Trends in Asia Pacific’s MVNO market

Trends in Asia Pacific’s MVNO market

This is an extended version of the “Trends in Asia Pacific’s MVNO market” presentation given at the Telecoms World Asia 2017 event in Bangkok 21-22 March.

In the following I will try to answer the questions: What’s driving MVNO growth in the APAC region? Where are the new MVNO markets and opportunities? Catering to the APAC region’s diverse population – factors for MVNO success.

Since the first MVNO launch with Virgin Mobile UK in 1999, launching a MVNO has traditionally had one of two main objectives. The more traditional objective: Generate telecoms revenue, with MVNOs launching purely to capture a share of the voice, data, SMS market.

Fig 1: Generate Telecoms Revenues – E.g. MVNO Tune Talk, MVNO Circles Life, MVNO Penguin Generate telecoms revenue MVNOMVNOs Generating telecoms revenue

– or the increasingly more common objective: Using a MVNO as channel to uplift/cross sell from the company’s existing core business, often seen as the choice for brands, having an existing user base and/or distribution channels.

Fig 2: Uplift / Cross sell core business – E.g. MVNO Woolworths Connect, MVNO LINE Mobile, MVNO Aldi Mobile uplift cross sell core business MVNO

MVNOs: Uplift or Cross-sell core business

Some MVNOs have started out with one objective, and then moved to the other, or kept a foot in each. For example much like Virgin Mobile, the Malaysian MVNO Tune Talk started off as a channel to uplift its parent company’s activities. In case of Tune Talk this would be to sell airline tickets to the no frills airline AirAsia.

Upon reaching, and proving a healthy subscriber base and business model on the MVNO in Malaysia, the opportunity for a franchise/licensing/JV deal with partners in other countries arrived, but still with the intention to upsell the parent company’s main business.

However, for the Tune Talk operations in Malaysia today, with the main shareholder being its host operator (Celcom) it seems to be doing fine concentrating on generating telecoms revenue.

Chinese MVNO Snail Mobile, is another example of adapting to opportunities. The wholesale market in China does not provide enough margin to launch a MVNO purely on generating telecoms revenue, as the wholesale rates from the MNO’s is the same as the retail price.

As a result, Snail Mobile chose to uplift its parent company Suzhou Snail Digital Technology, better known as Snail Games – a global provider of online games.

However with the increasing amount of Chinese tourist visiting the region (8.75 million Chinese tourists visited Thailand in 2016) Snail Mobile also moved into generating telecoms revenue by buying bulks of SIM cards directly from the Thai MNO’s DTAC and TRUE, and selling these to Chinese tourists, providing the tourist with local SIM cards to the destination.

Fig 3: MVNO’s in both categories or moving from one to the other – E.g. MVNO Snail Mobile, Tune Talk, Line Mobile.

MVNO upsell cross-sell and generate telecom revenue

I’ve added the Japanese MVNO Line mobile, to the uplift/cross sell core business objective in the presentation, as I expect to see the MVNO being used soon in other markets (Indonesia and Thailand), to offset the declining interest in Line’s main service, by linking the OTT part and telecoms services, into one seamless customer experience – which takes us to the next chapter in this presentation.

A NEW BREED OF MVNO’S

Over the past couple of years we have seen a new breed of MVNO’s entering the scene.

These MVNO’s consist of well-known device makers, OTT and web company brands. E.g. MVNO Panasonic, MVNO Lenovo Connect, MVNO Foxconn Xunjie, MVNO Xiaomi Mi Mobile, MVNO Google fi, MVNO Line Mobile, MVNO WhatsApp and MVNO Alibaba.

Fig 4: A new breed of MVNO’s – well-known device makers, OTT and web company brands New breed of MVNOsNew breed of MVNOs

Although some of them share a common IoT and M2M reasoning to enter the MVNO space, the new breed does not immediately fall into the two objectives mentioned above, but are also in it to:

  • Control the ecosystem, for a better customer experience and less dependent on MNOs for launch of new innovations and services.
  • Obtain and analyze telecom data along with their own, giving them a better 360 degree view of the customer behavior.
  • Satisfy the possible coming of new OTT regulations in various markets.
  • Use the MVNO to its fullest, not just for end-users but also for enterprise services, to streamline other -or their own organization.

