In the Asian mobile sector, sales of smartphones are soaring and mobile network operators (MNOs) are posting record profits, but the status of some of the biggest brands is about to be challenged by a new breed of mobile virtual network operators (MVNOs). Jennifer Kyriakakis, Co-Founder and VP of Marketing at MATRIXX Software, discusses how MVNOs are coming to market with a different mindset to the established MNOs, taking on the role of digital service providers (DSPs) that cater for the needs of the customer in real-time.
Today’s customers expect a personalized buying experience and are becoming adept at tracking down the best deals, the most flexible models, and the most competitive pricing; they are also becoming less brand-focused. They are exercising greater choice through online self-service, and rejecting rigid contracts, long-term commitments or outdated tariffs and fixed rate plans. As a result they are looking at viable alternatives to MNOs in the form of innovative and price competitive MVNOs that offer services that can be personalized to suit their lifestyle.
Today’s digital MVNO competes on a different basis than those of yesteryear that relied on price as the main competitive factor. These businesses are more nimble than their MNO counterparts, and can enter new markets with highly segmented, personalized offers rather than merely trying to compete on price. The result is that the whole MVNO sector is growing, with GSMA statistics from 2014 showing that there were over 1,250 MVNOs worldwide. From revenues of just under $26bn in 2014, Ovum forecasts growth of around 11% to $43bn by 2019 – the same year that MVNO subscribers in China are expected to hit the 100 million mark.
This latter figure is all the more intriguing given that the MVNO concept did not exist in China before 2014. It now has nearly 50 MVNOs, serving millions of customers. The speed at which this change is sweeping through the industry is putting the MVNO concept and business model under the microscope. It’s not just about cheap calls or ethnic target subscribers; it’s about market upheaval and a loud wake up call for established MNOs.
MVNO business models are based on the new reality that says pitching a practical and highly attractive proposition at the mobile user rests on delivering what customers want. The key to achieving choice and gratification is real-time customer interaction, a model that allows customers to deal with their CSP online, and instantly make purchases, regulate usage and tailor packages to suit their own needs – all from their mobile devices. This level of personalization and self-configuration is highly empowering for the end-user. It provides them with immense levels of satisfaction with the overall service experience, contributing to brand loyalty and greater brand advocacy.
MVNOs appear to be adapting to new market realities faster than the MNOs, largely because they don’t have to own any physical network assets and derive their agility from the intellectual ownership of powerful virtual propositions. In fact, this begs a serious question – do major digital communications companies need to own their networks?
Differentiation at the mobile core
Many MNOs are weighed down by systems and processes that weren’t designed to meet the challenges of Asia’s developing digital service market. By contrast, legacy-free MVNOs have been able to take advantage of a new generation of technologies specifically focused on monetizing digital services. These encompass agile BSS systems that give them the real-time interactive account transparency and management options required by customers. They enable MVNOs to differentiate their propositions with new offers and rapid price plan changes, delivered to consumers when and how they want. New digital brands have also wrapped this capability into self-care apps that reduce the cost of customer interactions traditionally associated with a call center operation. This supports the new economics of the reduced cost-to-serve models that successful digital businesses rely on.
This attractive business model puts digital MVNOs in a prime position to negotiate unique and exclusive deals with content and technology partners, and OTT players. They can instantly bring together everything needed to supply and deliver whatever content their customers’ desire.
Subsequently, the economics of launching a fully-fledged, consumer-ready, digital offering is more cost effective than 10 or so years ago. Owning the network infrastructure, therefore, becomes of little significance to these digital brands.
A digital future for the connected customer
As MVNOs continue to consolidate their position as a retail aggregator of digital services, they are pursuing a strategic approach that is not unique to telecoms but rather represents a major commercial and cultural shift taking place across numerous industries. Examples abound. Uber, the world’s largest taxi company, owns no vehicles. Facebook, the world’s most popular media owner, creates no content. Alibaba, the world’s most valuable retailer, has no inventory. And Airbnb, the world’s largest accommodation provider, owns no real estate. Even Google’s wireless venture will make use of existing Wi-Fi hotspots, besides leasing airtime from Sprint and T-Mobile in the US.
As much as the market is proving fertile territory for the agile MVNO, MNOs are now rethinking their digital strategies to replicate the agility of MVNOs through deploying the similar technologies that leverage the opportunities of real-time customer interaction and commerce. This recognition levels the playing field, providing a much-needed capability which enables MNOs to respond to the changes that are being forced upon them by their customers.
These customers are spending their money with service providers that can offer them the service choice and instant gratification they learned to expect from the Internet. It means that there is a huge opportunity for the MVNO to take on the role of integrated digital provider, offering a variety of services that can be delivered directly to the subscribers’ mobile devices. This model will give fledgling DSPs an advantage over incumbent players who are held back by conventional charging and policy technologies that don’t offer the flexibility for ongoing invention and real-time service delivery. In Asia, digital brands are being deployed using the MVNO model and it will be interesting to see if established MNOs can keep pace as data continues to fuel the prospect of new revenue streams.