcity of a specialised workforce: While MVNOs do not technically own a network, they are still responsible for just about everything else, including sales and marketing, customer activation, and billing. The local market they are serving may not have the specialised workforce trained in these critical activities, and outsourcing might be necessary to help MVNOs quickly gain traction in the market.
Lack of experience in strategic business planning for launching successful MVNOs: The market is incredibly attractive, but launching an MVNO can be a short-lived endeavour if the operator does not carefully lay out a business plan that incorporates all of the elements necessary for success. MVNOs need to consider:
- Start-up costs
- Post-launch subscriber acquisition costs
- Differentiators to survive in the market
- An agile approach to remain flexible in a rapidly changing industry
- A clear technology roadmap with a focus on the future
- Strong partnerships with highly experienced partners
Minimal technological and architectural knowledge of MNO / MVNE / MVNO eco-system: Although MVNOs do not need the technological experience that a MNO requires, they do need to understand how they must integrate with the MNO to ensure they are providing a quality service to their customers. They also need to understand the relationship with mobile virtual network enablers (MVNEs), which as companies that provide network infrastructure and related services, such asnetwork subsystems, business support systems,provisioning, administration and operations support systems to MVNOs. In effect, they enable an MVNO to outsource both the initial integration with the MNO and the ongoing business and technical operations management. Not understanding the technology, services and value that each partner brings to the table can be the downfall of an unprepared MVNO.
Need for experienced management teams with hands-on experience in launching successful MVNOs: For many companies, the MVNO market looks very attractive; seemingly low start-up costs can attract many would-be entrepreneurs to the market, some of whom have no background whatsoever in launching an MVNO, or any wireless offering for that matter. There are financial considerations, of course, balancing the customer experience along with a cost-effective, integrated solution? A concrete delivery plan is required with tight coordination with MNOs for prompt troubleshooting and efficient operation of the integrated processes.
The development of a strong relationship between MNO and MVNO: There must be sufficient radio spectrums available to the MNOs to allow them to sell capacity to the MVNOs without negatively impacting their own businesses. At the same time, MNO rates need to be competitive to allow MVNOs the chance to succeed in the market.
In many ways, MVNOs are like most start-up companies found around the world; MVNOs must develop and execute on a well-designed strategy—not be caught up a fad or fashion—to ensure success. This strategy needs to include:
- Realistic market goals
- Financial objectives
- Market segmentation and differentiation
- Customised offers for each niche market segment the MVNO is targeting
- Robust architecture and implementation plans
Proper business planning, technological understanding and exceptional execution capabilities are the key ingredients for a successful MVNO launch, growth and success.
If MVNOs can create a unique proposition for their customers and educate customers about the benefits when compared to the offering of a traditional mobile service providers, they have the potential to change the structure, economy and philosophy of the wireless industry.
Samia Bounaira is the General Manager of the Caribbean and Latin America (CALA) markets for Excelacom.