Let’s take Foxconn as first example. It makes a lot of sense, for a giant device maker like Foxconn to enter the MVNO sphere to provide a one-stop solution (e-SIM, IoT and M2M) with their product-line.

However, Foxconn’s first objective was actually an enterprise model, providing mobile services to Foxconn’s one million+ employees and their families, living across China and Taiwan.

Panasonic launched its MVNO service in March 2015, with the objective to stay as much as possible in control of the whole ecosystem, allowing Panasonics products to operate, be controlled and monitored to detect and proactively resolve issues via data collection and analysis – on a dedicated mobile network.

Panasonics MVNO transformation has provided them with greater control of the customer’s journey, product and service experience.

VIDEO: Panasonic’s MVNO Announcement

Similarly, Lenovo’s MVNO introduced Lenovo Connect e-SIM, a seamless out of the box communication service that works across devices, networks and borders for customers in China and EMEA.

Lenovo Connect eliminates the hassle of having to source and buy a separate SIM card for Lenovo devices, and offers benefits such as low-priced global roaming and enhanced customer engagement by leveraging Lenovo’s Big Data and cloud services. It provides a simple, fast and cost-effective connectivity solution for companies, SME’s and mobile professionals to stay connected.

In China, Lenovo Connect works on selected Lenovo smartphones and laptops. Users can access Lenovo Connect for local pricing on Internet access when they travel to more than 50 countries around the world.

Lenovo’s MVNO expands upon its connection strategy – to integrate cloud services and communications channels with devices, and Lenovo Connect is today one of the world’s largest MVNOs with 11 million users and more than 400 million cloud services users.

For the OTT and webco MVNO’s the objectives are slightly different than those of the device makers. OTT MVNO LINE and GoogleOTT MVNOs Google Fi and LINE

For OTT MVNOs like Line Mobile and WhatsApp, the initial objectives could be:

  • OTT Regulation: Obtain a local MVNO license to mitigate growing OTT concerns from national regulators, as seen in Indonesia, India and currently on the map in Thailand.
  • Interconnection: Linking OTT service (IP) together with telecom services for seamless connection and communication. E.g. Receiving a SMS when someone sends a message on the OTT service and the user isn’t online. PSTN, VOIP, VoLTE, Mobile call termination / interconnection. Routing voice calls through IP. Extended Dialer app with several options.
  • Cross sell and upsell: e-commerce, advertising, apps, content, payments, roaming services (B2B and B2C) Basically, becoming a mobile portal (or copy) of everything that’s popular on the Internet.

For the larger webco’s like Google, the objectives could be:

  • Complete Ecosystem: Google already have their own devices, operating system, services, and content but not the connectivity.
  • Push innovation: New innovation faster to mass market, instead of being delayed by having to go through several MNOs.
  • Data collection and analysis: to better control and monitor its services, operating systems and devices as well as delivering better targeted content (or advertising) Globally.

Eventually, most of these new MVNOs will fall into the uplift / cross sell core business category.

WHAT’S DRIVING MVNO GROWTH IN THE APAC REGION? – NEW MARKETS AND OPPORTUNITIES?

MVNO opportunities APAC

There are too many opportunities and drivers for MVNO growth to share all of them here. Instead, I will share some of them in a headline/Bullet list format, and then provide a bit more details on six of them.

