The History of MVNO

The History of MVNO
Although the first Mobile Virtual Network Operator (MVNO) in the world “Virgin Mobile UK”, was launched in the United Kingdom on November 1999, the history of MVNO dates back to the early 1990’s Europe, along with MVNO pioneers in the Nordic countries, especially Denmark and Norway.

Up until the late 1980’s telecom markets and telecommunication infrastructure, was mostly dominated by government controlled monopolies.

Yet, the approach towards liberalization in telecommunication was broadened significantly in Europe in 1993, with the issuing of directives concerning liberalizations of voice telephony, and the interconnection of public and private networks.

The most important directive in that regard was: Directive 95/62/EC of the European Parliament, 13 December 1995 – The application of open network provision (ONP) to voice telephony.[1]

EC Directive 95-62-EC ONP Telephony
EU Directive 95/62/EC, Open network provision to telephony

The directive was the beginning to the liberalization of telecommunication infrastructure and services in Europe, as it required EU member states to secure that any service provider, which obtains a dominant position in the market (Significant Market Power or SMP), had to grant access to their network on a transparent, fairly priced, and non-discriminatory basis.

By January 1st, 1998 – Any telecom operator had the right to interconnect with public networks at cost-related charges in Europe (EU).

The Nordic MVNO Pioneers

Although the full liberalization of most EU member states’ telecommunications markets occurred in 1998, the Nordic countries, and Denmark in particular – was among the early adopters. The Danish government established a political agreement on liberalization in 1995, resulting in the introduction of full competition in July 1996 ahead of the European Union deadline.[2]

Two years later, in 1998 – the Norwegian company Sense Communication (Net system International), was ready to challenge the duopoly of Telenor and Netcom in Norway,[3] and thus taking the first steps towards what we today know as Mobile Virtual Network Operator (MVNO).

Sense’s plan was to enter into interconnection agreements, with the mobile operators Sonofon in Denmark, Sonera in Finland, Telenor in Norway and Telia in Sweden.

However, Sense’s proposal included the use of its own Mobile Network Code (MNC) and Subscriber Identity Module (SIM) cards as part of the arrangement, which resulted in the mobile operators refusing to give Sense access to their networks, on the grounds that acceptance of another operator’s SIM card was considered roaming, and roaming was not interconnection.

As a consequence, of the rejection from the operators, Sense launched a dispute with the respective National Telecommunications Authorities (NRA).

In September 1998, the Norwegian NRA – Post- og teletilsynet (Nkom today) ruled in favor of Sense:

"It is the Post and Teletilsynets view, that Sense business idea could help reduce socioeconomic loss as a result of the lack of effective competition. Sense seeks to establish a virtual pan-European network that makes it possible to transport traffic in their own networks across borders, and by this establish an alternative to the existing roaming agreements. In our view, the pricing of international roaming, as is today, are not for the benefit of end-users"
Post og Teletilsynet
September 1998

The mobile network operators in Norway appealed against the ruling, and the Ministry of Communications decided to examine the matter, resulting in a report on the fundamental questions raised by the MVNO concept, being presented to the Norwegian Parliament in Autumn 1998.

In February 1999, the Danish NRA decided that the mobile operator, Sonofon had an obligation to meet Sense’s requests.

However, it decided that Sonofon was not required to route calls received from mobile terminals with SIM cards containing Sense’s own MNC code, because it constitutes the same functionality as roaming between mobile networks.[4]

Just like the Danish NRA, the Swedish NRA decided that the network operator, Telia, was not required to accommodate Sense’s request for access, on the basis that the form of connection requested, was roaming and not interconnection.

The National Telecommunications Authorities was now aware of the concept of Mobile Virtual Network Operators, and believed it would be beneficial to the competitiveness of the mobile market and as a result, proposed amendments which would oblige networks to provide access to MVNOs.[5]

Although obtaining support from the National Telecommunications Authorities, it was too little – too late, and Sense succumbed due to the lack of agreements with the operators.[6]

Despite the obstacles, Sense managed to return[7] from bankruptcy, under a new form in April 1999, with another MVNO operational model, aligning themselves more with the mobile network operators – and in November 1999, Sense, now named Sense Communications, signed a service provider agreement with Telenor and Swedish Telia, for GSM network capacity access, allowing Sense to offer its services, to its own customers in Norway and Sweden.

