MVNOs and operators: an evolving market
As Europe’s mobile industry evolves, so too the MVNO market changes shape, with an increased need for players to ascend the value chain in the digital age. Gareth Willmer explores the emerging trends, opportunities and challenges for both MVNOs and their operator partners
Throughout its history, the MVNO market has seen fluctuating fortunes. It has provided a source of differentiation and competition, but at the same time has faced challenges including squeezed margins and gaining the right conditions to thrive on the networks of mobile operators.
Yet even with these challenges, particularly as mobile prices have fallen worldwide, the MVNO market is still forecast to rise in the coming decade. Revenues are set to reach $140 billion by 2031, following a compound annual growth rate of 7.1%, according to data published by Research and Markets.
Europe is predicted to be the largest market, suggesting a continued opportunity remains for the region’s operators and their partners in this segment. Indeed, some players – notably those in the UK – have seen significant activity in the past couple of years, despite the Covid-19 pandemic.
NTT-backed European MVNO enabler (MVNE) Transatel has this year struck deals with seven new MVNOs in the UK, where it partners with BT Wholesale – a record pace of sign-ups despite the pandemic.
Part of this has been down to an increasing push by businesses to move up the value chain from being resellers to value-added service providers, and the need for converged services that facilitate working from both the office and home. The likes of Cinos and 9Eons have, for example, linked up with Transatel to offer unified communications SIM services.
Though this trend was on the agenda already, it has accelerated during the pandemic, says Nick Wootten, MVNO director at BT Wholesale, a market that, he says, remains buoyant. Indeed, he says that while BT Wholesale often sees about one MVNO deal per year, it has signed five direct deals in the past six months and expects more this year, with their identity set to be revealed later.
This shows that the company sees MVNOs as a continued opportunity. “If we want to maximise market share and our share price for our shareholders, we need to be in this space,” says Wootten.
But he notes there have been other shifting trends at play in the MVNO market, with a need to refocus on aspects other than just price.
Some of ties in with the move to digital services, with Wootten noting an increased move into the B2B market. In addition, new opportunities are arising in the MVNO market as IoT grows, thanks to 5G. This is reflected in BT’s latest deals, which Wootten says span the enterprise and IoT segments, as well as consumer.
For IoT, Wootten points out that the ever-increasing number of connected things make it a much larger market than the consumer and traditional enterprise sectors, unlimited by population size. “Wholesale partners are really important to maximise that overall value opportunity,” says Wootten. “Suddenly you’ve got IoT, and the ceiling is just going up and up and up. The number of people is not a limit on the number of subscriptions.”
In recent years, a variety of IoT-based MVNOs and MVNEs have emerged or added IoT to their offerings, including Cubic Telecom, EMnify and Arkessa.
Transatel also has an IoT offering, having established partnerships in a whole range of verticals – from automotive to energy, finance, agriculture and healthcare. Jacques Bonifay, the company’s co-founder and CEO, points to the automotive sector – in which Transatel has IoT relationships with the likes of Fiat and Jaguar Land Rover – as one that has significant potential for MVNO formation. It is in discussions with a number of players on this option as the market moves towards 5G-connected cars.
“Facing the growing appetite of Google, Apple and mobile carriers for smart vehicles and autonomous cars, ‘owning’ and managing 5G connectivity themselves will be critical for car manufacturers to continue to innovate,” he says.
Broad IoT scope
At Deutsche Telekom Global Carrier, Federico Homberg, head of business development and innovation, agrees that IoT provides MVNO opportunities. “IoT is a very wide area and still very fragmented,” he says. “No MNO can cover all the different use cases out there. I would say there is still plenty of room for IoT MVNOs if they can differentiate enough.”
He also refers to the advantages presented by a player such as 1NCE, an MVNO in which Deutsche Telekom holds a stake and which focuses on offerings including low-power NB-IoT, to which the operator outsources business in this area. This allows it to see how new models work on a more agile virtual platform outside its legacy network.
“MVNOs have the advantage of being focused on software and platforms,” says Arne Aßmann, head of strategy and business development at 1NCE. “Our software focus allows us to directly integrate into developer ecosystems, and to create new cloud-based systems that are well suited for customer requirements in the coming years.”
Yet one of the challenges for IoT-based MVNOs is to obtain connectivity, in forms such as eSIM profiles or SIM cards, from operators at rates that give them the room to operate effectively, says Homberg. “It is not easy. This is B2B, and margin pressure in B2B is higher than in the consumer business.”