  • UPTAKE/USAGE – of smartphones, devices and mobile data in all the markets.
  • EXCESS CAPACITY – despite increased usage of mobile data we still see excess capacity available at several MNOs, including but not limited to state enterprise operators.
  • DIGITAL TRANSFORMATION – across all industries and markets further pushed by governments digital economy or smart city/nation masterplans.
  • ENTERPRISE SEGMENT – historically, mainly served by fixed network operators, this segment is looking for unified solutions as part of their digital transformation.
  • INCREASED INVESTMENT IN ICT INFRASTRUCTURE – MNO’s and ISP’s in some of the markets have recognized MVNO’s as a partner to obtain faster ROI, by having the MVNO’s use their CAPEX/OPEX to on-board customers to the infrastructure.
  • MOBILE FIRST – the region is mobile first, with some markets even bordering to mobile only.
  • STARTUPS FOCUSED ON MOBILE SERVICES – a combination of the markets being mobile first and governments initiatives on supporting the startup scene is bringing new or enhanced mobile services to the ecosystem.
  • TECHNOLOGY EFFICIENCY CLOUD BASED SERVICES – the continuous development of new, and more efficient technologies have, and will continue to remove steps on the ladder of investment, resulting in lower barriers to entry – and/or better margin opportunities.
  • INCREASED LOGISTICS, E-COMMERCE, PAYMENT SERVICES – increased infrastructure investment in the region, providing better (cheaper/faster) movement of goods, services, and competition.
  • MATURING MARKETS – less organic growth providing opportunities in niche/segmenting with integrated offerings, rather than competing on price/bundles.
  • FINANCIAL SERVICES – m-commerce, m-banking, m-wallet, and more m-Fin. Huge interest but currently limited to a few certain markets where the financial service industry understands and see MVNO as a channel and enabler of their activities, as well as obtaining and analyzing data.
IoT M2M e-SIM OTT
  • Growth in IoT/M2M from various government programs and initiatives (Digital Economy Thailand, Smart Cities, Smart Nation Singapore, Digital Malaysia, etc.)
  • Availability of appliances and IT equipment for smart home, living and work. (e-SIM, IoT, M2M)
  • New vehicles with (and retrofit) navigation, security and entertainment systems (e-SIM, IoT, M2M)
  • Tourist and travel services (e-SIM, virtual SIMs, multi IMSI)
  • OTT service providers looking to obtain licenses to adhere to new regulations (I.e. India, Thailand, Indonesia)
  • Increased cross-border trade, new infrastructure, logistics and transportation.
  • Climate change: Smart farming, water management, traffic control, etc.
REGULATORY ENVIRONMENT
  • Growth in IoT/M2M from various government programs = open markets and lower barriers to entry.
  • Getting un-served segments served. E.g. better rural access and connectivity opens up for community MVNOs, or MVNO programs like in South Korea where the government is setting the wholesale rates in order for the MVNOs to provide cheaper handsets and data to low income segments.
  • Supporting startups and SME ecosystem.
  • Introduction of OTT licensing.
  • Closer cross-border regulatory co-operation.
CHANGE IN CONSUMER PATTERNS
  • Subscribers are more up-to-date on trends and innovations than most MNO’s and can’t understand why they have to wait so long for these new service to arrive. MVNO’s are more agile and innovative not only in services and content but also in setting up promotional packages.
  • Markets are maturing and becoming highly segmented. Opportunities in niche/segmented markets require unique and integrated offerings rather than competing on price/bundles.
  • Higher bandwidth availability from 3G/4G networks with consumers seeking convergent e-lifestyle services and content.
  • As smartphone makers and OTT’s have shown, Communications services is all about the experience – and experience goes far beyond simply having network connectivity perform as expected.
MEDIA & BROADCASTING
  • Print and Broadcasters are under immense pressure from OTT service providers, and need to find ways to survive and compete.
  • Digital transformation but currently depending mostly on MNO partner’s speed and willingness, which is like partnering a snail and turtle to win a race.
  • Backhaul/Enterprise – Bring/Choose your own device (BYOD / CYOD), e-SIM, multi-IMSI options for crews and equipment to work remotely and transmit live with mobile data bonding.
  • Zero rate breaking news. Citizen reporters. Better telecom data collection and analytics for targeted advertisement.
SPECIALIST MVNE’S
  • One-stop MVNE solutions are entering the region, which significantly reduce necessary Infrastructure investments, and decreases the time needed to launch an MVNO.
  • Multi-tenant MVNE platform resulting in economies of scale, and thereby being able to offer MVNO’s cost savings, providing higher profit margins to the MVNO’s.
  • Mitigate complexity: Many companies, with a strong brand and a large customer base, qualify as MVNO’s but are not attracted to the business due to lack of Telco and especially MVNO knowledge.
ASEAN – ASSOCIATION OF SOUTHEAST ASIAN NATIONS