Telenor and Sense signs MVNO agreement
Telenor and Sense signs MVNO agreement
Norwegian MVNO Sense website
Norwegian MVNO Sense website

Sense launched its service in Norway on January 17, 2000 – two month after the launch of the first MVNO in the world (see below), with a yearly target of 70.000 subscribers and a promise to break up the mobile duoply in Norway.[8]

During the first 3 months of operation, Sense manage to add 35.000 subscribers, half of its yearly target, and 4 times as much as the second mobile operator in Norway, NetCom (8.671 new subscribers).

Sense’s host operator, Telenor managed to add 81.598 subscribers in the same period for a total of 2.060.157 subscribers.

World’s First MVNO Launched in the UK

Meanwhile in the United Kingdom, The Office of Telecommunications, Oftel (now: Ofcom) had become aware of what was now known as Mobile Virtual Network Operators (MVNOs).

Oftel’s review of the MVNO concept, had been to obtain an assessment of the state of policy development on this issue in other European countries, and had noticed the Sense’s negotiations in Scandinavia, demonstrated some regulatory issues, when commercial negotiations failed.

In June 1999, Oftel launched a consultation document to gain possible stakeholders views on the potential introduction of MVNOs into the UK market.

Five months later, on 11-11-1999, the world saw the launch of the first MVNO “Virgin Mobile UK”, a 50:50 private joint-venture company (Virgin Mobile Telecoms Ltd.) between Virgin Group, and Deutsche Telekom’s One2One.

MVNO Virgin Mobile UK website early 2000's
MVNO Virgin Mobile UK website early 2000's

Virgin Mobile was targeting 1 million customers by March 2000, which would give it a 6% market share.

The launch was to be followed up with an advertising campaign of £20 million. Virgin expected to invest around £50 million before seeing a return in the company’s second year.

Richard Branson of Virgin Group told the Register[9], that Virgin Mobile would have one tariff. Calls would be priced per day. The first 10 minutes would cost 15 pence/min, the next 10 minutes would be ten pence/min, and the rest of the day is charged at five pence/min.

Virgin Mobile was using One2One as its host operator and Richard Branson said the company was “braver” than the other networks, and would let Virgin Mobile compete direct in the market.

Not one, not two - but three MVNOs

The Danish mobile network operator Sonofon, who initially refused access to Sense Communications back in 1998, entered into two MVNO agreements on August 2000, with the MVNO’s Club Blah Blah and Tele2 A/S.

Club Blah Blah (CBB Mobil), became Denmark’s first MVNO, when it launched on 1. October 2000.

Tele2 A/S became the second MVNO, when it launched on the 9th of October 2000,, 8-days later than Club Blah Blah.

Meanwhile the MVNO Telmore, had also finalized an agreement with Danish incumbent TDC, and launched Telmore, on 30. October 2000.

Danish MVNO club blah blah
First Danish MVNO club blah blah
Second Danish MVNO Tele2
Second Danish MVNO Tele2
Telmore Danish MVNO
Telmore third Danish MVNO

Telmore was founded by ICT entrepreneur, Frank Rasmussen and was Rasmussen’s second venture, after the internet service company Image Scandinavia (sold to World Online in 1999) – and would be the first of many MVNOs from his side.

The History of MVNO: Chronology of MVNO Launch Dates
LAUNCH DATEMVNOHOSTCOUNTRY
11. November 1999Virgin Mobile UKOne2oneUK
17. January 2000SenseTelenorNorway
01 October 2000Club Blah BlahSonofonDenmark
09. October 2000Tele2 A/SSonofonDenmark
30. October 2000TelmoreTDCDenmark
The MVNO Concept Proved Successful
Mobile subscriptions Denmark 2003
Danish Telecom statistics - Second half of 2003

According to the Danish National IT and Telecoms Agency (Telestyrelsen)[10], the number of mobile subscriptions nationwide end of 2003, grew by 7% to a total of 4.785 million (88.9% penetration).

However, the collective customer base of the five Mobile Network Operators: TDC, Sonofon, Orange, Telia and Hi3G, fell by 2.4% to 3.69 million, while the three Danish MVNOs: Telmore, debitel and CBB Mobil, saw their combined subscriber base rise by a staggering 74% from 558,000 to 973,000.

Telmore alone, managed to attract an impressive market share of 9% (453.815).

Telmore - A textbook example of MVNO execution

Faced with falling subscriber additions, the Danish incumbents TDC, had been forced into competition, resulting in the average cost of a mobile voice minutes falling almost 50% in the last six months of 2003.

With 3G around the corner, the Danish mobile operators were looking at ways to inject much-needed growth into their operations, including acquisition.

