With all the challenges facing mobile network operators around the world – increasing competition, diminishing average revenue per user, network management costs, demanding customers who want more bandwidth – it’s no surprise that mobile virtual network operators are taking flight. Indeed, even big names like Apple and Google are said to be heavily pursuing this market.
Overall, the industry predicts to grow at a compounded annual rate of 10.7% from 2014 to 2020, reaching more than 300 million users and $70 billion globally by 2020. Although strong, steady growth is expected around the world, including North America, Europe and Asia, nowhere is that growth more welcomed than in Latin America. Within the region, countries such as Mexico, Colombia and Chile are seeing strong momentum, while others, such as Peru and Argentina, are up and coming in embracing the MVNO model.
MVNOs are gaining such steam globally because they have freedom to alter their brand and enter niche or vertical markets with appealing customized offers. What’s interesting to see, however, is the difference in how the MVNO business case is evolving in LatAm vs. the rest of the world. MVNO growth in other parts of the world is coming from entrepreneurs, startup companies and other types of businesses outside of the telecom realm that are attracted to the market because of its relatively low barriers to entry. In direct contrast, in LatAm, the first phase of MVNOs is being carried by the operators themselves, driven by the potential of a strong prepaid market.
Despite the growth potential for the LatAm region, however, there are several challenges to overcome, as the market is characterized by decreasing ARPU, income disparities and regulatory constraints, as well as lack of spectrum capacity. Looking deeper at the opportunity for MVNOs in this market, we’re also seeing the following challenges and requirements emerge:
• The MNO-MVNO business relationship is fundamental to MNVO success. MNOs must solve the issue of providing enough radio spectrum to their MVNO operations to ensure their success, without negatively impacting their own businesses. At the same time, MNOs must be able to offer competitive pricing for renting capacity to MNVOs to ensure their success, as well as steer clear of any types of anticompetitive practices against the MVNOs. This relationship can be tricky at times, but many are already navigating this relationship successfully as they focus on the bigger picture.
• Spectrum availability is key. Agencies in several countries are making significant efforts to regulate the market and increase the amount of spectrum allocated for mobile services. The deployment of antennas and construction of towers is a top priority, and these agencies are working to cut through any bureaucracy. In Mexico, for example, the hope is that the MVNOs take off with the project implementation of a shared network in 700 MHz spectrum bands that was recently voted on by the Mexican telecommunications and transport ministry. That network availability could happen as soon as 2018, and would be a huge benefit to the MVNO market in that country.
• Business strategy must be driven by the complexity of the MNVO offering – by realistic market goals vs. fashion goals; financial objectives; market segmentation; tailored offers for each specific segment; and robust architecture and implementation plans.
The strategy must support solid brand positioning, and MVNOs must invest heavily in marketing and advertising to position their brand for success. An MVNO, such as Virgin Mobile, which established itself in Chile, Colombia and Mexico, can exploit its brand name and further grow the business. There is a fundamental punch list that MVNOs need to consider as they lay out their business strategy:
- Startup costs;
- Post-launch subscriber acquisition costs (i.e., how will they attract and grow their customer base);
- Market differentiators;
- Agility to remain flexible in a rapidly changing industry;
- Clear technology roadmap with a focus on the future; and
- Strong partnerships with highly experienced partners.
• Customer perception of the quality and value of the service must be high. Customers – even in niche markets – should not perceive any differences in performance attributed to network services. This requires tight coordination and integration with the MNOs to offer quick resolution to any issues that arise.
• Funding is critical. As discussed above, startup and customer acquisitions must be well thought out in advance to avoid any surprises. The hard fact is that only a small percentage of MVNOs will find success, so taking all business factors into consideration before launch is critical.
If MVNOs can find ways to differentiate themselves by creating a unique proposition for their customers, and demonstrating how they can best serve the markets they enter with valuable, cost-effective and reliable offerings, they have an opportunity to bring about significant change in the wireless industry in Latin America.
Samia Bounaira is the GM of the Caribbean and Latin America markets for Excelacom. In her role, she spearheads Excelacom’s international expansion and drives growth in CALA markets. Bounaira has an exceptional track record for driving revenue growth and business profitability for medium to large size global organizations in communications and media companies and high-tech solutions industries.
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