The Association of Southeast Asian Nations and the East Asian Community (EAC) which envisions ASEAN as a single market and production base. Once realized, ASEAN will be characterized by free movement of goods, services, and investments as well as free flow of capital and skills

  • Increasing demand in business traveling: e-SIM, Dual IMSI, Multi-IMSI and Virtual SIM.
  • Increased regional tourism: As mentioned already with the Chinese MVNO Snail Mobile, but also the Indonesian MNO Telkomsel, who provides Dual number SIM cards (E.g. One local Indonesian number + one local Malaysian number) or Hotel/Mobile phone services like Tink Labs’ “Handy”, where you receive a smartphone upon check-inn to your hotel, which includes free voice and data, as well as local tourist information.
  • SIM registration fingerprint (KYC) in Thailand, Laos, Cambodia, Myanmar will limit physical SIM sales abroad.
  • MNO’s as MVNO’s to enter other markets via MVNO sub-brands to create an ASEAN cluster or a cross-border setup. E.g. Telin a subsidy of Telkomsel in Indonesia is a MVNE/MVNO with agreements in several countries. Likewise Malaysian MNO Celcom, who is a majority shareholder in the MVNO Tune Talk, could use the MVNO to enter other markets in the region. Viettel, a MNO in Vietnam is also seen as a contender in this space.
  • Cable, Satellite, Energy and fixed-line operators are also lurking at MVNO opportunities.
  • Increasing demand for mobility and digital transformation in enterprise e.g. SMEs fixed–mobile convergence, broadband and mobile services bundling.
  • Scalability for MVNO’s – with increased regional investment in infrastructure, the lowering of barriers to entry from regulators, deeper adoption of digital and technology efficiency – MVNOs will be able to scale into neighboring markets. E.g. Singaporean MVNO, Circles Life has already announced it is looking at Indonesia as its next target market.
CATERING TO THE REGION’S DIVERSE POPULATION – FACTORS FOR SUCCESS

The region consists of a very diverse population when it comes to language, history, culture, religion, age and other demographics, not only between the countries but often within a country itself.

Diverse APAC

It is important to understand that one successful MVNO setup does not necessarily translate well to other markets. E.g. Difference between infrastructure in Thailand and Myanmar. Cultural differences between Malaysians and Khmer. Different content/service demand between Singaporeans and Laotians.

On top of that, there is also regulatory issues. E.g. Is mobile number portability (MNP) available in the market? Spectrum roadmaps? Network coverage? Does the regulator have the necessary knowledge and understanding of the MNO/MVNA/MVNE/MVNO ecosystem. Does the market allow for full MVNO’s, or only thin/non facility based operations?

As an example, Thailand is a very interesting market in terms of usage, niche segments and market size. However there is a big threat luring on the telecom regulator’s roadmap, which is fingerprint SIM registration.

The telecom regulator NBTC, wants to introduce fingerprint scanning when users register for SIMs. The cost of these fingerprint scanners (to be used by all SIM resellers) has to be borne by the MNO’s and MVNO’s, adding a very high cost to distribution, seriously limiting margins.

This will also negatively impact the Thai governments initiative on digital economy, as e-SIM profiling will be affected. E.g. how do you fingerprint register a laptop with built-in e-SIM while visiting Thailand, and do you have to do it each time you switch provider? What about your refrigerator?

To make matters worse, the Thai regulator is in talks with its compadres in Myanmar, Cambodia and Laos to let them introduce the same system.

What you will spent most time on, is however to source, negotiate and continuously work with, the right host operator (MNO), who understands the opportunity in on-boarding a MVNO for mutual benefits.

For the business itself, the MVNO today must understand, listen to, and create a unique brand positioning and value offer to attract specific segments or demographics. Which resonates well with this statement from Ericsson:

“As smartphone makers and OTT’s have shown, Communications services is all about the experience – and experience goes far beyond simply having network connectivity perform as expected” – Ericsson

You can download the “Trends in Asia Pacific’s MVNO market” presentation as PDF on slideshare

Trends in Asia Pacific’s MVNO Market

Author: Allan Rasmussen
Managing director at Yozzo. Allan’s expertise includes the development and execution of growth strategies, market insights, trends and opportunities, new business models and strategies
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