The dominant Danish incumbent TDC, which at the time controlled around half of the market, made the move in December 2003, having already acquired 20% of Telmore in April 2003 for DKK 100 million (U$ 15,025,155), TDC bought the remaining 80% of Denmark’s leading MVNO Telmore.[11]

In total TDC paid DKK 400 million (U$ 60,131,000) to take over Telmore, and its 460,000 customers, which was DKK 869,50 (U$ 130.63) per subscriber.

Telmore has long been regarded as a textbook example of MVNO execution in a fiercely competitive market.[12][13]

With a small workforce (From 20 employees in 2001 to 70 in 2003), online distribution only, and no subsidized handsets, Telmore had far lower costs than established operators, which is the ABC in wholesale business.

The success of Telmore is underlined by its rapid growth from just 130,000 customers mid-2002, to 460,000 by the time TDC took over. In fact, the success and user satisfaction was so strong, that TDC still brands the former MVNO as Telmore today.

Between its launch in late 2000 and 2003 Telmore (and CBB Mobile) collectively acquired 43.7% of all new mobile customers in Denmark. They introduced competition into the market, resulting in prices falling 50% – but overall volumes of mobile traffic increasing. End of 2003 Telmore was responsible for 36% of all e-payments made in Denmark.[14]

Frank Rasmussen, the founder of Telmore went on to open the MVNO Bibob, which was launched in 2007 and sold to Telenor for DKK 93 million (U$ 13.96 million) in May 2009 when it had 69,000 subscribers.

In 2011 he launched MVNO Systems, a OSS/BSS solution for telecom operators and MVNO’s, which he sold the same year to Telenor. In 2014 he launched the MVNO Justfone, which TDC invested in, and TDC has also invested in Frank Rasmussen’s latest venture CubeIO, which is an app with a modern take on voicemail.

MVNO Club blah blah - CBB Mobil

The other Danish MVNO Club blah blah, changed its name to CBB Mobil, and had 191,639 customers at the end of 2003. CBB was also the subject of interest after putting itself up for sale at the end of January 2004.

Virgin Mobile and Telenor was mentioned as potential suitors by industry sources. However it was Sonofon (the host operator), who bought the MVNO for 130 million DKK. (U$ 19,546,625) in 2004.[15] Sonofon itself was rebranded to Telenor in 2005/2006.

Tele2

The MVNO Tele2, expanded its territory into Austria, the Netherlands and Central Europe, and is today a European telecommunications operator, with about 14 million customers in 9 countries.[16]

Sense

In Norway, Sense had obtained a 4.7% market share (180,000) in 2003.

It was sold to Chess Communication AS in 2005, and the following year, Chess/Sense (400,000 subscribers) was sold to TeliaSonera for NOK 1,619 billion (U$ 192,006,439)[17] which was NOK 4047,50 (U$ 477.50) per subscriber.

With the purchase, Telenor’s rival TeliaSonera immediately increased its market share to 38% while the now former host operator Telenor, was estimated to have lost 600-800 million NOK.

Virgin Mobile UK

In the UK, Virgin Mobile reported its Q3 2003 results:[18]

  • Total customer base 3,183,347 (30. September 2003)
  • 269,681 net connections (Q3 2003)
  • Customer growth up 56% (2,013,382) QoQ
  • Q3 2003 turnover of £112,6m
  • 9 month EBITDA of £67m
  • 9 month operating profit of £59m
  • 9-month turnover of £309m

At the end of 2003, Virgin Mobile UK had managed to attract 7% of the UK mobile market (3,7 million).

Virgin Mobile was acquired by NTL Telewest in 2006, before joining the quad play of Virgin Media services, when NTL Telewest rebranded into Virgin Media in 2007.

As of March 2016 Virgin Mobile UK had 3.0 million mobile subscribers.[19]

The History and Future of MVNO

The liberalization and the introduction of MVNO’s has transformed telecommunication markets the world over. The benefits include price reductions, service innovation, greater consumer choice, and increased market penetration.

According to GSMA Intelligence,[20] between June 2010 and June 2015, the number of MVNOs worldwide increased by 70%, reaching 1,017 in June 2015.

The report further noted that the 10 countries with the largest number of MVNOs as of June 2015, was:

  1. Germany – 129 MVNOs
  2. U.S. – 108 MVNOs
  3. UK – 76 MVNOs
  4. Netherland – 56 MVNOs
  5. France – 49 MVNOs
  6. Australia – 43 MVNOs
  7. Denmark – 43 MVNOs
  8. Spain – 35 MVNOs
  9. Poland – 27 MVNOs
  10. Belgium – 26 MVNOs

The amount, and subscribers of mobile virtual network operators (MVNO) services has increased at a considerable pace over the past years. The number of MVNOs globally increased 61% between 2010 and 2018, representing an average annual growth rate of 6%.