But he says that if the right models can be found, MVNO partnerships make sense – with players having potential differentiators in areas such as speed and flexible platforms. “Deutsche Telekom is, in general, open to MVNOs, as they allow us to reach customer segments we would not reach otherwise,” adds Homberg. “The key is to find a niche so that a win-win situation can be reached.”
He says 5G also opens up other new opportunities, especially once it becomes standalone, such as the possibility for MVNOs to run the types of private campus networks that Deutsche Telekom is introducing with the new technology.
James Gray, managing director at consultancy Graystone Strategy, agrees that strategies such as campus networks make sense for MVNOs in the future, given their entrepreneurial approach. “Mindset-wise, MVNOs are very good at addressing new opportunities and niches. They are also very good at building relatively bespoke things to address that particular market opportunity,” he says.
Meanwhile, Yannick Decaux, VP of sales in charge of mobile operators and partners at Orange Wholesale France, says MVNO partnerships allow the ability to create value together.
“The MVNOs that pick Orange as their network host do not only expect the best network quality and professional services; they also choose us for our leadership in terms of innovation,” he says. “Our expectation supporting our MVNO partners is to co-innovate with them and generate value out of these innovations.”
And Decaux says that despite Europe seeing a recent wave of consolidation through mobile operators acquiring MVNOs, the market is still dynamic. “We are solicited every week for new MVNO projects, not only in the B2C space but also more and more in the B2B and IoT space.”
Indeed, he says, the momentum Orange has seen in the market forms a key part of Orange’s Engage 2025 strategic plan and overall mobile wholesale strategy over the past few years, which is necessary as part of enabling the massive investments need to deploy fibre, 4G and 5G networks.
He adds that the operator’s cloud and big data capabilities give opportunities for MVNOs to better target retail channels and advertising, along with its opening-up of 5G non-standalone and eSIMs to MVNOs last year.
Back in the UK, a drive for scale has also contributed to Vodafone’s bid to increase its share of the MVNO market – a segment where it has changed its approach over time. There, the operator reiterated its commitment to growing this segment earlier this year, on striking a deal with MVNE Digitalk that will facilitate integration of new MVNOs via its partner’s mobile cloud platform.
Such deals help leverage investments in the network through adding scale, says Mike Cartwright, head of wholesale at Vodafone UK. “What we recognise is that we need MVNOs to grow and bring scale to our business.”
Though Cartwright thinks the consumer business remains the core MVNO sector, he foresees opportunities opening up in areas such as enterprise when standalone 5G enables network slicing – though this may take a couple of years, with the market now on the “cusp” of such opportunities. “I think it’s going to enable some of these enterprise-based MVNOs to offer more specific features, allowing customers to set their own performance and quality-of-service criteria,” says Cartwright.
In the meantime, he says, the growth of services such as eSIMs aids MVNOs in their digital transformation and helps them improve the customer experience, “unlocking opportunities for new MVNOs”.
Ana Colak, global telecoms growth lead at Infobip, picks up on this idea of the need for high-quality digital services as customer demands grow. “MVNOs used to focus a lot on price,” she says. “Now we are seeing MVNOs looking to compete on customer experience as well… I think that has been one of the big things – that shift in customer expectations, where price alone is not really cutting it.”
This is reflected in Infobip’s recent launch of an offering for MVNOs in Europe via its communications-platform-as-a-service (CPaaS) solutions, allowing providers, through cloud, chatbot and automation services, to improve their communications with customers and cut costs. Furthermore, it provides a customer engagement hub, enabling MVNOs to launch focused promotions across a range of channels. Infobip has announced so far that the service is being used by Poland-based Next Mobile, which also provides IoT services.
Meanwhile, Paul Bassa, EVP for mobile cloud at Digitalk, says that the MVNO segment has evolved from a previous “gold rush” with a high attrition rate on pricing to a more long-term, considered approach. “Organisations are being very strategic about it. What they care about now is making sure that they establish a long-standing business, both from the operator perspective and from the perspective of the MVNOs themselves,” he says.
Challenges for MVNOs still remain, with Transatel’s Bonifay referring to the continued push to gain robust terms for access to networks and new technologies such as 5G. He adds that MVNO opportunities in areas such as IoT may face obstacles if there are restrictions to access in major markets, citing Germany as a market where access has been challenging. “It’s a bigger problem for IoT because IoT is a worldwide market,” he says. “You don’t deploy only in one country.”
Yet despite MVNOs’ love-hate relationship with operators, it seems opportunities are still there for both operators and partners – if they keep up with an evolving market and the fit is right. “I’m a strong advocate that MVNOs bring incremental traffic to network operators if they choose the right MVNO partners,” says Gray.