MVNOs around the world 2018
More than 1300 active MVNOs in 80 countries

In 2018 there were more than 1,300 active MVNOs operating in 80 countries, representing more than 220 million mobile connections – or approximately 2.46% of the total 8.9 billion mobile connections in the world.

The rate of progress seems to continue. Orbis Research estimated that the value of the global MVNO market was $54 billion in 2017, and is expected to reach a value of $84 billion dollars in 2022, which implies a compound annual growth rate (CAGR) of 9.27% during this period.

In line with increased mobile penetration and less organic growth in developed markets, the top eight MVNO countries in 2018: USA, Germany, Japan, UK, Australia, Spain, France and Denmark – made up more than half of the 1,300 active MVNOs worldwide.

Top 10 MVNO countries 2018

COUNTRYMARKET SHAREACTIVE MVNOsYEARS WITH MVNO
USA4.7%13917
GERMANY19.5%13518
JAPAN10.6%8318
UK15.9%7719
AUSTRALIA13.1%6618
SPAIN11.5%6313
FRANCE11.2%5318
DENMARK34.6%4918
NETHERLANDS33.5%3918
RUSSIA5%3716

Click on the + on the countries to see the information

Top MVNO countries background

DENMARK

MVNOs: 49

Market share: 34.6%

Years with MVNO: 18

GERMANY

MVNOs: 135

Market share: 19.5%

Years with MVNO: 18

UK

MVNOs: 77

Market share: 15.9%

Years with MVNO: 19

FRANCE

MVNOs: 53

Market share: 11.2%

Years with MVNO: 18

SPAIN

MVNOs: 63

Market share: 11.5%

Years with MVNO: 13

USA

MVNOs: 139

Market share: 4.7%

Years with MVNO: 17

AUSTRALIA

MVNOs: 66

Market share: 13.1%

Years with MVNO: 18

JAPAN

MVNOs: 83

Market share: 10.6%

Years with MVNO: 18

The presence of MVNOs in developing countries has doubled in recent years. In 2010 MVNOs operated in 13 countries, while for the first half of 2018 they operated in more than 30 developing countries.

For year 2019/2020, especially the LATAM (Brazil, Mexico, Chile, Colombia) and APAC (Singapore, Vietnam, China) regions, has seen an increased growth in MVNO launches, while national telecom authorities in other markets i.e. Nigeria, Kuwait and Georgia are actively introducing MVNOs to foster competition and innovation in their markets.

References

1. Directive 95/62/EC of the European Parliament, 13 December 1995 – The application of open network provision (ONP) to voice telephony

2. Competition Policy in Telecommunications: The case of Denmark | International Telecommunication Union (ITU) | PDF

3. Ikke tilstrekkelig konkurranse på mobiltelefoni | Digi.no | 30. September, 1998 

4. Sense får samtrafikk – ikke roaming | Digi.no | 16. February, 1999

5. Sense ved stupet | Digi.no | 27. February, 1999

6. Slutt for Sense | Digi.no | 17. March, 1999

7. Sense selges for noen millioner | Digi.no | 7. April, 1999

8. Sense lover å bryte mobilduopolet | Digi.no | 17. January, 2000

9. Virgin shakes up mobile market with One2One deal | The Register | 11 November, 1999

10. National IT and Telecom Agency, Denmark (IT- og Telestyrelsen) | Telecom Statistics – Second half of 2003 | PDF

11. TDC acquires 100% of Telmore | TDC Press Release | sec.gov

12. From Strategy to Business Models and to Tactics | Harvard Business School | Ramon Casadesus-Masanell, Joan Enric Ricart | 2009 | PDF

13. Telmore – Disruption in the Danish Mobile Market | Case Study | European School of Management and Technology | Jamie Anderson | 2004 | PDF

14. Fremgang for e-handel i Danmark skyldes ét firma | Computerworld.dk | 29 January, 2003

15. SONOFON acquires CBB Mobil | Telenor Press Release |30 april 2004

16. Tele2 | Wikipedia

17. Chess-salget endelig i boks etter priskutt | Digi.no | 29 August, 2005

18. Virgin Mobile enjoys its best ever Q3 – and pips Orange! | Internet Archive

19. Virgin Media | Corporate

20. Report: Number of MVNOs exceeds 1,000 globally | FierceWireless | 2 September, 2015

The History of MVNO was originally written by Allan Rasmussen 01. August 2016

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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